This is Paul and we are in exciting Las
Vegas again, and we had the most incredible thing at my presentation we
had a real-life robot 400-pound five-foot robot, and we were lucky enough
that we have the CEO of Knightscope and Knightschope is the company that makes
this robot – the K5. Well, welcome and hey thanks for having us thanks for
coming and bringing K5. No, absolutely. 400 pounds, it’s a big boy. Yeah, I’ve got some folks that are like hey just bring it on the plane with you and I’m like I don’t think you understand. Ya, I was telling you in the presentation that it’s the perfect size for a security robot because I think of like you know
you’d want something that you couldn’t really move. Ya. we actually have kind of like a police officer. It’s a stand up straight command respect and authority shiny shoes but you can’t scare grandma or the child right you
have to have just the right balance of maybe I’m gonna do a double take before
I do something silly so that’s the way it is. Ya, so many of readers have heard about robots and robotics and I would say I
gave this presentation about robotics robots, robotics as this great investment
opportunity, but tell us a little bit about Knightscope and about K5. Sure, so I
think the next 10 years the world’s going to change more than the last
hundred years combined we started Knightscope five years ago
one at a personal motivation and one professional. On the professional side I’m
an ex Ford Motor Company executive I think autonomous technology’s gonna
turn the world completely upside down all this self-driving technology, there’s
been about $80 billion dollars invested in the sector, nearly 50 companies
working on it and have you seen a self-driving car generating revenue
anywhere around here? No. No, so Knightscope is the worldwide leader in
commercializing self-driving technology. We’re operating in 16 states,
running 24/7 across four time zones so we’ve taken a completely different
path to commercialize that very profound technology. On a personal side I was born in New York City someone hit my town on 9/11 I’m still really upset about it so
I’m dedicating the rest of my life to better securing our country. Yeah, I was
in New York for 9/11 – I was thinking about that so was that the inspiration
for creating Knightscope? Yeah, so I love my country but it’s structurally flawed in trying to stop
all the crime and violence. So most people don’t realize that crime has a
one trillion dollar negative economic impact on the US every single year. So if
you add up all the handcuffs, all the prisons, all the judges, all the
ambulances it’s a hidden tax we all pay in blood, tears, and treasure and every
time something goes wrong our political leaders on both sides of the aisles
stand up and say what? Oh, we extend our thoughts and prayers. Hey buddy,
that’s not gonna fix the problem. So structurally if you want to look at it
from a macro political economic perspective there’s a $700 billion dollar budget that the US Department of Defense manages. There’s one
person in charge a Secretary of Defense. There’s a huge military complex to build
whatever widget you want. Northrop, Blockee, Raytheon, Boeing right and
there’s a process and if you want a new submarine or new widget or new tank like
there’s a way to deliver that. What’s structurally flawed in a huge economic
and opportunity and an opportunity to make a big positive impact on society is
the US Department of Homeland Security and the US Department of Justice has no
federal jurisdiction over 8,000 private security firms and 19,000 law
enforcement agencies and there’s literally no one in charge. So that’s why
over the last 100 years has been no innovation in the security space because
there is no capital going into the sector, there’s no leadership, there’s no
process, there’s no anything. And what we see is gold in them Hills. Yep, right. There is a huge problem and here’s a new technology that we’re able to start
helping society fix it and our long-term ambition is to make the United States of
America the safest country in the world, changing everything for everyone. So if
we’re able to do that the volatility of financial markets, the
safety of your family, the viability someone’s local
business, housing prices, insurance rates like literally everything changes for
everyone. So, we had K5, which is your biggest robot. You were kind
enough to bring it to my presentation it’s spectacular. So what are the economics of like of having like say a
neighborhood organization wanted to have it is that something that’s viable? Could like an HOA say hey, we’d like one. Absolutely, we have clients that are. So the economics loosely speaking because this ranges
across the country but if you want an off-duty law enforcement officer that’s
