The Next Failure in Wireless Video Surveillance: $18 Million Funding

Author: John Honovich, Published on Aug 21, 2015

Wireless video surveillance is one of the most difficult niches in the industry.

Tens of millions have been wasted trying to build a wireless video surveillance winner. The most famous, of course, was Firetide, who failed, despite more than $50 million in funding.

Now, an Israeli company, Siklu, has taken in $18 million, aiming at the video surveillance market.

In this note, we examine the company's positioning and why this big bet is likely to be a big failure.

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Comments (26)

John...I agree with your comment about the usefulness of Siklu for multiple camera backhauling. We had a challenging design last year that forced us to include about a dozen radios, and Siklu worked perfectly. The very narrow footprint at their higher frequencies greatly aided in solving our location and aiming issues. We also needed the ability to encrypt the links. The customer had many 1080p streams and was concererned about hacking, and the distances between buildings was reasonable. Siklu may not be required for single device llinks, but the race for higher megapixel cameras, coupled with increasing concerns regarding attacks, may make Siklu more appropriate than in the past. Additionally, the higher cost may not be as important in larger projects.

As an aside, I saw camera manufacturers using Siklu inside the Sands Convention Center at ISC West to distribute signals throughout the hall.

Ted, good feedback. I concur those are good fits.

The challenge is building a sales and marketing organizations to go after a niche of a niche. It's quite expensive relative to the revenue possible to generate with such a small and spread out market.

To that end, a better fit would be just to OEM / sell through someone like Fluidmesh who has a general purpose offering rather than trying to spend millions to build their own.

"We also needed the ability to encrypt the links."

Theoretically you could have done the same thing with a pair of Ubiqiti radios and a pair of VPN-enabled routers on either side. You'd still be at 10% of the cost of the Siklu approach.

Given the fate of AvaLAN, Firetide, Fluidmesh, etc., as well as factoring in the low-cost options, I think the market for $5000 RF links is probably limited to a very small number of opportunities. I'd be very surprised if Siklu ever even sells $18M worth of equipment, much less selling enough to justify any positive valuation.

You associated AvaLan with the likes of Firetide and Fluidmesh, it is my understanding that AvaLan is alive and doing very well. They recently released some new products that are proving to be very reliable and cost effective. I have used them and found the products to do want they say they will do. The pre sales support we recieved was excellent!

I suppose "doing well" is somewhat subjective. Of the companies I listed, Avalan is probably doing the best, but they're also not on any sort of track to be a major player (IMO).

I was using Avalan as an example of a company that has been around for a while but has never really broken out in the sense of being a runaway success. Siklu has raised $18M on the investor's speculation that $18M will become $180M, which requires Siklu to sell $500M worth of product over time. That's not taking into account generating a return on the other money invested.

In terms of 'fates', the big issue with wireless video companies is raising / spending lots of money. To the extent that Avalan is doing 'well', it is because they did not raise much nor are they that big.

Fluidmesh also seems to be doing well, though they did not blow through money like Firetide did.

"I'd be very surprised if Siklu ever even sells $18M worth of equipment, much less selling enough to justify any positive valuation."

Like Firetide and Pivot3, Siklu is spraying their offering in different applications / verticals, so they may wind up winning in others.

As for $18 million in video surveillance, they probably look at that being 'just' 5,000 pairs sold. Of course, selling that is going to take a huge amount of sales and marketing spend, plus time, since those deals take a while to close. Ultimately, this is what burns out the new entrant. They realize the time needed and cost of sales incurred makes it hard to profit.

Siklu Inc., the global market leader in the millimeter-wave technology...

...With this new funding and partnership, Siklu will continue to disrupt the mmWave market.

I predict this company will self-disrupt...

(Disclosure - I am Director of Business Development & Sales for Video Surveillance & Security at Siklu)

John,

Although I respect your opinion, we are seeing a significant increase in demand for our products from the video surveillance market, particularly for the need of an uncongested and interference free wireless solution for dense urban areas where integrators are often experiencing difficulties with implementing sub-6GHz systems. Furthermore, we see a need for higher throughput as the demand for capacity increases from higher megapixel cameras. This is why we entered this market in the first place.

I do want to correct one item in your report. Our radios can achieve distances of up to approximately 2 miles or 3km (depending on the model), not 1km as per your report.

Which models get 3km? What tradeoffs in reliability and throughput? What weather conditions?

Btw, I am taking this directly from a Siklu email to us about the EH-600T that you are positioning for video surveillance: "Specified range up to 1,600' at 99.999% availability"

Hi John

70/80GHz bands (our EH1200 models) have a longer range than 60GHz bands (our EH600 model). With an EH1200 + 1ft antenna you get up to 1 mile and with a 2ft antenna up to 2 miles. Throughput and availability are directly related to rainfall (the higher the rainfall the shorter the distance for full 1Gbps throughput OR the lower availability/throughput). We have an online Link Budget Calculator which calculates throughput and availability at different distances in different rain zone areas (you can also do it by city or Latitude/Longitude).

