Top Deal: Convenient and Affordable Home Security

$80M

Key Stats: Kangaroo on Republic

Valuation Cap

$80M

Amount Raised

$82,650

Number of Investors

415

Minimum Raise

$50,000

Maximum Raise

$1,070,000

Likelihood of Max Unlikely
Start Date

05/22/2020

Stop Date

09/15/2020

Days Remaining

67

Security Type

SAFE

Investment Minimum

$150

Deal Analytics

Click Here

Summary

Kangaroo has been selected as a “Top Deal” by KingsCrowd. This distinction is reserved for deals selected into the top 10% of our due diligence funnel. If you have questions regarding our deal diligence and selection methodology please reach out to hello@kingscrowd.com.

The Problem

Rates of violent crime and property theft have decreased significantly in recent years. While Americans are less concerned about being robbed, 39% still fear that their homes will be burglarized when they aren’t there and 25% fear being a victim of burglary while present at home. Roughly 325,000 homes are broken into each year. Property crimes in 2015 caused $14.3 billion in losses. 

 

Given lingering concern about crime, smart home security systems are all the rage. The global smart home security market is expected to reach $4.37 billion in 2022, with an annual growth rate of almost 20% over the next several years. Despite this boom, only 17% of houses in America had a security system in 2017. This could indicate that the large majority of Americans don’t feel served by or are uninterested in current market options. 

 

Indeed, current smart home security systems are unappealing to many Americans due to their cost. Complete home security packages commonly cost hundreds of dollars to purchase, install, and maintain through monthly contracts. Despite the introduction of mass-market smart systems like Ring (purchased by Amazon in 2018), security is not yet an affordable, conveniently-connected possibility for most American families. 

The Solution

Kangaroo is manufacturing affordable home security hardware that connects to users’ mobile devices for a convenient, cost-effective security solution. Kangaroo products differ from other smart home security systems in that hardware products and ongoing monitoring subscription plans are simple and affordable. Additionally, their in-home security cameras offer a level of privacy unique in the market. 

 

With regard to privacy, Kangaroo has patented an in-home security camera design that shuts the camera off (via an opaque privacy screen that automatically slides over the lens) when users are at home and don’t need monitoring. This design should appeal to homeowners who are interested in an in-home monitoring system but are concerned that the video feed of their family life could be hacked. 

 

The Kangaroo privacy camera is one in a full line of connected security products that homeowners can mix and match to fit their unique needs. Other products include a front door security kit with doorbell camera, motion sensors and flood sensors, and an alarm siren with a disarming keypad. Products range from $15-$80 singly. The all-inclusive starter kit is a mere $149. Users can connect these products to their Kangaroo mobile app, which provides simple device control for free. Kangaroo’s “Complete” subscription plan for $10 per month includes monitoring, Alexa and Google Assistant integration, motion capture, cloud storage, and more features included in most security monitoring packages. 

 

Kangaroo products are currently sold at Office Depot, Micro Center, and QVC. The company is in talks with Walmart and Home Depot for further distribution. Kangaroo is also pursuing partnerships with insurance companies to sell security products alongside home insurance packages. Insurance provider Hippo signed on as a pilot partner, and Kangaroo reports progress with 27 more insurance partnerships. 

 

Kangaroo was founded in 2018 and has raised $18 million in venture capital investment from leading firms Greycroft and Lerer Hippeau. The company spent its first two years building product infrastructure and conducting product and market channel testing. Kangaroo has welcomed over 20,000 users over the history of the company, with 1,500 daily active users as of spring 2020. Financial statements show that Kangaroo has generated $475,000 in revenue in 2019. Combined with significant cost of goods sold and other expenses, the company operated at a net loss of just over $7 million last year. 

Team

Maxiumus Yaney is the CEO and Co-Founder of Kangaroo. He has enjoyed two successful exits in previous entrepreneurial ventures, selling Titan Aerospace to Google and growing Mohawk Group to over $100 million in revenue and an IPO. Prospective investors should note that Yaney was convicted of felony conspiracy to commit bank and wire fraud in 2015, related to a previous real estate venture. 

