Sentry AI on Republic | Deal Review

Apr 11, 2021 4 min read
Sentry AI on Republic | Deal Review

Company Overview & Business Model

Problem Addressed: Although it is useful for insurance claims or forensic investigation, having a security camera system barely helps to prevent crimes. Video surveillance still relies on costly on-going human monitoring to make it useful. After 12 minutes of continuous video monitoring, an operator will miss up to 45% of screen activity, and up to 95% after 22 minutes of viewing.

The Product: Sentry is a Silicon Valley-based physical security AI SaaS startup that uses computer vision AI to detect and recognize people and vehicles in the video feeds from security cameras, identify anomalies and security risks, and reduces false alerts and personnel costs for enterprises, monitoring centers & security providers

How Sentry AI Makes Money: Sentry has a SaaS model with no hardware requirements. We charge for security & safety monitoring service per camera per month averaging $20.

Customers: Sentry AI's target customers are SMB, Monitoring centers, Campuses, Enterprises, and homes.

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Sentry AI Business Structure

  • Form: Corporation
  • Jurisdiction of Incorporation/Organization: Delaware
  • Date of organization: July 25, 2017

The Deal Terms

  • Security: Crowd SAFE
  • Valuation Cap: $12,000,000
  • Discount Rate: 15%
  • Min. Offering Amount: $25,000
  • Max. Offering Amount: $1,070,000
  • Min. Investment: $200

The Team

Uday Kiran Chaka (CEO) advised Fortune 100 companies as a strategy consultant at Pricewaterhouse Coopers (PwC). Uday graduated with distinction from an MBA program at Duke University and a Bachelor of Technology from Indian Institute of Technology (IIT). He holds two patents (1 issued, 1 pending) in computer vision AI for security and safety.

Farhat Ali (COO) was the President & CEO of $1B+ Fujitsu America, leading a 10,000 employee global organization. He is an angel investor and startup adviser. Farhat graduated summa cum laude from Princeton University with a BSEE in computer science, and an MBA from Harvard Business School.

Employees: The company has 6 employees in the US and Subsidiary employs 10 employees in India.

Sentry AI Cap Table

The table below lists the beneficial owners of twenty percent (20%) or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power:

Sentry AI’s Cap Table
(Source: Sentry AI’ Form C)

Competition

The markets in which the company's products are sold are highly competitive. Sentry AI competes against similar products of many large and small companies, including well-known global competitors. The company's competitors include video-analytics companies, such as Evolon, AgentVI, and Calipsa. According to the founder, they don't offer the full suite of AI capabilities that they do.

Note: I'd love to know more. What exactly makes Sentry AI different from those competitors? Why would a potential customer choose Sentry AI over competitors?

Intellectual Property

As a Software-as-a-Service business, the company has a significant amount of intellectual property, including images and videos from client security cameras, trade secrets, such as algorithms, machine learning models, neural networks, and software source code and documentation, and the Company has applied for and has a patent pending. The patent was applied for on March 13, 2019, is assigned to the company, and has the title: “Methods And System For Monitoring An Environment.”

Note: In the company's team description, I see that the CEO holds two patents (1 issued, 1 pending). Is that pending patent the same described in the company's IP section? If so, who holds the patents?

How will Sentry AI Use The Funds Raised On Republic?

Sentry AI use of Republic campaign’s proceeds
(Source: Sentry AI’ Form C)

Intermediary Fee: This fee will be paid directly to the intermediary for assisting in conducting this Offering.

Research & Development: These proceeds will be used for research, engineering, and product development.

Sales & Marketing: These proceeds will be used for sales, business development, marketing, and promotions.

Finance, Legal & Administration: These proceeds will be used for Zoho CRM, G-Suite Email, Insurance, Taxes, Facilities, Legal, and accounting expenses.

Accounts Payable: These proceeds will be used for repayment of outstanding loans to shareholders and clearing accounts payable.

Debt

The Company has the following debt outstanding:

Sentry AI’s debt
(Source: Sentry AI’ Form C)
Note: It never feels good to see that the founder lent money to the company instead of investing in it on the same terms as his potential investors. I'd love to hear more from the founder.
Sentry AI’s debt
(Source: Sentry AI’ Form C)

Financials & Liquidity

As of January 31, 2021, the Company had an aggregate of approximately $91,000 in cash and cash equivalents, leaving the Company with approximately 4 months of runway.

Sentry AI’s Income Statement
(Source: Sentry AI’ Form C)

According to the company's COO, total sales in 2020 was $77K and most of this was for their home product, Smart Sentry. They released Sentry AI, their business product, in 4Q 2020. They have started signing up paid customers in 1Q2021 for Sentry AI and currently have a robust pipeline of 80+ prospects and have partnered with 20 resellers.

Conclusion: Did I Invest?

I’m still in the process of writing a full deal report and decide whether or not I will invest in Sentry AI. I will send my final investment decision on Saturday to subscribers of the Angel Notes newsletter (you can join through the form below). See you soon!

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