Zenus

Early Stage

Video analysis on a massive scale

Analytics

Raised to Date: Raised: $492,344

Aggregate Commitments $

Platform

StartEngine

Start Date

09/29/2020

Close Date

09/29/2021

Min. Goal

$9,999

Max. Goal

$1,069,998

Min. Investment

$200

Security Type

Equity - Common

Funding Type

RegCF

Series

Seed

Pre-Money Valuation

$9,987,374

Rolling Commitments $

Status

Active

Reporting Date

09/26/2021

Days Remaining

3

% of Min. Goal

4,924%

% of Max. Goal

46%

Likelihood of Max
unlikely
Avg. Daily Raise

$1,360

Momentum
cool
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Location

Austin, Texas

Industry

Business Services, Software, & Applications

Tech Sector

Retailtech

Distribution Model

B2B

Margin

Medium

Capital Intensity

High

Business Type

High Growth

Zenus, with a pre-money valuation of $9.9 million, is raising funds on StartEngine. The company is introducing a revolution in facial analysis with its proprietary technology. The technology scans public data, including foot traffic, demographics, and sentiments, and creates heat maps without the risk of data theft. Rakshak Talwar and Panos Moutafis founded Zenus in 2015 and have raised over $1.2 million in previous rounds of financing. The current crowdfunding campaign of the company has a minimum raise of $9,999 and a maximum raise of $1,069,998. The proven technologies of Zenus are being used in over 20 countries by companies, including Accenture, Oracle, and the UK Treasury. The company works on a monthly subscription business model and charges $750 per month per camera to access the live dashboard.

Summary Profit and Loss Statement

Most Recent Year Prior Year

Revenue

$55,383

$41,893

COGS

$7,850

$2,342

Tax

$0

$0

 

 

Net Income

$-419,282

$-385,766

Summary Balance Sheet

Most Recent Year Prior Year

Cash

$217,701

$406,039

Accounts Receivable

$10,144

$0

Total Assets

$227,845

$406,039

Short-Term Debt

$8,963

$12,874

Long-Term Debt

$0

$0

Total Liabilities

$8,963

$12,874

Financials as of: 09/29/2020
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Ratings

Analyst Report

Synopsis

Rapid improvements in technology in recent years have created significant opportunities for companies. But there’s a dark side to this growth. As technology improves and innovations make data collection and analysis easier and less costly, the line between what should be private and what shouldn’t be blurs. In anticipation of continued technological advances, both governments and companies are taking steps forward to meet the public’s demands for privacy. As of early 2020, more than 60 jurisdictions globally — representing 10% of the world’s population — have enacted privacy and data protection laws. Analysts predict that by 2023, this figure will hit 65% of the world’s population. By 2022, an estimated 1 million organizations will have appointed a privacy officer. 

Regulations and corporate policies can go a long way toward meeting the public’s expectations. But those aren’t the only ways to balance this equation. After all, regulations can make it more difficult for organizations to collect the very data they want to glean value from. There is another approach to addressing this problem while ensuring data collection and analysis — build systems with the fundamental aim of protecting said data. Zenus wants to accomplish this without sacrificing the information that end users desire so much. 

At the core of Zenus’ business is the premise that technology can be designed to capture valuable data without infringing on privacy. Examples of data the firm captures includes the number of people present in an area, if they are happy, what their gender is, and more. It also is able to create and keep track of heat maps. All of this is accomplished through a small, high-grade camera that syncs with the company’s application. This technology has many applications for various businesses. Retailers can keep track of foot traffic in their stores. Amusement parks and sporting events can conduct analyses to see how busy they are. Companies trying to test how well a product is received can also glean insights from how many and what type of people interact with their products. All of this information is available in real-time through Zenus’s system.

The smart camera Zenus uses to capture this information is capable of telling a lot about that person. Instead of relaying information to the cloud, the business’s hardware and software system analyze the data. The end result is the creation of actionable insights for the end user. Those insights are then sent through the cloud to the end user. Any private data like a record of a person’s face or even possibly their identity, remains on the local device.

Zenus intends to adopt a subscription-based model instead of a one-time purchase option. For each camera and the features it offers, the company intends to charge $750 per month. Customers must commit for at least one year of the service at a time. Discounts may be offered for some clients, particularly those involved in pilot tests and bulk subscribers. 

Since launching, Zenus has done well to get some big names on its customer list. These include major firms like Accenture and Oracle. Management also boasts signed letters of intent with prospective partners. These players host events that ‘typically support’ over 10,000 activations per year. Investors should be cautious regarding letters of intent though. Management has not indicated whether these are binding, and a non-binding letter can easily be cancelled by the signator.

Price

On a pre-money basis, Zenus’s valuation has been set at $9.987 million. That is awfully high given its financial performance across 2018 and 2019. Management has also not provided any estimate of how 2020 is turning out. This creates ambiguity over whether its sales are still trending higher during the COVID-19 pandemic. But absent some major positive development there, it’s difficult to see the valuation management expects as justified. For this reason, Zenus’s price score is one of its lowest.

