Brivo Bought Out by Drako for $50 Million

By John Honovich, Published Jun 11, 2015, 12:00am EDT

One man is betting $50 million on hosted access control.

Dean Drako [link no longer available], who has been investing millions into building a cloud video startup, Eagle Eye, is now doubling down his commitment to the physical security industry.

In this note, we share details from an interview with Drako and Brivo's CEO about how Drako bought Brivo and what this means for the future of both Brivo and Eagle Eye.

Key Financial Details

Dean Drako is paying $50 million for 100% ownership of Brivo from the previous owner, $3 billion investment firm The Duchossois Group. Drako said he won an auction for Brivo against 2 other bidders. It had been known / rumored that Brivo was up for sale for some time.

While Brivo's revenue was not disclosed, we estimate 2014 revenue to be in the $12 to $20 million range, based on the number of doors / openings they service and their pricing structure.

Other notable financial details reported by Brivo / Drako:

  • CAGR of 25% for past 5 years, implying Brivo has tripled revenue since 2009 / 2010
  • 100,000 doors / openings serviced
  • 'Accelerating growth' claimed
  • Profitable in 2014
  • 2.5-3% annual churn, which Drako described as the lowest he has ever seen in any subscription business

Other notable Brivo operational details include:

  • ~100 employees at Brivo
  • ~325 dealers of Brivo
  • Average of 4 doors per site using Brivo
  • Average of 6 doors per account using Brivo

Here is Drako's video explanation of the buyout:

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Comparable Deals

Access control acquisitions are relatively uncommon. Avigilon's 2013 acquisition of RedCloud for $17 million is the closest. Judge based on price to sales ratio and profitability, Drako got a lot better deal for Brivo than Avigilon did for RedCloud. On the other hand, Avigilon has slid RedCloud into their monster sales and marketing machine, which can accelerate revenue much easier than what Drako can do.

Brivo and Eagle Eye

One critical piece of the deal is that Brivo and Eagle Eye are not being merged into one company, though there will be deep integration of the two products.

Drako says the reason he is not merging the two is that a merger could become very time / resource consuming, which could damage their individual growth.

Short term plans addressing how the purchase impacts either company's dealer channel are still being developed, but Brivo tells us it will likely add Eagle Eye as an alternative to their cloud based OVR offerings soon. Just how soon Eagle Eye dealers will cross-sell Brivo is yet to be determined, given the relative complexity of access installation compared to video surveillance.

Brivo's Overall Market Positioning

Hosted access has remained a distinct niche, despite Brivo's  efforts for the past 15 years. Indeed, there are very few hosted access options even available though, many use traditional access control systems and manage them (see IPVM's Hosted and Managed Access Control Statistics).

A key challenge is that electronic access control is so incredibly slow to change (see Lifespan of Electronic Access Control Systems with 70%+ of systems lasting more than 15+ years). This makes it hard for any new entrant (and at 15 years old Brivo is still, relatively speaking, a new entrant).

Compounding this is Brivo's proprietary panels and lack of Mercury panel support, making it harder for Brivo to take over existing systems and more costly to buy new panels.

Lastly is Brivo's questionable business case, based on all sorts of laughable, unrealistic assumptions of their competitors, including the need for $3,000+ controller and a $6,000+ server for 6 doors plus $3,000+ annual IT expenses.

While there are certainly benefits for cloud management, Brivo's tiny market share shows that the offsetting challenges still hold the company back, regardless of owner.

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