Gryphon Online Safety is raising capital via a Crowd SAFE at a $35 million valuation. Notably, this is a $10 million increase in valuation compared to Gryphon’s last crowdfunding round in the fall of 2021 – an increase that doesn’t seem justified. The company hasn’t achieved much in that time and posted decreased revenue for 2021 compared to 2020. A $35 million valuation is also a bit high when compared to Gryphon’s most recent annual revenue of $2.8 million. A 16.8x revenue-to-valuation multiple is outside of the optimal range for a hardware-plus-software company. Altogether, Gryphon’s current valuation is overvalued.

Gryphon Online Safety’s products cover several use cases and therefore touch several markets. First, Gryphon offers a high-speed Wi-Fi router, so the company is theoretically competing within the $16.4 billion North American router market, which grew at a sluggish 2.9% compound annual growth rate (CAGR) between 2015 and 2022. However, Gryphon’s products go far beyond a traditional Wi-Fi router, so the company is drawing the majority of its market value from other verticals. The first is network security. This North American market was worth $8.2 billion in 2021 and is expected to grow at a healthy 13% CAGR through 2029. Finally, Gryphon is also vying for a share of the North American parental control software market, which is much smaller. It stood at just $350.1 million as of 2021 but has an expected CAGR of 12.1% through 2029. 

Gryphon is straddling several markets, which might not be the best strategy to achieve product-market fit. However, the company does stand to gain from more than one decently sized market. Buyers don’t necessarily have to be seeking all three of Gryphon’s solutions (router, network security, and parental control) to benefit from a Gryphon product. Therefore, the company’s market prospects are relatively strong. 

Gryphon Online Security is led by two impressively experienced founders. John Wu, Gryphon’s CEO, has more than two decades of experience in the wireless and internet of things industries. In fact, he is one of the inventors of the MiFi personal hotspot, which was named a top gadget of the century by Time magazine. Before founding Gryphon, Wu spent more than 16 years at Novatel Wireless and most recently served as its vice president of advanced engineering and MiFi Labs. 

Wu’s co-founder, Arup Bhattacharya, is equally well credentialed. He has almost 40 years of engineering experience. Bhattacharya was an executive at PortalPlayer for six years, reportedly playing an important role in developing the chip that powered iPods. That technology led PortalPlayer to an initial public offering and ultimate acquisition by NVIDIA. Bhattacharya later worked at NVIDIA for two years, followed by a five-year stint on Novatel’s MiFi team, where he presumably met Wu. 

Including Wu and Bhattacharya, the company reports having only three employees, with a few other advisors and contractors in the mix. While this team is small and lacks specific entrepreneurship experience, Wu and Bhattacharya have significant combined experience in this particular industry. They are well suited to develop both hardware and software solutions and are impressive leaders of this company. 

Gryphon Online Security’s products seem to stand out from the pack. Gryphon’s routers and subscription software essentially combine three solutions: providing Wi-Fi, protecting devices from cyberattacks, and helping parents monitor their kids’ internet access and screen time. On the one hand, this lack of focus could hinder Gryphon’s ability to find product-market fit. However, the company also has three value propositions for buyers. Any of the three could be compelling, and the combination of all three might be particularly compelling for a specific segment.

Across all three of its solutions, Gryphon appears to be best in class. The company has received a large number of positive reviews and industry accolades, including recognition from reputable outlets like PC Mag and Tom’s Guide. These endorsements mention Gryphon’s superior performance, reliability, and flexibility to provide both network security and parental controls. Beyond these brand quality differentiators, Gryphon also boosts its defensibility with several patents on its hardware and software products and additional patent applications pending. Altogether, Gryphon has a good deal of advantages over its competitors.

Several things about the Gryphon Online Security investment opportunity seem very favorable, but performance is where the company falls flat. Gryphon has generated decent lifetime metrics, with 55,000 routers shipped and more than $9 million in total sales. However, the company seems to be slowing down. Revenue hit a high in 2020 at $3.3 million but declined to $2.8 million in 2021. Gryphon didn’t cut costs as revenue performance slowed in 2021. In fact, the company spent more, with a 12% increase in operating costs between 2020 and 2021. Declining revenue and increasing costs took a toll on Gryphon’s bottom line, with its net loss increasing from $1.5 million in 2020 to $2.3 million in 2021. 

Gryphon continued to gain recognition from publications in 2021, including Fatherly and MSN. In October, it also expanded to Canada through Best Buy and Amazon. Otherwise, Gryphon doesn’t seem to have achieved other impressive milestones in recent months. While Gryphon touts a new network enhancement coming soon and an upcoming blockchain project, it’s not clear whether these will offer a significant, revenue-boosting improvement over existing models. It seems possible that Gryphon’s best years have already passed.