Market

In its filings, management states their belief that the market opportunity for Zenus is worth $80 billion. Our research indicates that this is probably not the case. One source we looked at pegged the global facial recognition market at $3.2 billion in 2019. With an annualized growth rate of 16.6% projected for it, the market should expand to $7 billion by 2024. A second source put the number at $3.4 billion in 2019. The growth rate projected there is 14.5% per annum through 2027, by which point the opportunity will be worth about $10 billion. 

Another angle we looked at the opportunity from was the audience engagement market. This is undeniably a broader market than the very specific facial recognition market. However, it does incorporate some of the company’s other features. These include things like data analysis, subject sentiment, foot traffic measurements, and more. Our source on that matter pegged the global opportunity here at $4.9 billion this year. By 2026, with an annualized growth rate of 11.9%, it should reach over $9.6 billion. A separate source pegged the number at $4.5 billion today. Its forecast, with an 11.8% annualized growth rate, calls for the market to reach $6.3 billion by 2023. 

The fact that the market the business operates in is small is discouraging. However, the rapid growth expected of the space helps to counterbalance that. Bringing these factors together, Zenus’s market score is only slightly above average.

Team

At this stage in the game, there are two key members of the Zenus team. The first of these is Panos Moutafis, the company’s co-founder and CEO. He holds his PhD in Computer Science, which is obviously relevant for any product as technical as this. Previously, he worked as a Research Assistant at the University of Houston’s Computational Biomedicine Lab. He also co-authored a book chapter in Face Recognition Across the Imaging Spectrum. And before that, he won the best paper award provided by the IEEE Homeland Security Conference on Biometrics, Forensics, and Physical Security. He holds one US patent and has another one pending. 

The second key individual at Zenus right now is Rakshak Talwar, co-founder and CTO. Previously, he was an Undergraduate Researcher at the University of Houston. He also co-founded and worked as the CEO of Parabyte Intelligence. That company ran a spending tracking project for the City of Houston. Other experiences include serving as a Software Consultant. He also worked as the co-founder and CEO of RaptorBird Robotics, a smart drone platform. He is presently the co-inventor of one US patent. The range of technical work Talwar has been involved with includes important topics for Zenus like deep learning, machine learning, computer vision, and more. 

Although both Moutafis and Talwar possess key technical skills, their lack of entrepreneurial experience contributes to Zenus’s somewhat low team score.

Differentiators

The underlying concept of providing facial recognition and other similar analytics is not all that novel. Even Amazon has a suite of services dedicated to some of the features that Zenus offers. However, Zenus’s business model is a clear differentiator. This is because many alternative solutions charge between $30,000 and $200,000 just to measure foot traffic at tradeshows and in other venues. The company’s emphasis on protecting personal information should also serve as a robust selling point. These positive attributes do seem to position the company as a significantly different player relative to its competitors. Thus, Zenus has a strong differentiators score. 

Performance

Zenus’s revenue in 2018 was just $41,893. This ticked up modestly to $55,383 last year. Over the same timeframe, Zenus’ net loss expanded from $385,766 to $419,282. Its operating cash outflows followed a similar trajectory, rising from $379,787 to $433,336. The net losses and cash outflows are to be expected for a company this early in development. Additionally, it is encouraging that Zenus does have a product already developed (as opposed to using this raise for development). Although its revenue isn’t particularly strong yet, the company does boast solid partnerships and has paying customers. Zenus has also successfully raised $1 million from investors in the past. Zenus’s high performance score is reflective of this promising past activity and the presence of current users and partnerships.

Bearish Outlook

Zenus is an interesting company, but there are some things about it that are obviously bearish. Its high valuation and low sales growth are the two that most easily stand out. The market’s growth rate is encouraging and that could provide robust upside, but the size of the market as a whole isn’t all that large. One really significant negative, though, is that there appears to be a conflict with an alleged co-founder of the business. A spat between the firm and an individual known as Rick Gentry has broken out on the Q&A section of its crowdraising page. Gentry claims to be a co-founder — and owner of 300,000 shares — who left the company last year. He did so “in protest of their culture, their engineering practices and the CEO’s behavior with certain employees.” He is requesting that his shares be redeemed “if possible” with the warning that if the situation isn’t resolved, he will take “other action.” Management has responded to his multiple posts, and they do not make any attempt in them to disprove Gentry’s statements.  Their responses are mostly generic and do not aim at a public solution so much as providing a link to their filings/disclosures and stating that they would like to address his concerns. Getting involved in a startup with major founder conflict and the possibility of a costly lawsuit is always a risky decision.

Bullish Outlook

Though there are a number of bearish items for investors to consider, there are also plenty of bullish ones as well. The industry Zenus operates in is growing rapidly. Management has domain experience, and the firm has managed to work with some major companies along the way. Their technology does not appear to be revolutionary, but it is valuable. Add on to this their emphasis on protecting individual privacy and there are plenty of reasons to be drawn to the company.

Executive Summary

Zenus is working on a product that could have high appeal for companies and that would be socially acceptable to privacy advocates. This double-win, and the attractive market opportunity makes the business an interesting prospect. There are issues with the company, though, such as a poor financial record and fighting involving a former co-founder. Zenus clearly works in a small space, but that’s not so bad if they can capture a chunk of the market. In the end, we believe this list of pros and cons warrants a Neutral rating for Zenus at this time. 

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

Analysis written by Daniel Jones.

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