 Hey, welcome back everybody. Jeff Frick here with theCUBE. You know, one of our favorite things to do is go out and visit a lot of the cool innovation companies that are all around us here in Silicon Valley. It's a real blessing to be here, we can do it. And so we're really excited to come here today to Nightscope. They're doing so many interesting things that combine software, hardware, autonomous vehicles, artificial intelligence, security, a lot of the topics that we talk about all the time, sometimes in the general terms, and here it's real. You can feel it, you can touch it, don't try to knock it over, it weighs too much, but we're excited to be here. And we've got the Foundries of Chairman and CEO, William Santana Lee of Nightscope. Great to see you, William. Welcome to Nightscope headquarters. Get to have you here. Absolutely. Well, first off, congratulations on the recently announced funding. That's good news. Thank you, thank you. That's our fourth round of funding. So we're using that capital to scale across the country. We're now holding contracts in about 14 states. And the company's now starting to accelerate our growth. So we're pretty excited about that. So not to do the whole history, but kind of where have you come up, kind of when did you start, when did the first one get deployed, and now you're about ready to launch your fourth model? Oh, sure, sure. Company started April of 13. When we started, basically, we got the first initial round of comments from all sorts of interesting folks. Bill, you're out of your mind. This will never work. Security is not an investment thesis. You'll need $15 million to build the first one. Oh, and by the way, it's too complicated. It's hardware and software, you should pick one. And like most good entrepreneurs, we ignored everyone and just did what we said we were gonna go do. So we deployed in the real world, let's see, May of 15 was the first one that actually was out operating 24-7. And that seems like so long ago, but also just recently as well. But you really have bitten off a huge chunk of challenges, right? Because you have the hardware piece, and they're not only hardware like a computer, but it's a vehicle, it goes outside, it's in the weather. You've got the software piece, you've got the sensors piece, you've got the monitoring. So you did bite off quite a chunk, and then you're really delivering it as a solution. So you're putting all these things together very much like the first iPhone. Yeah, probably two comments. One, clients don't care about all that. They just want their problem fixed, and so whatever it's gonna take to fix that problem in their particular case, it's crime. And second, I'm an ex Ford Motor Company executive. Spent 10 years in Detroit, little bit fluent in I'll say large-scale hardware outdoors. And for me, these are a lot easier than building a car. Let's put it that way. That's right, no people, no glass, no- No airbags, all kinds of stuff. Safety highway things. Okay, but it begs the question, how did you get to the design? Because they're very distinctive. They do look like RTD to some of the mid-tier ones. You've got the stationery and this really cool Jeep looking one back here. How did you come up with designs? What were some of your initial thoughts? Well, first of all, we design, we engineer, we build, we deploy, we support. Everything's done in-house. So maybe a little background. We have a challenge similar to a law enforcement officer. A law enforcement officer needs a command, respect, and authority, shiny shoes, stand up straight, but you cannot scare grandma, you cannot scare the child, right? These are not military products, so you need to be able to operate within society. So we spent maybe way too much time worrying about every little font, every radius, every surface, color treatments, everything else, because part of it is putting that physical presence there to deter negative behavior, but at the same time it needs to be inviting enough to be accepted by society. So that one, in May of 15, when we first put the one out, we were worried like what's gonna happen, are people gonna go nuts or what we didn't expect, and ended up happening, was a massive amount of robot selfies. Everyone's wanting to take a picture with the robot. So maybe to put it a different way, if you showed up today, and the machines patrolling outside were painted black, with red LEDs glowing with an ominous sound moving 10 times faster than they, we probably wouldn't be sitting here talking, right? So we had to spend a lot of time. I was scared by the white one when I pulled in this afternoon, like oh. But we need to provide, again, that physical presence and deterrence, but it needs to be accepted by society. The next thing I think is really interesting is the business model. And I'm sure when you talk to your investors after they told you you were crazy for doing hardware and software integrated system and manufacturing, they probably said what's the business model? How are you gonna support these things? How expensive are they gonna be for a capital investment point of view? How about