The distance you quoted is correct for the EH600T - 60GHz band - which is a short range Edge-type radio.

(Disclaimer - I am a Siklu employee)

"Short range: Max distance is ~1km, which limits applicability."

Longest range we've ever done is 1200ft.

Unneeded bandwidth: Siklu is rated for gigabit throughput that is overkill for connecting to most cameras.

No such thing as too much throughput.

Strict line of sight: These high frequencies mean no obstacles or barriers whatsoever.

We're pretty diligent in keeping to line of site, but sometimes there are "slight" obstacles, so could be problem in some case.

High price: The cost per link is ~$5,000, which is 20x more than what is most commonly used in surveillance, i.e., Ubiquiti.

OH HECK NO

"High price: The cost per link is ~$5,000, which is 20x more than what is most commonly used in surveillance, i.e., Ubiquiti.

OH HECK NO"

Lol... And that's the problem Ubiquiti has created for the wireless market. Now, the market is benchmarked against that, making it tough for rivals to sell a premium product to a broad customer base.

I used to work for Fluidmesh. Hundreds of projects, never found an area that was oversaturated, per se. You just need to look a little harder.

As far as line of sight and penetration goes, it's just simple physics. Wavelength is, quite litterally, the length of the wave from peak to peak or valley to valley. A wave will punch through material about 40% of the thickness of the wavelength before it gets too attemuated to continue. 900 mHz is hundreds of feet from peak to peak - you can punch throuh a lot. 5.4 GHz is a little smaller than a baseball, a little bigger than a golf ball. You might punch through drywall, if you hit it straight. 70 Ghz is about a millimeter. You'll do well to punch through a piece of paper.

As far as bandwidth goes, wireless is often used to backhaul from a remote facility. 25 cameras in the building across campus, etc. Most mesh radios are half-duplex, and there is overhead, so on the best day, you're going to get 60Mb/s throughput. It's not overley difficult to overwhelm a sub-6 radio in a point to point.

These guys are not competing with Fluidmesh, they're competing with Dragonwave, etc. $5k is pretty competitive in this space. They will do well to partner up with the Fluidmesh's of the world, as their products are complimentary.

Hal, I agree there's potential for connecting facilities but Siklu is very clearly targeting connecting individual cameras (e.g., the 600T and its small size), not just backhaul.

The two issues I see for backhaul for individual camera connections are:

(1) There's a lot fewer backhaul opportunities than there are camera connections in video surveillance (by definition).

(2) For backhaul, as you mention there are plenty of competitors, including Ubiquiti which has a 24Ghz unit that is roughly half the price of Siklu's.

...900 mHz is hundreds of feet from peak to peak...

Actually it's a little over a foot.

John and IPVM Tribe,

Great post. My name is Cosimo Malesci and I am Fluidmesh Co-Founder and VP of Sales. I wanted to share my two cents on this topic as I think it is very interesting and very close to me.

As John pointed out, the main issue that prevents the sustainability of VC investments in the wireless video surveillance space is related to market size. The market is a lot smaller than what most people believe it to be. The second issue is the buying process. Most of the largest jobs are government money with a sales cycle longer than 12-18 months. As a consequence, there is no exponential growth and there is no 'tornado' thus ruling out VC money as a sustainable funding mechanism. The returns are just not there.

That said, you can still run a very successful and profitable company in the space, you just need to have the right expectations. We funded Fluidmesh in 2005 bootstrapping the company and managed to make it profitable in 3 years. In the past 10 years we have managed to expand our sales force to every continent and keep double-digit growth year after year. At this point we are a bit more than 50 people between Chicago, NYC, Milan, Lima, and Taiwan. In North America in 2015 we are on track to do roughly 42% growth. We have launched a new product line in 2015 and we are scheduled to release a newer generation radio in early 2016, which will be able to push north of 500 mbps at 5 GHz. So things are going really well for us and we are gaining good traction. Because we started with a very small investment and funded our own growth, we don't have any major capital to return or any target growth to reach. We focus on what makes sense, what our customers need, and what the market can sustain. This year we have seen momentum from the disappearance of some of the other VC backed wireless vendors in the space. In addition, our entry-level PTP Radio Kit “Ponte” has been very well received given the aggressive price point and the pre and post sale support provided.

Siklu has an interesting product and Alex is a good friend so we wish them best of luck in this new roll out hoping they have done their homework and that they will be able to find growth in this and other markets and keep their investors happy.

Go Wireless!

Cosimo

I was formerly a director of the distributor who first brought both Siklu and Ubiquiti to the UK market, so I feel I am qualified to comment.

1. Siklu equipment has been extensively and very successfully deployed for surveillance links in the UK over the last 5 years. Many enterprise and government customers are reluctant to use 5GHz solutions for higher capacity links that aggregate multiple cameras. Whilst it may be the case today that a link runs (almost) error-free, customers are investing in hardware that is intended to last 5 years or more and no integrator can confidently provide guarantees of zero interference operation over that time period given the huge number of low cost 5GHz links that are being deployed, particularly in urban areas. With higher throughput links where you need larger bandwidths (40MHz and above) this is more of an issue.

