You’ve probably seen ads for “Knightscope Security” on popular sites like Drudgereport.com. If you’ve clicked on the ad, you’ve been presented with a slick presentation and compelling concept: the idea of the ‘automated’ robotic security system.
Let’s just start off with one positive, and that is that only ‘accredited’ investors are allowed in and the minimum investment is $1,000. That gives us an idea as to the level of legitimacy of the project, and that they have passed most if not all U.S. financial obligations to offer their stock.
Our bigger concern is the timeline of the project. It turns out that Knightscope Security has been around for a few years, slowly integrating itself into the marketplace. They already raised millions in capital two years ago, and now they need another boost of capital. It’s not really a new product, but rather a company looking to go public simply to raise more capital. They are offering 506(c) Series S Preferred Stock.
What’s your objective as the investor? To see the stock rise in price, it’s that simple. But that may be a tall order with a company that has yet to show a profit, as is the case with Knightscope Security. We certainly do not believe it is a scam, but it may not be profitable in the future at all.
Let’s go through some basic questions and answers:
- Do the robots really work? Yes! They do offer a real deterrent to criminals, in particular due to their photo and video-capturing abilities.
- Are they cheaper than a real security guard? Yes! They are cheaper, up to 40% cheaper.
- Can they offer the same crime fighting abilities of a real person? No, absolutely not.
- Is there a real future for these robots? Yes, we believe so. The tech will improve, and we may see these little robots in stores and public places. All it will take is for a store like Wal-Mart to make a deal with Knightscope to see the stock rise.
Now let’s go through the downsides you may not be aware of:
- The robots do not contain any proprietary technology. In other words, they’re spliced together with existing tech.
- The robots are very expensive to build, around $100,000.
- The company incorrectly claims most real security guards cost around “$25 an hour”. This is not correct. Most security guards make around $10 to $12 an hour. It is not a high-paying position.
- The Knightscope founders’ previous start-up, Carbon Motors Corporation, closed its doors when it failed to secure a loan from the Obama Administration under the ATVM program, leaving Connersville, Indiana in worse shape than when they got there.
- The Knightscope company seems unable to secure venture capital investment, and instead they are seeking investment from the public.
What we see is a good concept, but low demand, low upside and a company that is clearly struggling to stay afloat. Their latest ad blitz is one, last attempt to secure more funds to keep the project going. It is not profitable.
However, it does offer a view into the future, and we do believe these types of robots probably will have a place in our society. But, we do not believe they will be bulky, large robots like Knightscope Security offers — instead, they will be small, flying, quiet drones, that are cheaper and faster. The robotic security niche is going to be suited more for video surveillance rather than crime-stopping.
We feel this company made a mistake in calculation in trying to replicate a real security guard with a robot; it cannot be done with current tech, and may not be something available until 30 or 40 years into the future.
We would recommend not investing in this company at this time. Look for drone companies offering surveillance instead. Automated drones that fly around and land, re-charge, and begin flying again to monitor an area inside or outside are going to be the future. They will be quiet, small, cheap, and simply offer video surveillance and a crime deterrent in that respect.
This two year old Mad Money video clip has some informative comments below it:
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