Epilog is raising through common equity at a pre-money valuation of $21.2 million. Considering the company’s lack of significant revenues, this represents a significant and perhaps unwarranted jump from the valuation in its previous raise, where it was valued at $9.2 million. While this is not entirely unreasonable for a tech startup with several high-margin verticals, it’s still quite high compared to many other startups currently seeking funding. A third-party valuation will take place next month as of this writing.

The global computer vision market size is expected to reach $19.1 billion by 2027, growing at a CAGR of 7.6%. Similarly, the market for machine vision was valued at $29.7 billion in 2019. WIth a CAGR of 11.3%, it’s expected to reach $74.9 billion by 2027. Epilog sits comfortably in both these markets. The high resolution cameras it makes are part of the machine vision market, while the AI it has developed sits in computer vision. By tackling both aspects of the technology needed to enable image recognition across applications, the company is more likely to be able to adapt as market needs evolve and change. Epilog is well-positioned to secure a healthy niche for itself in these growing market sectors.

Co-founder and CEO Michael Mojaver holds a Bachelor of Science in engineering and physics from the University of California San Diego and spent seven years in research of elementary particle physics at Cornell University. He entered the startup leadership game with his role as president and CEO of Tempest Microsystems, a microchip design company. He spent two years working as CEO for Gaming Innovation Group (GiG) in Norway, a computer vision company. Tempest was acquired, while GiG went public.

Co-founder and CTO Lance Mojaver is the more hands-on architect of the company product. He is an expert in super-resolution computational imaging processes and has deployed software used for monitoring locations such as schools, airports, and military bases. Vice President of Business Development Marc Munford has extensive experience working with tech startups, including a role as co-founder of NetDrive, the first internet personal storage service. Finally, Professor Dieter Koller works part-time with Epilog from Germany. He holds a PhD in computer science and physics from the Karlsruhe Institute of Technology and conducted postdoctoral work on vision-based car tracking and tracking in video sequences at the University of California at Berkeley and Caltech. Generally, the team has the levels of experience in tech that are quite appropriate for their roles at Epilog.

There’s quite a lot of interest in the applications for computer vision technology, given the vast benefits automation has already generated for the economy. To that end, Epilog needs to set itself apart. The company has picked up nine patents to protect its products with more pending — for example, a pending patent for its health diagnostic camera, Tempo.

Epilog has established a partnership with Jabil to scale manufacturing and lower costs while still providing a system that provides a cost-performance improvement of more than 10 times over existing vision systems. Existing offerings generally just don’t pick up nearly as much information as the human eye, but Epilog is changing that. Although 8K has been called extravagant and pointless, when it comes to gathering information for steering a vehicle, that level of high resolution really matters. Even so, it isn’t being offered right now.

Major competitors in the computer vision space include such giants as NVIDIA, Intel, and Apple, but the good news in that regard is that after years of development in a capital-intensive space, Epilog’s patents set it up well for acquisition by one of these larger companies. 

Although Epilog was officially incorporated in 2010, most activity at the company has been happening from 2015 onwards. The company has taken in just $9,990 in total revenue but thanks to smart management has kept liabilities down to $555,316. Prior fundraising has been successful with $1,069,999 raised on StartEngine in mid-2020. Epilog has entered into beta trials for its Tempo system with various medical offices and other places of business. It also has leads on clients like airports and metro areas to use Luma for queue management. Through a partnership with manufacturer Jabil, Epilog has attained rapid scaling of its SideCar product. Overall, Epilog has laid a solid foundation for itself, but it has yet to see that work begin to pay off in a financial sense.

As Epilog continues towards commercialization and enters its products into the testing phase, investors should be leery of time risk. The kinds of markets it intends to break into — automated driving and automated monitoring — are highly regulated. Overcoming those hurdles on the corporate and consumer level could take years, so there is something of a time concern. In addition, as with any product yet to actually complete development, there is always the chance that it could not be as effective or efficient as the company predicts. When it comes to computer vision, high standards are absolutely demanded.

Looking at a deal with a rapidly-increased valuation and relatively few revenue-generating verticals in the near future, it’s prudent to be cautious. There are significant barriers in the way of widespread adoption of computer vision and not just technological ones. Consumer wariness and government regulation are phenomena with real impact on the adoption of these technologies, and ongoing woes in the auto industry — due to chip shortages — are putting pressure on Epilog’s highest-priority market.

Investors should be wary of investing in a product that is still testing after years of development and has yet to generate any significant revenue. Considering the hurdles of regulation and potential competition, Epilog still faces a long road ahead before generating returns for investors.

It’s encouraging to see a startup with tech that is applicable across several verticals, and Epilog is providing that. Queue management, diagnostic monitoring, and self-driving cars are all quite utilitarian and useful to a variety of industries. Now that Epilog has developed high-power, patent-protected tech, it is ideally positioned for establishing partnerships or even reaching an acquisition deal. In early 2020, Facebook acquired London-based Scape Technologies for $40 million, which developed 3D map infrastructure — very similar to what Epilog does and might be able to do in the future.

Epilog is a tech startup raising funds for development of its digital vision technology, which is of a quality on par with what can be perceived by the human eye. While the tech has applications across a number of verticals, the startup’s primary focus at this time is on driver assistance. Its patent-protected 8K camera tech is also being used for a remote health diagnostic tool called Tempo, created in response to the COVID-19 pandemic. 

After years of development, the company has partnered with a manufacturer to drive down costs on its Luma devkit. Despite that progress and a fruitful raise last year, Epilog is still going through the testing phase for its products, and its pre-money valuation has risen significantly from a prior raise in 2020. Development has proven to be quite capital-intensive. After securing extensive patent-protection, though, Epilog could be well-positioned for acquisition by any of many companies interested in computer vision technology. Therefore, Epilog is a Neutral Deal.

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Analysis written by Benjamin Potts.