armed to stand out your office or your home it’s about $85 an hour. If you
want a security guard to patrol your premises what the client pays and not
what the guard gets paid is around twenty five dollars an hour and it
ranges widely depending on what you want her him to do. We offer our
machines as a service business model. At an effective
price of six to twelve dollars an hour. So it’s a massive cost reduction for a
lot of our clients has spent fifty or hundred million dollars a year on
security guards, right? The security guard industry is a bit
broken so the employee turnover rates are about a hundred to four hundred
percent. Awful customer service, awful focus on technology, awful margins as one
staffing business and it’s a really difficult commodity. It’s a
brutal job. Your job is just to like walk around endlessly. But the intersection is really important. So now you’ve got a profound set of technologies, you’ve got a price point
that’s really attractive for a client so why does an investor care?
Well the investor cares because our clients sign one, two, or three year-long
contracts. Roughly there’s seventy thousand to one-hundred thousand dollars a
year of revenue that comes in per machine. And let’s just round up to make
it easy numbers. So I’m an ex-auto executive, you expect me to make sure
that machine lasts for five years. So five years in service $100,000 a year
revenue comes into the company that’s a half a million dollars of revenue per
machine over that five year period. And then there’s an operating cost, it cost
us much money to build the machine, etc. But you’re gonna probably net out around
a quarter million dollars of profit per machine over that five year period. That’s why economically it gets really really attractive. And so you’ve got kind of hardware automotive per unit economics economics meaning the dollar per machine
is really high but you got sass or software-as-a-service margins right and
you know when I was back in Detroit like we could barely cover our cost of
capital I mean you look at the after-tax return on sales and it’s like one, two,
three percent you know it kind of hanging on like not a viable business. This is why Elon Musk was saying there’s only two companies, two auto companies
that have never gone bankrupt Tesla and Ford. And they both just barely made it
by the skin of their teeth in 2008, barely made it. So where are the growth prospects in your business? Where is Knightscope going? Are you going to stay in security or is the business plan? It’s a
large market however it’s a difficult market, but that makes it like no one is going to come. So 95% of startups fail. Okay, 80% never make it past their third anniversary. 50% fail the first year. One of the problems is the CEO is not willing to
say no and we’ve got a lot of investors pushing us this way in that way we’ve
got nearly 6,000 folks that have backed the company, and we’ve got to be able to
laser focus on the mission. What is it that we’re trying to accomplish? We’re
trying to make the U.S. the safest country in the world like going off and
working on mapping or doing delivery, like that’s not gonna help. If you add up
globally the private and public sector how much is spent annually on security –
it’s half a trillion dollars. So when someone asked me like hey you should go
work on delivery, I don’t think that’s probably a good use of time. So, you’re operating in four countries? No, so we’re operating for time zones in the U.S. only. We’re in sixteen states
right now and growing significantly primarily in the logistics space,
healthcare. We’re at LaGuardia Airport so that’s starting to grow, we’re
in casinos, Westfield malls, corporate campuses like Citizens Bank, Blackrock. You know Blackrock manages six trillion dollars a big money manager. Samsung,
Seagate’s a client, and now we’re starting to grow significantly and
that’s why we’re raising our pre IPO financing now. So a few years ago the
federal government changed the rules that allow private companies to do
public offerings, but remain private so the stock doesn’t trade, so you can literally go to Knightscope.com and buy in at eight bucks a share for accredited investors. Well it’s a great conversation.
Thanks for bringing K5 So that was the CEO of Knightscope. Check out the robot at Knightscope.com and you can contact Bill.

3 thoughts on “Paul Mampilly Interviews William Santana Li, CEO of Knightscope Robotics”

  1. This is only half a soultion to change the 'safety' of our country. There is an entirely different level- that of a social services one. Would love to see this company contribute to the social welfare seems to be a good marraige. Perhaps through donations of good programs.

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