maintenance and ongoing upgrades? But you said forget that, we're gonna go as a service. So I wonder if you could tell us a little bit about that decision and how that's impacted your customer relationships. So we offer our technology and a machine as a service business model. So that gives you the machine, the data transfer, data storage, the analysis, user interface, all the hardware, software upgrades, all the maintenance service, everything, one throat to choke, we're responsible. So one of the things we wanted to do for our clients is we don't want you setting up the robot maintenance service division, right? We need, they're already busy. They got plenty on their plate, all the chief security officers and their staffs. So we need to be able to empower them and not add more workload to them. So from a service standpoint, that works well. Two, we're at the bleeding cutting edge of technology. If we were to offer it on a purchase type of arrangement, let's just say I spent a lot of time in Detroit, we could barely cover a cost of capital selling hardware. And that's probably not a good business model to go after long term. So if we can provide a lot more value to the client and then us retain the authority over the asset and be able to upgrade it and as most technology around here in Silicon Valley, it's better and better and better and better. As Mercedes mentioned, we drop new software every two weeks, new hardware every three, six, nine months. So the clients continue to get improved technology. And then from a security standpoint, we want to make sure, given the nature of the product that all the assets are under our control. It's interesting too. I think something that's not spoken about enough is when you have a services relationship with your client and I assume it's a monthly or a quarterly or whatever you structure your payment system, it forces you to maintain a great relationship but forces you to continue to deliver value when they are writing that check once a month or once a quarter. The feedback loop is really important. So we signed one to three year long contracts. We had quarterly business reviews with our clients and we get to learn real time and we get real time input. So yeah, after the transaction, the contract sign, that's when the work begins, not when we get to celebrate. We get to celebrate when our clients win. Right. So don't tell me any secret sauce that you can't tell me but I'm just curious as to where some of the real significant challenges are that people maybe don't appreciate. Is it the integration of these very sensors? Is it the way that it moves? I mean, what are some of the real things that make a night scope autonomous security robot special? So as an ex-auto executive, I think self-driving technology is gonna turn the world completely upside down and I'm really excited to see all the massive amount R and D efforts, small, medium, large and extra large that have been going on. However, we're the only company in the world that's actually scaling autonomous technology in the real world with real clients doing real work. It's easy to go build prototypes but you want machines running 24-7 in the rain with cats, dogs, people, cars, trucks, goats and sheeps and I don't know what else we've seen. That's a whole other level of engineering and fortunately we've been able to operate in that manner for a very long time. Depending on who you believe, autonomous or self-driving vehicles require a failover, a human one, meaning 30 to 70% of the times the algorithms fail, someone needs to take over. Despite what some people think, there's nobody in there. Right. Are you sure? We gotta be right 100% of the time. Right, right. And 24-7 and you gotta do a good enough job that a client's gonna pay you for it. Right. And that requires a different level of scale and a different level of discipline. Another question in terms of customer adoption. Well, to back up what you just said, I mean that's part of the benefit of your services model, right? Is that you're getting feedback, you get these things in the field like you said as you've shipped them to heat and snow and this and that you're learning all the time so you actually benefit from that relationship too as opposed to just selling them something. I'm curious from the customer adoption point of view, what was the biggest hurdle that people just didn't, either didn't buy it, didn't expect it, I got great security guards, before Mercedes told me that they'd turn over 300% a year but clearly it's a new technology. It's something new, something different. I would imagine there was all kind of interesting kind of challenges to overcome. One is just a fundamental structure of our country. Most people don't realize that maybe different than the Department of Defense. DoD has a $600 billion budget. There is one person in charge. There's a massive industrial complex to build your new favorite submarine jet fighter or what have you and they give the troops every level of capability you might ever imagine and I'm fine with that. What I have a problem with is we have two million law enforcement