A story in the Washington Post over the weekend underscores how technology is increasingly drawing entrepreneurs and private equity money into the physical security space. It also illustrates why the traditional security business model – selling boxes – is fast yielding to a new way of doing business.
Looking for growth prospects across the investment landscape, a pair of 40-year-old MBAs acquired a small Maryland-based security company called Eyewitness Surveillance. The fledgling company has deployed some 4,000 cameras, with video analytics, at car dealerships and metal-recycling companies in 10 states.
The headline alone – “Eyewitness Surveillance helps secure car lots, but finds that next Chevy buyer, too” – says so much about how nowadays physical security systems aren’t just about catching the bad guy any longer. Applying business intelligence applications via analytics allows end users to leverage their security systems in multiple ways. In turn, this opens up newfound streams of recurring revenue. Hello new opportunity. Hello new entrants.
Eyewitness Surveillance is estimated to have more than $5 million in revenue and a profit margin somewhere between 15% and 20%, according to the article’s author. Indeed, the main attraction to the company, which the two entrepreneurs purchased with investment backing, was its recurring revenue business model. Eyewitness Surveillance clientele are inked to multiyear contracts, each generating RMR of $1,300 to $2,000 on a 12-camera system, according to the article.
Think maybe an already competitive landscape isn’t getting even fiercer? Chalk Eyewitness Surveillance’s story up as an isolated example of where the marketplace – and the traditional way of doing business – is heading.