2. Of course in terms of volume there are usually more access links than backbone links in a project, but this is not always so. Think of customers such as public housing where they may have 20 or 30 cameras in a building all cabled, but they want to have centralised monitoring and recording.

3. Unlike Firetide, surveillance is only one relatively small market sector for Siklu. I am certain the majority of their link installations are for last mile access and cellular backhaul.

4. The EH-600T's form factor is due to its primary target market of small cell backhaul rather than single cameras (for which I agree it is not at a suitable pricepoint).

5. Whilst Ubiquiti has a comparable capacity solution in the AF-24, the 24GHz band is limited to 100mW EIRP in Europe so it has the same range limitation of a mile or less. The AF-24 also has a completely different form factor, weighing 17kg for the 1Gbps full duplex variant, compared to 1.8kg for the EH-600T and 4.5kg for the EH-1200.

Andrew, excellent feedback, thanks!

"The EH-600T's form factor is due to its primary target market of small cell backhaul rather than single cameras (for which I agree it is not at a suitable pricepoint)."

When Siklu presented their offering to us, they emphasized the EH-600T's value for single camera connections, highlighting its small size. While the small size is good, I think we agree that the high comparative price is the real issue for single cameras.

(Disclaimer - I am Director of Business Development & Sales, Video Surveillance & Security at Siklu)

It would be of value if I were to clarify a number of items which seem to have become a little misty in this important discussion.

With the most deployed mmwave radios in the world, and selected for four consecutive years as a leading millimeter wave company, Siklu today is, by all accounts, a very successful millimeter wave wireless technology company.

Our 60 70/80 GHz radios have been adopted by major carriers across the globe and successfully address challenges such as network density, climbing capacity demands and video and image jittering.

I would also like to shed light on the additional $18M funding. This capital will not only be directed to the video surveillance market, but will also be used to help grow additional markets, such as the Gigabit-To-The-Home (GTTH) market - including the Multi-Dwelling-Units (MDU) niche market.

Siklu’s market strategy and sales processes are not centered on one vertical market at any given time, but rather on maintaining a steady and developing customer base, while new growth-markets, with a compelling need for network resolutions, such as those that Siklu delivers, are nurtured. These markets include edge-based and backhaul connectivity.

With the most deployed mmwave radios in the world, and selected for four consecutive years as a leading millimeter wave company

Honest question, who are your top 3 or 4 competitors?

Is "most deployed mmwave radios" measured in 10s, 100s, or 1000s of units deployed in total?

It's clearly many 1000s. Here's proof.

All E-band links deployed in the UK are required to be registered with Ofcom (our equivalent of the FCC) and the register is publicly available. You can download on this URL http://licensing.ofcom.org.uk/binaries/spectrum/fixed-terrestrial-links/downloadable-forms-resources/7080register.xlsx

You can see that as of this month there are 2067 registered links, of which 730 (i.e. 1460 units) were supplied by Siklu. That's just the UK and doesn't include V-Band links - which do not require registration.

Andrew, Siklu itself in their marketing material says thousands: "We've already sold thousands of radios worldwide to service providers, mobile operators, wireless security network operators and enterprises."

But is thousands really a lot?

This is a company that has raised tens of millions in VC funding. You could say "Wow, they've had to raise $10,000 in VC funding for every radio they sold."

Maybe Siklu will become a success over the next five years in different industries (not video surveillance) but selling thousands of units is too early to really decide how big or successful the company (or millimeter wave segment) will be.

I agree there's a big question surrounding all microwave/millimetric vendors. You only have to look at Ceragon who have been around for over 15 years but consistently fail to realise a profit. Valuation is always based on potential volumes, which never quite seem to arrive. I personally would not invest my money in these businesses.

Siklu has transformed the millimetric market - before their arrival the only options were companies such as Bridgewave and Gigabeam selling links at $30,000 each. This doesn't necessarily mean their business model will succeed in the long run but customers are certainly benefiting from the improved economics.

If we extrapolate from the UK figures we get cumulative worldwide sales of at least 15,000 units (hard to believe we account for more than 10%). If Siklu earn $1500 for each radio sold, then that's $22m of revenues so far. Not enough yet to justify the VC investment but not insignificant.

John,

Looking at Siklus' webpage, they seem to aim several markets besides Security. The question would be how their technology will stand "against" up coming standards like WiGi ( IEEE 802.11ad) . Customers don't want to get "locked" on propietary technologies.

Pretty well all fixed outdoor wireless technologies are proprietary. Even Ubiquiti radios that are based upon Wi-Fi standards use their own proprietary media access control solution (airMax) that doesn't talk to any other vendor's product.

Standards based solutions tend to fail either because they don't do an effective job in the outdoor environment (Wi-Fi) or they are too complex / expensive (WiMAX).

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