founder

Founder Profile: The Man Behind The Rise Of The Robots

Summary

Self-driving technology is the muse of large automotive corporations. But in many ways it can feel like a horse chasing a carrot on a stick. And to date, no major automotive producers have seemed to figure it out. Perhaps, the reason for this is the automotive industry’s desire to leap before they could crawl.

When I first stumbled upon Knightscope a couple of years ago raising on SeedInvest at the time, I thought it was interesting but didn’t necessarily understand the long term vision of the business.

The idea that Knightscope could become not only a leader in creating a new age robotic security force but also a leader in the autonomous vehicle movement didn’t hit me.

However, in talking to William Santana Li, the Founder, Chairman & CEO of Knightscope it became clear to me that Bill and his team are not only passionate about creating security technologies, but they are also passionate about building the future of autonomous vehicles.

The team has made tremendous strides, has built a sizeable business and a whole line of autonomous robotic vehicles that could be a sightline into the future. Now raising on their own website, you can own a piece of Knightscope.

Bill is an innovator and an incredible leader. After our discussion I was left wanting to be a part of the company. His vision, execution and management style are enviable and this is one you will want to invest in.

Chris Lustrino

Bill can you give us a bit of background on yourself and why you decided to found Knightscope?

William Santana Li

I’m a former automotive executive and believe that self-driving technology is going to turn the world completely upside down.  However, there has been over $80 billion invested in the technology with 50+ companies working on it – and no one has really shipped anything yet in a commercially viable format – except for Knightscope.  We have a unique path to commercialization of this game-changing capability.

Also, I was born in New York City and someone hit my town on 9-11 and I’m still pretty upset about it.  So I’m dedicating the rest of my life to better securing our country.

Chris Lustrino

For those that don’t know how do you define Knightscope as a business?

William Santana Li

Knightscope is an advanced physical security technology combining autonomous technology, robotics and artificial intelligence.  We design, develop, and deploy fully autonomous security robots on a Machine-as-a-Service (MaaS) business model. Our subscription service is all-inclusive including hardware, software, charging systems, data transfer, maintenance, service as well as unlimited software, firmware and at times hardware upgrades.

Chris Lustrino

What types of surveillance robots do you have today and what product features do they have to enable them to manage security of large commercial spaces?

William Santana Li

When visiting www.knightscope.com you’ll see we have numerous solutions.  A K1 stationary machine, a K3 indoor machine and a K5 outdoor machine – all of which generate 90+ terabytes of data per annum – certainly much more than a human could ever process.

These state-of-the-art machines can read 1,200 license per minute, livestream and record 360 degree eye-level HD video, can detect mobile devices in the area, can run thermal scans and can even hold a two-way dialogue between a human and a machine using our Custom Concierge feature.

Chris Lustrino

Can you speak to the value proposition of employing a platform like Knightscope over humans and how have your products performed in the field?

William Santana Li

For discussion purposes as pricing can vary wildly across the country, but generally an off-duty law enforcement who is armed can be around $85 per hour, an unarmed security guard is around $25 per hour (what the client pays not the guard’s compensation) – our machines go out at an effective price of $6 – 12 per hour depending on the machine and options, running 24/7 on one, two, or three year long contracts.

To date we have had over a dozen crime fighting wins including helping a law enforcement agency issue an arrest warrant for a sexual predator, helping a security apprehend a thief and catching a corporate vandal.

Chris Lustrino

What does your core addressable customer look like and how has Knightscope been received by this prospective customer base?

William Santana Li

Our clients are corporate campuses, manufacturing plants, data centers, warehouses, logistics facilities, hospitals, stadiums, airports – effectively anywhere you might see a security guard indoors or outdoors.  

The reason I’m most excited to raise our growth round of funding is we now have clients not only renewing contracts but adding more machines – which is a major milestone for this new cutting edge technology.  You check out a visual representation of our clients at www.knightscope.com/gallery.

Chris Lustrino

What challenges does the team face when trying to sell Knightscope to a new client and how do you manage to overcome this?

William Santana Li

Because of the uniqueness of the technology – literally everyone wants to be involved.  From the CEO, to purchasing/finance/legal plus sometimes the CFO, the cyber security team, facilities, HR, public relations, marketing – and, of course, the security team.  

Now that we hold contracts in 15 states across 4 time zones running 24/7 fully autonomously – we have gained a great deal of field experience and proactively work with our prospective clients on the rather lengthy pre-deployment checklist so we make sure we have everything covered.

Chris Lustrino

What are the unit economics of Knightscope in terms of cost to build / maintain versus upfront purchase price and subscription cost?

