Knightscope $420,425 2016 Revenue, $5+ Million Loss Seeks $20 Million Investment

60,000 per year is where its gonna fail.

According to Knightscope's marketing people, that's just $7 an hour if you assume the user wants to run it 24/7/365 and it never needs to be charged or maintained, questionable assumptions.

You can hire a human for that?

They are from Silicon Valley where wages are far steeper than the rest of the company.

That said, $60,000 per year is still definitely a lot of money given the various limitations robots have. And they will have increasing numbers of competitors (e.g., the list in the post) who will price significantly lower than them, which will cause downward pressure.

Companies generally don't hire guards directly, they contract them through providers like G4S, Allied, Securitas, etc.

Those companies have a fair amount of markup on the straight overhead of the guard's salary. The guards bill out in the range of $15-$20/hr. to the end user, even though the actual human guard himself is only making $8-$10/hr in many cases.

Knightscope, and the other robot companies, are hoping to make the argument that a $7/hr robot is a better deal than a $20/hr guard, and that the robot can do enough to be worth the money (e.g., if the robot is ~1/3 the cost, and at least 1/2 as functional/useful, it is a good deal).

If the concept works, the guard companies might just go directly to Chinese suppliers and source units directly, skipping over Knightscope and the other companies. Or, we will see Hikvision come out with a security robot that costs a fraction of the Knightscope unit.

These are not the droids you are looking for.

#3, all, here is the table covering the executive's compensation:

Relative to Silicon Valley startup compensation standards, those compensation levels do not strike me as high. As for sales performance, the VP Marketing & Sales is making $130,000 which is not a lot of money given the very high cost of living in their Mountain View CA base and what tech startup VPs of Marketing and Sales make.

As for expenses, here is theirs for H1 2016:

Sales & marketing expenses are actually really low, at an annual pace of a quarter million dollars, especially given all the media exposure they have gotten.

However, G&A strikes me as being quite high and it appears they are categorizing marketing expenses like trade shows there:

Our general and administrative expenses have increased significantly from $238,896, in the year ended December 31, 2014, to $654,844 in the year ended December 31, 2015. This increase reflects a doubling in our real estate footprint, marketing expenditures at trade shows, insurance costs and operating costs.

Similarly, that R&D is only $3,510 for 6 months is strange but it must be they have categorized R&D expenditures for employees under 'compensation & benefits'.

For a company that reports 25 full-time employees in a Silicon Valley tech startup, their expenses strike me as normal.

The bigger thing to me is revenue. How many customers can they get to rent robots for $61,000 a year?

I lol'd.

When a small, young company gives revenue guidance with $400K of uncertainty, that's a problem. In their case, simplistically that would require collecting annual operating fees (I doubt companies give them $60K up front) for almost 7 additional robots to hit the $1M figure (assuming they were already at $600K when the statement was made - they probably were not). If it costs them $55K-$65K to build one robot, I have to assume there is significant lead time as well. I also have to assume they don't happen to keep multiple units in stock to satisfy unpredicted surges in demand. Doesn't pass the sniff test. Neither does the hockey stick growth to $5M.

It is also not clear if $1 million is enough for the K7 development,

$1 million is not even enough to develop a new camera (I don't mean relabelling or slightly modifying something from Dahua/Hikvision/whatever, but laying out something custom and developing firmware for a specialty application like analytics), let alone an entire robot.

They will spend more than $1M just on testing, QA, certifications, and stuff that is not related to core development.

Knightscope lists three contingencies, if they can't raise the full $20,000,000:

If the offering size were to be $15,000,000, 75% of the maximum offering amount, then Knightscope would adjust its use of proceeds by

limiting the speed of growth, delaying key initiatives and limiting the amount of additional recruiting of new employees and, other than servicing of its debt facility...

If the offering size were to be $10,000,000, 50% of the maximum offering amount, then Knightscope would adjust its use of proceeds by

focusing solely on California, canceling key initiatives and maintaining a smaller number of employees and, other than servicing of its debt facility...

If the offering size were to be $5,000,000, 25% of the maximum offering amount, then Knightscope would adjust its use of proceeds to

focus exclusively on growth in California and will refrain from additional hiring or executing on new initiatives and, other than servicing of its debt facility...

Though considering the lackluster response show on IPVM maybe they should have a couple more just in case, such as*

If the offering size were to be $1,000,000, 5% of the maximum offering amount, then Knightscope would adjust its use of proceeds to

focus exclusively on growth in the greater metropolitan Mountain View area, pay criminals to 'get caught' by roving 'pro bono' K5s, sue kid who made k5 run him over, stiff debt facility.

If the offering size were to be $200,000, 1% of the maximum offering amount, then Knightscope would adjust its use of proceeds to

meltdown the K5s for copper, cancel subscription to Robotica, and relocate to a van to be parked down by the river.

*satire

Those 2019 and 2020 numbers are going to have to come way down if they expect to attract any hockey fans ;)

There have been 145 business days (e.g.: M-F, excluding weekends and holidays) between Dec 9 2016 and now (July 9 2017), according to this calculator.

In that time, Knightscope has produced an additional 35 robots, giving them a pace of 1 robot every 4.1 days.

Based on your comments above, I imagined myself a potential investor in Knightscope..... so I did a little non-standard due diligence to see if I could get some kind of idea who this company is and why I should give them my hard-earned money.

When doing a simple Google search, the returns are dominated by the recent drowning of the K5 known to the locals in DC as Steve.  But if you look beyond that, you can find some interesting things.

What is the background of the people running Knightscope?

Here is a recent article about the bankruptcy of the previous company the people that are running Knightscope used to run:  Carbon Motors (Note the date of that article is June 2013 - the same month Carbon Motors filed for voluntary Chapter 7 bankruptcy).

This all occurred 2 months after their new company Knightscope was already formed (see pic below).

At the bottom of their own FAQ page, under "Why Did You Start Knightscope" they say that "Knightscope was originally founded in response to the tragic events at Sandy Hook and the Boston Marathon."

Except their domain name was registered on 3/29/2013 and they were incorporated on 4/4/2013 - and the Boston Marathon bombing didn't happen until 4/15/2013:

Lastly, I checked Knightscope's LinkedIn profile and saw this:

With $0 spent on QA, it's no wonder Steve died...

...may he rest in pieces.

*I am not a lawyer, nor licensed to give professional financial and/or investment advice.  So you will have to come to your own conclusions.