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

Knightscope - $122,509 Revenue, $2.5 Million Loss Seeks $20 Million Investment on Dec 09, 2016
The robot that ran over a child, Knightscope, wants money and they need it. Investors can invest as little as $1,000 to participate and...
$38+ Million Funding Powers VMS Challenger IronYun on Nov 09, 2016
VMS and video analytics have received little funding this decade. However, one Taiwan startup, IronYun, has bucked this trend, with a relatively...
The Dumbest Investment Campaign - Knightscope on Oct 12, 2016
IPVM has seen many strange investments over the years. Who can forget how BRS Labs burned ~$100 million of mom and pop investments in their...
Hikvision $6 Billion: Doubles Chinese Government Funding on Aug 18, 2016
This is seriously bad news for the rest of the industry. Hikvision has announced a new $3+ billion line of credit, in addition to the previous $3+...
You Can Invest In The Silicon Valley Robot Mini-IPO on Aug 16, 2016
Do you want own a part of the robot future? Now, you can. After gaining international fame with their robot runs over child debacle, Knightscope...
Silicon Valley Startup Density Launches People Counting As A Service on Aug 09, 2016
A Silicon Valley startup says their people counting sensor is so accurate it's free, just pay for the data. They recently raised $4M from a top VC...
Anti-Terrorism Video Surveillance Bad at Fighting Crime on May 16, 2016
So much of city video surveillance has been deployed and funded with the intention of stopping, or at least mitigating, terrorist attacks. But...
Vidsys Hangs On, Gets $11M New Funding on May 16, 2016
The founder of Vidsys claims to have invented the term "PSIM" in 2005, and for some time, many thought that PSIM was going to be the new VMS. Over...
Mark Cuban Funded Analytics Company Shifts Away From Security on May 10, 2016
In early 2015 Mark Cuban has funded a video analytics company, Netra, after the founder cold-emailed him. Now the company has shifted away from...
Vivint Gets $100M from Peter Thiel And Mitt Romney on Apr 27, 2016
One of the most prominent Silicon Valley investors and a former presidential candidate are backing Vivint with a $100 million investment.  In this...

Most Recent Industry Reports

Vivotek Favorability Results on Jan 20, 2017
Financially, Vivotek is doing relatively well. The company did ~$130 million in 2015 revenue and 2016 revenue (through Q3 reported) was up more...
PR Firm: Don't Scrap PR Spending on Jan 20, 2017
PR is not dying, warns pleads PR firm. Take 40+ year old industry PR firm LRG, who recently lamented the 'misconceptions' that: Traditional PR...
Getting Started With Your IPVM Membership on Jan 20, 2017
Here's how to get started and get the most out of your IPVM membership. Books for Members All members can download the 3 member-only books below...
Jim Cramer Sucks Up To Knightscope on Jan 19, 2017
Credit must be given to Knightscope. They are raising money right now and despite their $80 million pre-money valuation against a lowly sub $1...
ADT Launches Canopy - Professional Monitoring For DIY Devices on Jan 19, 2017
The intrusion industry has criticized DIY security systems for years, claiming systems like Canary or Scout cannot match professionally installed...
Dahua (Un)Favorability Results on Jan 19, 2017
Dahua, the mega-Chinese surveillance manufacturer not primarily owned by the Chinese government has been trying to break out of the shadow of...
Paxton Hosted Access - Disruptive Low Dealer Pricing on Jan 19, 2017
Paxton is entering the hosted access game, with BLU, at a cost that is a fraction of key competitors. The different approach could be very...
Geovision Launches Direct Cloud Offering on Jan 18, 2017
Add cloud, subtract integrator. Geovision has launched myGVcloud, an offering that allows consumers to buy cameras and cloud services directly...
Anixter / Bosch Sells Direct to Amazon on Jan 18, 2017
Anixter regularly says they do not sell direct to end users or that they do not do it anymore. However, over the past year, Anixter has sold Bosch...
Smart Power Tools For Security Installs on Jan 18, 2017
Installing a smart camera? Perhaps you should use a 'smart' drill. The intelligent appliance / IoT trend has hit power tools. In this note, we...

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