Camera Doorbell Startup Ring Now With ~$100 Million Funding

David -

You're right, that part of my report was not clear, I edited it, but wanted to address your comment about my 9M estimate.

I also want to point out that I said "doorbells", but it's really any of their products. Doorbells, cameras, deadbolts (speculation), whatever.

Ring isn't the only company in this game, and they have risk of competitors coming up much more so than Dropcam or Nest did at the time of their acquisitions, this can push their valuation down if they end up in a crowded market. I was assuming investors would want a return in the 8-10x range, or an exit price approaching $2B.

I'm assuming Ring would be looking for a 3-4 year exit strategy at this point, so they'd have to grow to have sold ~9,000,000 doorbells/cameras/etc over the next 3-4 years to show that they have a solid product, wide applicability, staying power and so forth.

If we call this Year 1, and Ring does 1,100,000 unit sales and grows 50% YoY they'll sell 3,712,500 units year 4, and would have sold a total of 8.9M units by that time.

With an ASP of $200 to start (which might actually be a bit high), and a 20% decline in ASP YoY (cheaper products, price pressure, channel discounts) their Year 4 Revenue would be $380,160,000. This is assuming all hardware, no money for cloud services.

I'm not sure I believe a lot of people will pay $250 for a doorbell and $10/mo to see who is ringing it, but let's say they have $34M in high-margin cloud services as well (that's roughly $1/mo for every unit ever sold at that point. Not every unit would still be in service, etc., so just an estimate).

Ring is going to be mostly hardware driven, which tends to give lower multiples than pure software companies. A 5x revenue number would be average. Nest and Dropcam got higher valuations, but they were early. Lorex got <1x when bought by FLIR, Milestone rumors had them a little than 3x, Axis was ~4x. If other consumer automation/security companies get bought up on big multiples this will help Ring. If other automation companies struggle, this will not help Ring.

At Year4, Ring is doing $414M. 5x that is ~$2B.

We don't know what kind of exit Ring's investors would accept, and we don't know what other products or services they will roll out. But given where the market is, I don't think Ring will have a Dropcam-style exit. I think it's going to be a much harder go for them, but they *do* have a shot at a win if enough things go in their favor.

I think that if Ring does not sell several million units with steady growth their valuation will end up too low for a positive exit.

What do you think of my logic?

But is that video from your house?

Smart doorbell owners saw video from other houses thanks to a weird bug