Mistaking Surveillance Start-up Success

By: John Honovich, Published on Sep 28, 2011

People routinely assume that start-ups with big marketing presence at trade shows, magazines, events, etc. are successful. This is highly misleading and obscures a critical factor in true long term success - the ratio of revenue to company investment. In this note we explain why companies with a low ratio, such as 3VR, Intransa and Pivot3 are in far worse shape and riskier than companies like Avigilon, Exacq and Genetec.

Indeed, if you only looked at booth size, sales calls, ads, etc. (which is the easiest approach) you would think that the companies were of equal strength or that the former were actually stronger. This is far from the case.

Getting Sales

Roughly speaking, startups can get sales from one or two ways:

  • Buy business: If you spend a lot of money on sales people and marketing, you will get sales even if what you are selling has questionable value. A combination of vendor hype and end user naivety will assure that.
  • Generate value: Even if you do not spend much on marketing, if you have a clear value proposition, you too will get sales.

Here's where it gets confusing: In the short term both approaches can drive similar levels of revenue. As such, if you look at revenue alone, the companies appear to be similarly successful. That is highly highly misleading.

Startup marketing spending splashes are inherently unsustainable. You cannot indefinitely sell dollar bills for 85 cents. This is a 'jump start' technique approved by investors to quickly get the startup to some level of critical mass. However, it can implode unless the company's products offer real sustainable value.

Looking at Surveillance Companies

Let's start by looking at the 2010 annual revenue of 6 video surveillance companies:

  • 3VR: $14 Million
  • Intransa: ~$20 Million (estimated - insiders say estimate is too high)
  • Pivot3: ~$20 Million (estimated - insiders say estimate is too high)
  • Avigilon: $32 Million
  • Exacq: $19 Million
  • Genetec: $40 Million

These companies are roughly in the same revenue range and roughly founded in the same time frame (7-10 years ago). If you are looking at just revenue, the companies seem to be close.

Now, let's look at the amount invested in them - numbers are not exact but are in the approximate range:

Get Notified of Video Surveillance Breaking News
Get Notified of Video Surveillance Breaking News

  • 3VR: ~$50 Million
  • Intransa: ~$100 Million
  • Pivot3: ~$100 Million
  • Avigilon: ~$5 Million
  • Exacq: ~$4 Million
  • Genetec: ~$3 Million

You can start to see great disparity between the two groups of companies. To pull this together, let's look at the ratio of revenue to investment:

  • 3VR: 0.3
  • Intransa: 0.2
  • Pivot3: 0.2
  • Avigilon: 6.4
  • Exacq: 4.8
  • Genetec: 13.3 

Let me show it to you visually so you can see it:

This difference in efficiency between the groups is drastic. It points to one clear fact - the latter group of companies are doing a much better job of meeting customer's needs and has a far greater likelihood of being successful.

To cap it off, it is nearly certain that the companies in the latter group are all profitable while the companies in the former group are burning cash and are dependent on further investment.

What About their Growth Rates?

You might object and say, "3VR, Intransa, Pivot3, etc. keep on announcing record growth levels. Surely that shows their strength." However, the reality is that when you are spending so much on sales and marketing that such 'record' growth is needed just to survive.

What About Independent Integrator Satisfaction?

On the various online surveillance forums, Avigilon, Exacq and Genetec are three of the most commonly praised products by integrator technical people. Integrators love Avigilon so much that it is sometimes annoying. By contrast, we rarely, if ever, hear integrators recommending 3VR, Intransa or Pivot3. Indeed, our recent Intransa discussions confirm that most technical people remain skeptical about their value.

While independent integrator satisfaction is much harder to read, it is clearly a much more reliable indicator of real product acceptance.

What Does This Mean?

This pattern happens regularly in the industry. Right now, the two recent entrants spending a ton on marketing are Briefcam and Brickcom. We hear about them all the time from their PR and sales people but rarely from integrators. Bad sign.

If you want to reliably determine which companies are going to be sustainable leaders focus on the ratio of revenue to investment and what real integrators are saying, not the marketing machine.

Comments : PRO Members only. Login. or Join.

