Biggest VSaaS Funding Yet: Dropcam's New Round Examined

By John Honovich, Published Oct 09, 2011, 08:00pm EDT

While dozens of companies are launching VSaaS services, to date, all of these new companies have relatively small amounts of funding - typically less than a million dollars. Now, Dropcam has announced a new Series A funding round of nearly $6 Million, much higher than any other VSaaS startup. In this note, we examine Dropcam's potential, how it matches up against Axis AVHS partners and other potential rivals.

Dropcam Overview

Dropcam has a fairly straightforward offering - Choose from 1 of 2 OEMed Axis cube cameras and from one of 3 service plans (either free for live viewing or up to $24.95 for a month of recording). You can buy directly online from them. Dropcam's offering has changed little since our first review last year.

Dropcam Size

We estimate that Dropcam has between 2,000 and 5,000 total customers. While Dropcam would not comment on this point, we base this on the following:

  • Dropcam confirms that they have ~15 employees.
  • About 60 Amazon reviews currently are posted for their cameras.
  • About 250 iTunes App store ratings [link no longer available] (though many are for just viewing public cameras, not actual paying customers)

To the contrary, readers should note that the moderator of the VSaaS LinkedIn discussion group is claiming that Dropcam has 150,000 customers. However, given the metrics cited above, we think this is impossible.

Dropcam Future

We asked Dropcam a number of questions about what they are going to do next. Here are the most interesting responses:

  • "We've gotten so much interest from other manufacturers that we realize there is a real need for a secure, reliable, scalable cloud-based recording and analytics service which we plan to provide and improve as time goes on."
  • "Dropcam's vision is big - we want to connect everybody with the things they care about. Our focus is the residential consumer, and we want to make sure we give them a seamless experience.  Easy.  Simple. Anywhere.  That is Dropcam's mantra, and that's why we think this is primarily for the mainstream consumer."

The biggest competitive advantage Dropcam now has is far more funding than any of their competitors. While many are re-selling Axis AVHS, Dropcam can invest and develop a more sophisticated overall solution.

Competitive Analysis

Given Dropcam is clear focusing on the consumer market, we will constrain our analysis on just that segment. Here's how we break down Dropcam versus the 3 main competitive options:

  • The strongest competitor is not a single company but the general trend of offering simple, no recurring cost consumer remote viewing options. The best example of this may be iCam, a service we tested last year. It's just $4.99 one time cost for a powerful Dropcam alternative that works with a variety of cameras. It's quite popular as well with over 3600 ratings on the App Store. Dropcam will have difficulty defending against this as it is significantly less expensive while meeting a similar need.
  • A number of alarm companies are now bundling IP cameras with their offerings at relatively inexpensive prices while using their existing techs/support infrastructure. We expect that online services like Dropcam can co-exist with alarm companies offerings as alarm companies only have so much market reach.
  • We expect that Dropcam will be more attractive to consumers that AVHS partners who are not innovating much on the software side and are likely more attracted to bigger projects from their core business customers. AVHS partners, of course, have their own problems.

Outlook

Until now, Dropcam's offering has had little differentiation to other options (AVHS, alarm companies, etc.). Now with a significant cash infusion, it will be interesting to see what improvements it can make. Silicon Valley money is no guarantee of success (see 3VR, Intransa, Pivot3) but it does provide a major short term advantage for building up a new product. It is worth watching Dropcam closely over the next 2 years to see how significantly it can evolve.

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