Gryphon Online Security is a medium-risk investment. On the one hand, the company has been generating revenue for several years, with many industry accolades, positive reviews, and other signs that it offers products worth buying. However, performance has slowed in the last year, which might point to a company in decline. Gryphon faces significant financial risk if revenues plateau while costs continue to increase. Fundraising might also be a risk. If Gryphon is forced to continue seeking investment to sustain the business, it might fall on hard times as venture capitalists and other investors tighten their purse strings thanks to the volatile economy. 

Gryphon Online Security’s last crowdfunding round was on SeedInvest less than a year ago, closing in September 2021. The company does seem to have increased its user traction, which more than doubled from 25,000 in 2019 (as mentioned in the previous analyst report) to 55,000 in 2021. This growth may be partially because it expanded to Canada through Best Buy and Amazon in October 2021. Its employee count has also increased from two to three since 2020. 

For the most part, though, Gryphon hasn’t demonstrated significant progress. Most importantly, Gryphon’s 2021 financials are available for this round, and they reveal that the company’s revenues declined significantly from $3.3 million in 2020 to $2.8 million in 2021. Operating expenses increased, and the net loss ballooned from $1.5 million to $2.3 million. Despite these dire financial signals, Gryphon’s valuation actually increased by $10 million between rounds, from $25 million to $35 million. There doesn’t seem to be a good reason for this steep increase in less than a year because Gryphon is losing steam. Therefore, Gryphon’s current round has been downgraded from a Deal to Watch to a Neutral Deal.

Gryphon Online Security’s best days may be behind it. The company’s financial performance was very poor in 2021, with revenues decreasing significantly from $3.3 million in 2020 to $2.8 million in 2021. Its costs increased, and therefore the company had a much larger net loss of $2.3 million in 2021. Despite its worsening financial performance, Gryphon’s valuation for this round is $10 million higher than its previous round, which ended in September 2021.

It’s not clear where Gryphon’s troubles are coming from. It could be because the company is struggling to find genuine product-market fit beyond initial hype. Gryphon does offer three distinct value propositions for buyers, which could be confusing. In addition, buyers could be overwhelmed by the notion of replacing their existing Wi-Fi router with a Gryphon device, particularly when other alternatives for network security and parental control only require a software download. Whatever the cause, Gryphon needs to quickly right the ship, or it could be forever tethered to investment funding simply to pay the bills. 

Gryphon Online Security’s products are multi-faceted. While they might be too complicated for the average buyer, the products do offer significant upside for its target prospect. Gryphon can provide high-speed internet, full network protection across all connected devices (including smart home devices, which are often left out of the network security conversation), and robust parental controls for both screen time and content access. If buyers don’t need parental controls, that’s fine. They can enjoy best-in-class network security with strong Wi-Fi performance. 

Beyond the basic attractiveness of Gryphon Online Security’s product offering, there are other attractive signals about this investment opportunity. Gryphon is led by a seasoned pair of engineers with strong credentials in the wireless industry. Gryphon is also addressing relatively large and growing markets in network security and parental controls. COVID-19 only accelerated most families’ connectedness, so Gryphon’s security and safety solutions are perfect for this new era. Lastly, the company has expanded its target market to Canada through Best Buy and Amazon, and it has now sold more than 55,000 products.

Gryphon Online Security offers comprehensive security and safety solutions for home wireless networks. Its products and services include a high-speed Wi-Fi router, seamless network security across a home’s full range of connected devices, and sophisticated parental controls to regulate screen time and content access. Gryphon’s patent-pending HomeBound app can protect registered devices anywhere. These solutions have been named best in class by reputable industry publications like PC Mag. That’s no surprise, given that Gryphon was founded by two impressive wireless engineers. Gryphon’s diverse offerings help extend its market opportunity, and the high-quality solutions give the company an advantage over competitors.

On the other hand, Gryphon’s recent financial performance has been poor. While its products seem to be a valuable solution to growing challenges in today’s connected world, the company still seems to be struggling. Revenue declined from $3.3 million in 2020 to $2.8 million in 2021, though costs increased. Plus, Gryphon is raising at a steep $35 million valuation that is $10 million higher than that of its most recent raise, even though the company hasn’t achieved anything to justify that increase. Therefore, Gryphon Online Security has been rated a Neutral Deal. 

For questions regarding the KingsCrowd analyst report or ratings for this company, please reach out to support@kingscrowd.com. 

Analysis written on June 3, 2022.