Defendry Revenue, Valuation & Funding (2024)

hello everyone my guest today is pat sullivan he's building a company called defendry helping folks in the active shooter defense space pat you ready to take us to the top here cheyenne so how do you help people with defend against an active shooter situation is this software or hardware or a combination just a combination basically we use artificial intelligence to see and recognize weapons we lock the doors we then put video and pictures in front of a human uh monitor analyst um called a human in the loop who then verifies that it is or it isn't uh a dangerous situation uh if it is they call the police if it isn't they unlock the doors and we're done okay so who's buying this is it consumers like me for my my house or is it big commercial buildings or schools or what it is uh schools places of worship worship and businesses okay and on average what do they pay per year for the technology side of your business depends on the number of entrances that they want to protect it averages around 800 per entrance per month okay and how many entrances does the average customer have i would say no more than two or three and and a good a good percentage of them only had one okay so call it something like between 800 and 1600 per month on average correct okay when did you launch the company what year uh it was early this year uh february when we acquired uh an ai company in silicon valley called deep science okay and why uh how what did you buy deep science for um it was basically a uh what is called an acquihire where it was two individuals one was a phd the other one was the programmer who worked with him to build this and we basically hired them in exchange for employment and a royalty um on the sale of their technology okay so no cash up front that's correct okay got it so your company today do you bring was that just a tech buyer did you get your first customers from that acquisition uh they had no customers okay so how many customers now are you serving today that you got we we only have two okay but we have several uh in the installation process the situation is such that it's not like software they can you can just buy download and run on your pc this requires a systems integrator to install cameras and a network video recorder that we plug into and watch all the cameras that are installed mm-hmm okay so two customers 600 per month they're doing about 3 200 bucks a month right now in revenue for that yes sir what do you mean for that well i i have another brand which we've talked about called river and we still market river and it is growing and and doing nicely we haven't talked about river here on the show so on this episode i thought we had not only sorry sorry not on this episode so give people some context about what river is right yeah river is a collaboration platform to for chat for threaded topics and management of tasks um and we've been marketing that for about three years we have hundreds of thousands of users and um we continue to market that and expect to continue to market that it also serves for the underlying basis for the communications that is required for defending yeah so you came on the show back in uh september of 2018 and told me that that company is about 20 people you'd raise about 13 million in funding about a thousand customers so you're doing about 840 000 a year in terms of arr at that point all those numbers still about the same no they they have grown by uh 25 or so so you're north of a million bucks a year then today and top line that river yes that's correct so why not stay all in on that you raised 13 million bucks you must have investors going what the hell is pat doing we invested in river and now he's doing this gun thing well um there are two companies uh slack and microsoft teams that basically have sucked all the air out of the room and there is no room for a third or fourth or fifth or sixth recognized well over a year ago that river would never be a big company and so i began to look for a way to use the platform that we had developed in another way and defendery was the result of that search why not go run a quick process and sell river so you can get some cash out and then double down on defendry well because river is the underlying platform and technology underlying defendry and it is funding the large percentage of the development and marketing of the country okay are your investors in river uh are they are they on the cap table of defendry yes so it's all on the same cap table that is correct oh i see okay so okay perfect so that funding that you raise at 13 million uh that that is all some of that's potentially still in the bank and you're using it now on defendry that's correct okay i see and these are so so just be quiet to beat this in the ground but greyhawk capital kickstart seed fund all these guys that give you series a back in 2013 they're still in the cap table that's correct how did this what happened to the debt in 2014 you raised 1.5 million in debt whatever happened to that um that debt is still a part of the cap table through convertible note uh it has not been uh converted to equity at this point it's still sitting there i see okay and why has it not converted to equity when you've done two rounds of equity financing past 2014. um you know i'm not a lawyer i i'm not sure why the lawyer said that that wasn't necessary or why we decided to do it frankly okay so it's just kind of sitting there all right okay that makes sense so rivers river's there it's kind of a flat-ish business doing about a million per year uh 13 million in funding raised but now that is essentially powering the back end of defendry uh which you just launched you got your first paying customer what a month ago two months ago uh two two paying customers um in the last uh three months okay and where did you find these customers is it a church a school which are they um one is a business um a corporate office a corporate campus uh the other one is a retail store um that has uh traffic in and out and uh the concern was could someone bring in a weapon into that retail store like they did two weeks ago in walmart um if i was a gunman walking into a walmart with the gun in my backpack how would your technology know that there's a gun in the backpack if you can't see it we can't see it yeah so you wouldn't be able to react until i pull it out in the grocery aisle and start shooting people uh that is correct so so what cameras can be used inside to see the weapon but correct we could not unlock a door and stop the person from shooting so what i mean what's the sale then because at that point there's people there at the shooting calling 9-1-1 you have not helped at all in terms of response time or anything like that what's the real value proposition here oh but we have um is as soon as we're aware that there's a shooting