William Santana Li

Our contracts can generate up to $96K per annum and our manufacturing costs of security robot itself is recovered in year one.  We estimate a $250K estimated profit per robot over targeted life of 5 years with about 30% of customers pre-paying the full year contract.

Chris Lustrino

How have your revenues grown over the past few years and do you see a path to building a sustainable business at this point?

William Santana Li

Yes. Believe our first year of actually having machines out in the field started with about $400K revenue, then growing to $1.6M the following year and likely to end this year in the $5M range.  Looking forward to hitting nearly $20M next so long as a few key items fall into place.

Chris Lustrino

You are currently focused on security vehicles and continue to expand your product line. Do you see a world where you expand into autonomous vehicles for a broader market?

William Santana Li

No comment – other than to say that I’m a former Ford Motor Company executive.

Chris Lustrino

How much capital are you raising this round and how do you justify the doubling in valuation from the last round?

William Santana Li

We are raising $50M in what we hope to be our pre-IPO financing.  Almost every financing we’ve done has been oversubscribed and the last one wildly so.  At the time the prior valuation was set we were only operating in California with 2 types of machines – and have since introduced 2 more machines, now operating nationwide, have renewing clients and have added new features like Custom Concierge.  

I believe we have a shot to build a $30 billion company and as I mentioned $80B has gone into the sector with 50+ companies working on it – yet Knightscope is the only company in the world that I know of that is scaling operations nationwide with real clients, doing real work, generating real revenue.  My personal opinion – it is undervalued but we also wish to be reasonable with our investors.

Chris Lustrino

To date you have raised several millions in capital via online investing from platforms like SeedInvest. And you are now hosting your own funding round online via your website. So why do you continue to raise capital in this non-traditional manner?

William Santana Li

To date Knightscope has raised over $40M since inception in April 2013.

Numerous reasons.  First, as an officer of the Company, I have a fiduciary responsibility to find the lowest cost of capital for our investors.  The federal government changed the rules to effectively allow a private company to do a public offering and remain private – and if the the entrepreneur can set the price, can set the terms, can set the timing and not ‘sell a board’ set – my question is why are other founders using archaic funding mechanisms that are a lot of times not in the best interests of the shareholders?

Second, there about 800 VCs that dump $80+ billion into startups annually.  Name me the VC that is fluent in law enforcement, physical security, robotics and hardware – with a track record and we should pay a premium for that type of capital.  I would never trade out our nearly 6,000 investors for 4 firms that have no expertise in what we are doing. We have chief security officers, vice presidents of leasing, law enforcement officials, bankers, lawyers, executives, etc. that have backed the company and we are forever grateful for their ongoing and continued support.  Given our long-term ambitions we look to long-term, balance sheet driven or otherwise evergreen funding and don’t want any short-term shenanigans inherently baked into the cap table.  

Third, I believe a Founder should have the right to architect the right governance structure at the right time with the right people.  It is not appropriate for the firm that wrote the largest check to buy a board seat in a number of cases.

Chris Lustrino

What are the plans for the capital and what additional team members will you bring on?

William Santana Li

Use of proceeds are three fold.  First, need to double the size of the entire team as we are drowning in workload.  Fortunately over the years we’ve had 10,000+ applicants so have great choices. Second, once we get to 250 machines-in-network we are targeting to be profitable and that is a big goal of ours.  Lastly, we wish to have enough cash on hand so as not to do another financing before we file, potentially, the S-1 for the IPO. We have reserved our ticker symbol on NASDAQ which will be “KSCP”.

Chris Lustrino

Do you see Knightscope being a standalone business that files for an IPO or will you look to acquisition in the years to come?

William Santana Li

An IPO is a financing – not the end goal.  Our long-term mission is to make the United States of America the safest country in the world, changing everything for everyone.  The company is not for sale. As a former M&A guy probably would be thinking about it in a slightly different way.

For accredited investors, if you are interested in investing in the future of security you can learn more at www.knightscope.com/invest – join us and be a force for good!

If you are accredited we do think this is one of the best investment opportunities available right now. Stay tuned for further coverage on Knightscope in the weeks to come.

The future of security and autonomous robotic technology is here. Glad to have Bill as the lead in this technology. He is the exact type of founder we like to recommend people back.

If you have questions regarding this investment be sure to reach out at hello@kingscrowd.com

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About: Chris Lustrino

A Boston College Eagle for life, on a mission to democratize startup investing for all people at KingsCrowd, with a passion for Fintech, investing, social impact, doing well and doing good, and an avid runner, cyclist and writer.

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