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

The Dumbest Investment Campaign 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 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...
BRS Labs Is Gone; Giant Gray Is Here on Mar 28, 2016
BRS Labs is no more.  After raising over $100M and years of outrageous claims, the company is effectively starting over. In the report, we examine...
Camera Doorbell Startup Ring Now With ~$100 Million Funding on Mar 16, 2016
Smart doorbell startup Ring has raised an additional USD$61M in funding. Ring has also announced a "Pro" doorbell, which is an enhanced product...

Most Recent Industry Reports

"WTF?!?!? Who is Brian Karas?!?" Exclaims Knightscope on Oct 21, 2016
Knightscope co-founder Stacy Stephens emailed us: He may not have intended to send it us and he probably can figure out who Brian Karas is,...
Security Consultants Speak Episode 1 - Protus3 on Oct 21, 2016
This is a first of a series of conversations with security consultants. If you are a security consultant that wants to talk and can share frank...
Sony and Samsung Breaking VBR on Oct 21, 2016
For years, users have known variable bitrate (VBR) as one thing only: bandwidth varies, compression stays the same. This is not an accident but an...
Pelco Matrix End Of Life - End Of An Era on Oct 20, 2016
Pelco Matrix switchers, once the pinnacle of large SD analog installations, are now literally impossible to build. The Matrix products were not...
Axis Video Revenue Down on Oct 20, 2016
An important milestone. Axis revenue for video products is down year over year. But Axis is now focusing on 'diversification'. In this report, we...
Worst Access Control 2016 on Oct 19, 2016
Two access control providers stood out as being the worst to work with for integrators. In this report, we analyze the answers to: "In the past...
Hacked DVRs Surge To 400,000 on Oct 19, 2016
The global internet is under attack from record breaking botnets. And it is getting worse, Mirai doubled in size in the last month. Shamefully,...
Longse Rips Off Hikvision on Oct 19, 2016
Longse is on the attack, and now they are targeting Hikvision. Evidently not content just to rip off Milestone and Video Insight, Longse has now...
China "Unswerving Leadership Over State-Owned Enterprises" Like Hikvision on Oct 18, 2016
The PR agency of the Chinese government declared: President Xi Jinping stressed the Communist Party of China's (CPC) unswerving leadership over...
Move Aside Cisco, Axis Has A Network Switch For Integrators on Oct 18, 2016
Cisco is a common choice for network switches, including in our Favorite Network Switches survey, but now Axis is releasing a 16 port PoE+ switch...

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