Never underestimate the value of an experienced leadership team. Fishers, Indiana-based Qumulex has this in spades. The seven founders have all worked together in the commercial physical security industry and have successfully launched and exited two companies before founding their new endeavor in September 2018. I recently sat down with Qumulex President Dan Rittman who will be presenting during our February Road Show on its strategy of moving this legacy system industry to the cloud. Here’s our conversation:
BP: What are the trends within the commercial video surveillance/access control space?
DR: Cyber security dominates conversations today yet physical security is a huge concern. Every time there’s a school shooting, a breach at a military installation or an intruder at a workplace, the first thing people ask is, what could we have done differently? Physical security systems, specifically those that are video-based, have undergone major technology shifts. Today, there’s a push to move away from on-premise equipment to cloud-based solutions. The commercial security industry is among the last to move to the cloud even though benefits are significant. Given the role of video and point-of-entry security in identifying, responding to and managing threats in real time and often in concert with law enforcement, the time for industry disruptors is now.
BP: Explain the Qumulex solution.
DR: Qumulex offers a cloud-based, mobile-first, unified access control and video surveillance solution for physical security integrators that serve commercial markets. We’re unique in that our mission is to provide integrators with a transition path for customers to embrace cloud technology and mobile accessibility and a subscription-based business model without an integrator having to turn their back completely on the legacy approach based on existing technology and transactional revenue. As this transition happens, Qumulex’ product line will support any mix of systems from on-premises to the cloud. The system is designed to be cloud-agnostic, but will launch with the Google cloud.
BP: Do you have competitors that offer solutions comparable to Qumulex?
DR: Legacy solution providers control 95% of the market and they are the “comfort zone” for many potential Qumulex integrators and end users. Cloud competitors include Verkada, a Silicon Valley startup that raised an $80 million Series C with a $1.6 billion valuation in late January 2020, and more established companies like Eagle Eye Networks that has solid customers – McDonalds, Shell and Volvo – but has failed to achieve significant market traction.
BP: What is your competitive advantage?
DR: The biggest one is the experience and connections of our seven founders within the physical security integration industry. Even though Qumulex is new, the leadership team is a known and trusted in the space. The second advantage is that we’ve designed our product so transitions from legacy systems to the cloud are easier and more manageable. Our hybrid model allows customers to be both on premise and on the cloud. In our demos, people love this approach because end users get the accessibility, redundancy, and mobility benefits of video on the cloud without having to entirely replace a legacy system.
BP: Who is your ideal customer and what market traction do you have to date?
DR: Every school, hospital, university, military installation, retail/hospitality, office or manufacturing plant is an ideal customer. That said, Qumulex is a channel marketer; we sell directly to physical security integrators who sell to end-users. There are about 10,000 security integrators in North America that range from single person shops to major global integrators. Our ideal customer is in the middle; integrators that currently sell our type of product and at our price point.
In terms of traction, there is tremendous pent-up demand. We hosted a suite at ISC West last April, which is the largest physical security show in North America. Over the course of two-and-a-half days, we had 91 booked appointments with integrators. We’ve been to other, smaller shows with the same high interest level. We currently have beta tests in progress and plan to launch in late Q2. There’s a lot of anticipation. So far, we’ve signed 11 sales rep firms to cover the United States.
BP: What are the barriers to adoption?
DR: The commercial security industry, like others comfortable with legacy systems, is slow to move. People tend to go with what they know so there’s an education process involved. What has really helped us is the rapid adoption of cloud-based consumer solutions like Ring smart home security. People have seen it, used it, and want that type of convenience and accessibility for their business security systems.
There’s another market pressure working in our favor. The integrator market is consolidating, with larger companies acquiring the little guys. However, acquirers are interested in those with at least 20% in recurring revenue. Most don’t know how to move from a transactional business model to monthly recurring revenue. We can get them there so they are a more attractive acquisition target, but also better positioned should they prefer to remain independent.
BP: What is your revenue model?
DR: The commercial security industry is a traditional transactional business so our revenue model is both transactional and SaaS. We sell equipment for on-premise systems, but our main focus is recurring revenue from our software.
BP: How much money are you raising and what will the funds be used for?
DR: Our current raise is a Series Seed 2 with the goal of raising $2 million. This will take us to our commercial launch in late Q2, and then through a year of commercial activity before a Series A round. It will supplement a significant investment made by the founders and an earlier seed round.
BP: Why should VisionTech Angels invest in Qumulex?
DR: I really have to go back to our leadership team: we know what we’re doing. All of us have been in the industry for 20-plus years and know the market well. We also understand startups, having founded and exited two companies to date: Integral Technologies, which we exited in 2000 for $50 million, and Exacq Technologies, exited in 2015 to Tyco for $150 million. We believe the commercial security market has reached a technology inflection point and Qumulex is positioned to disrupt, but equally important, provide a practical bridge from legacy systems to the cloud that makes adoption easier.
To learn more about Qumulex, visit their website. To RSVP for the VisionTech Angels’ February Road Show, visit our events calendar. Accredited investors interested in learning more about joining our group should contact Ben Pidgeon, firstname.lastname@example.org.