Steelbox Foreclosed - Purchased by ASG

Author: John Honovich, Published on Nov 19, 2008

NVR provider Steelbox Networks has gone out of business in the last month.  Steelbox, a specialist in large scale video management systems, was unable to obtain additional funding. Square 1 Bank owns the assets. On January 22, 2009, a medium size integrator/OEM, AGS, announced that they acquired Steelbox's assets.

This report examines likely causes of this failure and the potential value of the technology assets.

Here is my speculation (not based on inside information, so skepticism is warranted):

  • The technology is valuable as it uniquely solves a problem that will only grow in importance in the next five years - how to handle thousands of cameras with minimal hardware and at minimal cost.
  • The company spent too much money too fast on sales and marketing.
  • The company was never able to clearly communicate its value, causing confusion in the marketplace.
  • The credit crunch that is significantly cutting back on VC funding hurt Steelbox's efforts to get a new round of funding.

Valuable Technology

Steelbox's architecture is literally unique in the video management space. This archictecture provided a 70% decrease in cost structure and far greater scalability. Read my detailed review of Steelbox's technology for details.

This is an excellent technology for large scale markets and could make an ideal acquisition for a company like Cisco.

Money Spent

Steelbox announced 3 rounds of funding with the last round of $10M USD in 2006. I would guess the total funding was around or just short of $20M USD. 

Rounds of funding are generally designed to last 1-3 years, with an average of 2 years. What most likely happened is that 2 years since their last funding, they ran out of cash from the previous round and were not able to obtain new funding.

Note: if you want to guess what vendors are trouble, see when their last round of funding is. If the funding was in 2006 and earlier, they better be cash flow positive or they could be in danger of shutting down without a new round.  Even if they get a new round, they may be forced to do 20%+ layoffs and the value of the company may drop significantly (i.e., "down round").

Get Video Surveillance News In Your Inbox
Get Video Surveillance News In Your Inbox

One phenomeon many noticed was Steelbox's high spending on marketing. The most obvious example was the huge 30 X 30 or 40 X 40 booth at the trade shows two years ago. This was the one with pictures of movies stars like Pamela Anderson. The cost of the booth and manning it is easily a few hundred thousand dollars. It signaled to many of us an alarming high rate of spending.

Problems Communicating their Value

I remember talking to a lot of people at the time and none of us could understand Steelbox's value. It seemed like just another NVR. Indeed, until I spent a few hours on the phone with Steelbox's engineering/product team, it was not clear to me. I assume that if I had a hard time figuring it out, other people did as well.

Credit Crisis Impact

Many IP video surveillance companies are not cash flow positive and are dependent on VC investments to fund their losses.  In normal economic times, this is standard business. Good companies can fairly easily access VC funds. However, the credit crisis has made VCs more careful about their investments, more demanding on the terms and potentially less able to provide funds.

Security System News is now reporting that Steelbox has been foreclosed by Square 1 Bank.

It will be interesting to see what happens to Steelbox's assets and which company is the next to be impacted.

1 report cite this report:

Investments & Acquisitions Directory 2011 on Dec 26, 2010
This directory provides a single source of information on funding and acquisitions in the video surveillance market. It is part of our Video...

Related Reports on Funding

Silicon Valley Cybersecurity Insurance Startup Coalition Profile on Mar 20, 2019
Many industry people believe cybersecurity insurance is not worth it, as the voting and debate in our Cybersecurity Insurance For Security...
City Physical Security Manager Interview on Mar 14, 2019
This physical security pro is the Physical Security Manager for the City of Calgary. He is a criminologist by training with an ASIS CPP credential....
BCDVideo Expansion And Switch From HP To Dell Examined on Mar 11, 2019
BCDVideo says they have more than tripled revenue in the past 5 years and are continuing to grow, powered most recently by switching their lead...
Start Up Safe Zone $150 Gunfire Detector Profile on Mar 06, 2019
While gunfire detectors have been around for years, typically they are limited to enterprise level or municipal deployments. Startup AVidea, makers...
What Is the Importance of Revenue vs Profitability for Integrators? Statistics on Mar 01, 2019
A company can be highly profitable but if it is small, they will still not make much money. By contrast, a company can generate lots revenue, but...
BluB0x Company Profile on Feb 20, 2019
BluB0x has doubled in revenue every year since its founding in 2013, according to CEO Patrick Barry. We originally reported on them in 2015. At the...
Solink Raises $12 Million - Company Profile on Feb 12, 2019
Most industry professionals have never heard of Solink, a company whose tagline is: It's time to revolutionize the way business uses...
Barnes Buchanan 2019: Despite 'Strange Narrative' Great Time To Be In Security on Feb 11, 2019
A "strange narrative" is being spun, said Michael Barnes at the 2019 Barnes Buchanan Conference. However, despite that narrative, it is a "great...
Surging Wyze Raises $20 Million, Threat To Chinese Brands on Feb 01, 2019
The Seattle Startup that is disrupting consumer IP cameras with $20 pricing has just raised $20 million dollars (SEC Filing and company press...
Gorilla Technology AI Provider, Raises $15 Million, Profiled on Jan 15, 2019
Gorilla Technology is a Taiwanese video analytics manufacturer that recently announced a $15 million investment from SBI Group, saying this...

Most Recent Industry Reports

Silicon Valley Cybersecurity Insurance Startup Coalition Profile on Mar 20, 2019
Many industry people believe cybersecurity insurance is not worth it, as the voting and debate in our Cybersecurity Insurance For Security...
Covert IP Camera Shootout - Axis, Hanwha, Hikvision, March, Vivotek on Mar 20, 2019
Covert cameras were one of the last holdout areas for analog cameras. However, in the past few years, IP / HD covert cameras have become...
Top Metrics For Ensuring Integrator Profitability - Statistics on Mar 20, 2019
How do integrators ensure the profitability of their projects? As part of our profitability study, 100+ integrators answered the following...
Avigilon Launches 'Renewed Products Program' on Mar 19, 2019
There are lots of 'pre-owned' cars but pre-owned IP cameras? While such programs are common in other industries, in video surveillance, they are...
Hanwha Tax Evasion Probe, Camera Division Implicated on Mar 19, 2019
A Hanwha group subsidiary was raided as part of a tax evasion probe. While a Korean news media report listed the raided entity as 'Hanwha...
Genetec Security Center 5.8 Tested on Mar 19, 2019
Genetec has released Version 5.8. This comes after a wait of more than a year that caused frustrations for many Genetec partners. Our previous...
Retired Mercury President Returns As Open Options President on Mar 18, 2019
Open Options experienced major changes in 2018, including being acquired by ACRE and losing its President and General Manager, John Berman who...
Large US University End-User Video Surveillance Interview on Mar 18, 2019
Schools have become targets in modern days of active shooters and terrorist fears. The need for video and access security is high. Universities...
Hikvision Favorability Results 2019 on Mar 18, 2019
Hikvision favorability results declined significantly in IPVM's 2019 study of 200+ integrators. While in 2017 Hikvision's favorability was...
ONVIF Favorability Results 2019 on Mar 15, 2019
In the past decade, ONVIF has grown from a reaction to the outside Cisco-lead PSIA challenge, to being the de facto video surveillance standard...

The world's leading video surveillance information source, IPVM provides the best reporting, testing and training for 10,000+ members globally. Dedicated to independent and objective information, we uniquely refuse any and all advertisements, sponsorship and consulting from manufacturers.

About | FAQ | Contact