 

Two of Yaney’s three co-founders were also involved with Yaney’s previous ventures, Titan Aerospace and Mohawk Group. Dhruv Garg is Kangaroo’s President and Co-Founder. He previously worked in engineering as well as research and development for the group’s previous businesses. James Xu, Kangaroo’s CTO and Co-Founder, was also an engineer in those previous projects. Kangaroo’s fourth co-founder was not tied to Yaney, Garg, and Xu’s previous businesses. Victor Meng, GM China and Co-Founder, previously led engineering at Sonos, Flex, and Siemens before joining Kangaroo to oversee product manufacturing in China. 

Growth Plan

After spending two years focused on product development and initial go-to-market research, Kangaroo is preparing to enter the market aggressively. With a particular focus on its patented privacy camera and video doorbell (the latter providing a more affordable alternative to the popular Ring doorbell), Kangaroo plans to expand sales via retail distribution, insurance partnerships, and the company’s website. 

 

Kangaroo plans to devote the bulk of capital raised in this offering toward inventory buildup to meet demand from increased marketing, and the remainder of the capital to conduct those marketing activities. In the long term, the company has clear plans to compete with Ring and even legacy providers like ADT and Vivint.

Why We Like it

Support from leading venture capitalists: Greycroft and Lerer Hippeau are well-regarded consumer venture capitalists with a history of backing successful brands like Acorns, Goop, Allbirds, Casper, and many more. Kangaroo’s $18 million raise from those firms is a very strong endorsement of the team, product, and strategy. Beyond the endorsement, these leading investors can connect Kangaroo with vital networks that will advantage the company in key growth areas like hiring and business development.

 

Proven team returning for another collaborative venture: Three of Kangaroo’s four co-founders were key team members at two previous startups that achieved successful exits to Google and via IPO. The team has proven expertise in product development, engineering, manufacturing, and brand-building. They are presumably experienced in dividing managerial areas amongst themselves for maximum results. The team also has built-in networks at Google, Sonos, Siemens, and other leading companies in the smart home space, an asset in developing products that are integrated with other market leaders.

 

Focus on subscription revenue: Kangaroo’s smart home devices are sold for below-market rates, which negatively impacts profit margin. However, Kangaroo is explicit about its focus on subscription revenue as the long-term driver of the business. After acquiring users via hardware purchase, Kangaroo can continue to reap $100 per year in subscription revenue per household, a high-margin revenue line that has been proven by many leading consumer companies to cause rapid revenue growth with minimal expense. 

The Rating: Top Deal

The smart home security space is booming, and consumers are seeking a connected security solution that is affordable and convenient. Kangaroo’s proven co-founders are meeting that need with simple, low-cost devices that have thoughtful and distinctive features that prioritize privacy alongside security. Moreover, the company has been heartily endorsed by leading venture capital firms and is focused more on recurring subscription revenue than low-margin hardware sales. Therefore, Kangaroo is a Top Deal. 

 

Kingscrowd has rated Kangaroo a Top Deal with a caveat that prospective investors should consider carefully. Kangaroo CEO and Co-Founder Maximus Yaney pled guilty to felony conspiracy to commit bank and wire fraud in 2015. He was sentenced to eighteen months in federal prison, and ordered to pay over $7 million in restitution and fines. Kangaroo states that “Mr. Yaney served his sentence in full and has paid the restitution and fines in full in accordance with the Court’s sentence.” More information on Yaney’s background can be found on his website here.  

 

In careful consideration of the facts surrounding Kangaroo’s business model, traction, and interest from outside investors, we have decided to award the company Top Deal status despite Yaney’s criminal conviction. Yaney is forthright about his misstep, and the investors at Greycroft and Lerer Hippeau undoubtedly spent time vetting him before welcoming Kangaroo into their portfolios. We believe that Kangaroo is an attractive opportunity for investors, not least because of the company’s exit potential. Amazon’s acquisition of Ring for over $1 billion in 2018 is a clear example of the value of smart home security solutions. Kangaroo is strongly connected to Google and is in distribution talks with Walmart, providing additional opportunities for acquisition by market leaders invested in smart home tech and home delivery services, respectively.  

 

Due to Kangaroo’s impressive roster of co-founders and investors, the company’s focus on subscription revenue, and potential exit opportunities, Kangaroo is a Top Deal. 

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About: Katy dolan

Katy is a marketing and research consultant to startups (including VC-backed companies, small businesses, and advocacy movements). With experience in tech, venture capital, politics, and non-profits, Katy partners with clients to strategize and execute compelling campaigns focused on user experience and empathetic narrative. Katy graduated cum laude from Harvard College with an AB in Sociology.

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