Related Reports

The Fastest Growing Video Surveillance Sales Organization Ever - Verkada on Apr 17, 2019
Verkada has the fastest growing video surveillance sales organization ever. In less than 2 years, they already have more salespeople in the US...
Top ISC West 2019 Booth Moves on Mar 05, 2019
With ISC West just a month away, we examine the most notable exhibitor moves including big exhibitors who dropped out and a number of significant...
Qognify Dropping Seetec and OnSSI Brands on Mar 01, 2019
Qognify is dropping both the Seetec and OnSSI brands, just over 2 months after acquiring OnSSI / Seetec and a week after sweeping cuts to the...
Verkada Gets Half Billion Dollar Valuation on Apr 26, 2019
Last week, when we profiled Verkada (The Fastest Growing Video Surveillance Sales Organization Ever - Verkada), we predicted they would raise $40...
Genetec Beats Milestone For IHS #1 on Jun 21, 2019
For years, Milestone has touted that they are the #1 VMS. Now, Genetec has beaten them in IHS rankings. But what is this? Even other manufacturers...
OpenALPR Doubles Prices on Jun 06, 2019
There is no 'race to the bottom' in cloud / AI video surveillance. In May, Verkada increased their prices. Now, OpenALPR is doing the same with a...
Anyvision Aims For 2022 Revenue of $1 Billion on Jul 17, 2019
Only 3 video surveillance manufacturers do a billion dollars or more in annual revenue - Hikvision, Dahua, and Axis. Now, Anyvision plans to join...
Giant Tyco Campaigns Against Startup Qumulex on Jul 25, 2019
One is a giant conglomerate that owns the world's largest security integrator. The other has no shipping products. But Tyco is campaigning...
How To Quickly Research An Unknown Company on Jul 23, 2019
There are hundreds of companies in the physical security markets, ranging from a flood of new startups to small companies that may or may not be...
Milestone Has Problems on Oct 01, 2019
Milestone has problems. While the company previously excelled in the shift to IP cameras, as IP has matured and competitive differentiation has...

Most Recent Industry Reports

'Severe Impact' Mercury Security 2020 Leap Year Firmware Issue on Jan 17, 2020
One of the largest access controller manufacturers has a big problem: February 29th. Mercury Security, owned by HID, is alerting partners of the...
Apple Acquires XNOR.ai, Loss For The Industry on Jan 16, 2020
Apple has acquired XNOR.ai for $200 million, reports GeekWire. This is a loss for the video surveillance industry. XNOR.ai stunned the industry...
Installation Course January 2020 - Last Chance on Jan 16, 2020
Thursday, January 16th is your last chance to register for the Winter 2020 Video Surveillance Installation Course. This is a unique installation...
Halo Smart Vape Detector Tested on Jan 16, 2020
The Halo Smart Sensor claims to detect vaping, including popular brand Juul and even THC vapes. But how well does it work in real world...
PRC Government Entity Now Controlling Shareholder of Infinova / March Networks on Jan 16, 2020
A PRC government entity is now the controlling shareholder of US security manufacturer Infinova as well as its wholly-owned subsidiary March...
Network Cabling for Video Surveillance on Jan 15, 2020
In this guide, we explain the fundamentals of network cabling for video surveillance networks, how they should be installed, and the differences in...
ONVIF Trashed Statement, Confirms Dahua and Hikvision Still Suspended on Jan 15, 2020
ONVIF has 'trashed' the suspension statement for Dahua, Hikvision, Huawei, etc. but confirms to IPVM that those companies are all still...
Wyze Smart Door Lock Test on Jan 14, 2020
Wyze's inexpensive cameras have grabbed the attention of many in the consumer market, but can the company's new smart lock get similar...
Wesco Wins Anixter on Jan 13, 2020
Despite Anixter earlier arguing that Wesco's bid was inferior to CD&R's by nearly 10%, Anixter confirmed that they are taking Wesco's 3.1%...
Anixter Resisting Takeover From Competitor, Bidding War Emerges, Wesco Wins on Jan 13, 2020
Mega distributor Anixter is going to be acquired but by whom? Initially, Anixter planned to go private, being bought by a private equity firm....