the the analyst who's monitoring it who will receive an alert they will immediately call the police and they'll stay on the line and use whatever video they have to provide intelligence to the first responders the biggest problem when police arrive is knowing what is the situation so often that data analyst can tell the police can even provide urls for real uh real-time video and pictures of what's going on okay interesting now this company have you raised an additional capital or still just the 13 million from river um we did raise uh 2.1 million dollars from avnet who is a a large electronics distributor about 20 billion dollars here in phoenix and the ceo there was enamored with the idea of helping to stop active shooters and there there is potential for tie-in later for uh hardware that can be used in this situation what valuation were you able to raise that because you're basically you're basically selling the social good cause here right which is which is admirable right which is stop mass shootings however capital is also capital and so people are not going to just make silly investments you're essentially pre-revenue on another company you raised 13 million for which is only not doing a million a year right so you could argue whether that was effective or not how did you convince someone to give you 2.1 million at any rate where you weren't significantly diluted actually um we talked a year ago i the 13 million is the amount to date that we have raised including the 2.1 million so i i may have somehow included that 13 million is the same same question though my point is on this new company raising 2 million pre-revenue i'm just trying to understand how do you do that without getting significantly deluded considering your historical you know output on river was basically spending seven eight nine million bucks to build a million dollar company beauty's in the eye of the beholder they felt it was worth it and they invested at the valuation that we wanted did you lock up an exclusivity with them where if you ever get into hardware you have to use them no okay so you could go use their number one competitor if you ever move into hardware with their money basically that they funded you with that is correct okay again i'm trying to understand why on earth they would give you the money i think you're not giving yourself credit here and there were terms in here that you're not sharing um you know i i don't know all the motivations they had other than the what uh bill emilio the ceo of adnet said he was he loved the idea of doing something to stop active shooters they he he loves to find ways and invest in companies where technology can be used to solve problems whether or not avnet um participates in some way in the hardware so do you have any hardware components in the field today actually deployed i told you i have two installs well you said you had two people paying 800 to 1600 bucks a month i don't know that means there's actual installs i just know they're paying i said there were two installs there's hardware there's cameras there's network video recorders there's software there's the defendery uh appliance which is what watches all of the video so yes there is hardware and there is software what does the mpap by the way i'm asking i don't want you to get frustrated i have direct quotes from the show as the show goes on via tech we have you did not specify if there were actual physical installs what you said was you have two customers paying between 800 and 600 bucks a month and the total solution does combine software and hardware i didn't know if you actually deployed cameras yet so you have to you have deployed the physical pieces my question is if i came to you today and asked you as a school hey i have four entrances i want to pay you what would it cost me on the hardware side to get all that set up the hardware side there are it depends um the cameras can be deployed at a distance and at the so um they could put additional cameras uh on the perimeter so that they have the potential of seeing a weapon uh uh a hundred yards away so what does one camera cost a one timer could be um two hundred dollars okay and then is there any extra payment that you we have to make to get that tied into your software system no okay so if i had how many cameras do you recommend per entrance typically uh three to four cameras and an entrance is sufficient okay so i'm basically paying a grand and personal in terms of hardware per entrance on top of the software fee of 600 bucks a month or 8 800 a month but that is a one-time expense yeah right yes that's correct yeah one grand yeah that's what i said yeah perfect okay good that's helpful understand now do you are you selling that camera to them at cost or you just give them third-party providers to go buy it from we work only work with systems integrators who install security and surveillance system in every state you have to be licensed to sell anything related to security is that 200 per camera though at cost are you building in some margin there for you they sell the cameras we don't sell any candles okay yes you don't touch that currently all right good stuff good stuff let's wrap up here with the famous five number one what's your favorite business book uh the hard thing about hard things number two is there a ceo you're following or studying right now um my chairman of the board is roy valley who was a ceo for 25 years multi-billion dollar company he is my mentor number three what's your favorite online tool for building your company um river i know besides river um i mean i i would used to have said email but 80 of my communications is via river so second would be email number four what's your favorite online or sorry how many hours of sleep are you getting every night oh i sleep seven to eight hours okay and what's your situation married single kids married four children holy mackerel you're busy how old are you i'm 66. okay last question what do you wish your 20 year old self knew great question um i i i i wish it um uh you know okay i'll say this i wish i'd known to spend more time with my kids guys spend more time with the kiddos pat sullivan launched river grew about a million bucks in terms of annual revenue they launched to fendry trying to go after helping solve this epidemic we have of active shooters with a combination of iot plus software currently two customers paying uh caught between 800 and 1600 bucks a month for this for the flair they spend about 200 bucks per camera about four cameras per entrance so about a thousand dollars in hardware expense one time per entrance but again then you save yourself potentially from mass shootings and get better response times over time as he looks to scale across from these two locations hopefully to many many thousands pat thanks for taking to the top thank you nathan enjoyed it