professionals and security guards that get up every morning on our own soil and willing to take a bullet for you and your family and the level of technology that we provide to them as a country is certainly beneath the dignity of this nation and so what I expect to happen is for us to give them the right set of tools for them to do their jobs much more effectively. The Department of Justice and Homeland Security have no federal jurisdiction over the 19,000 law enforcement agencies and 8,000 private security firms. So there's literally no one in charge and there's basically been no innovation in this space. So when you ask me how are you gonna get this into a client's hands? Well, we basically took the thing that was on the movie screen and is now operating autonomously on your premises and that takes a little bit of gall to do that. Probably the best way is show and tell. You can do as many video conferences and calls and what have you but us bringing a machine to their premises and instead of having a discussion with just the Chief Security Officer or the Director of Physical Security or whatever, it's like, hey, the robot's here and 50 people come streaming downstairs and it's purchasing, it's legal, it's finance, it's the CFO, it's everybody who has a stake somehow of this new massive device patrolling their campus. So you get that buy-in that way and then now that we've got a track record of crime fighting it becomes a little bit easier. So we've had in some cases criminal incidents where a client is experiencing one to two vehicle thefts, assault, batter, you name it, and their premises. We put the machine there and for the last year it's all gone down to zero, as was Mercedes had mentioned earlier and that makes a big impact. Now when the staff says or the guards, this area is so crime-ridden, I won't even patrol. Now this machine's come here and actually made the environment that much safer. They're gonna renew that contract, right? And so the adoption starts getting stronger just from our own wins and so we've now been in service and long enough they're starting to get renewals and the renewals are based on merit. We had five break-ins or negative things happen a month now it's gone down to two to one to zero. That makes a huge difference and it's extremely cost-effective. Now what happens, I just wanna follow up, so say it is a really rough neighborhood and your machine is patrolling in the parking lot. Certainly some bad guys must come up and hit it with a baseball bat or something. I mean, there's gotta be a tough kind of initial reaction in some of these rough neighborhoods. I mean, how do they respond? So you wanna think of this as two different things. One, these are tools for the guards to use. So majority of our clients are looking at this as adding additional capability of force multiplier to give really smart eyes and ears for the security guards to cover more ground and be able to do their jobs again much more effectively. In some cases, the physical presence deters a lot of the behavior. So simply if I put a marked law enforcement vehicle in front of your home or your office, criminal behavior changes, right? Most of these guys and they're mostly guys are literally just trying to get away with something and looking for the path of least resistance, right? You walk up like you did today, you pull into a parking lot. I have no idea what this thing does. I don't know what it's recording. I'll go to the next part of life. And that's exactly what happens. And so clients get to see that, that there's a net positive brand enhancing effect. So manufacturing plant A puts one in Kentucky and it's like, hey, this is kind of working. Let me call my sister plant in Mississippi and let's put one there. Mall A in San Jose decides, this is actually working really well. These guys have helped us a lot. In one case for a different client, we were able to have assist a law enforcement agency in issuing an arrest warrant for a sexual predator, right? That's a huge win for us to be able to do that. Or there was a someone that showed up with a shotgun to basically steal someone's car. We captured all the video and everything else that nothing above 12 stories looking at the top of your head is gonna be very helpful in doing, gave the evidence to law enforcement and the guy was caught before he crossed the state line. We helped a security guard apprehend a thief in a retail environment. The list goes on and on and on. So you start having those kinds of wins. The next mall calls up and says, hey, I heard things went really well here. How can we get a couple over here? And that's where we are now. We're starting to really accelerate the growth of the company. So I would be remiss if I didn't ask the obligatory security question in terms of getting hacked. So. Hacked. Everyone who wants to hack the machine, they take it home. So a little bit about how does the communications work? Do they work autonomously? Do they work in teams? And clearly someone's gonna sit outside with the laptop and on their second trip back to the parking lot and say, I'm gonna crack this code. So we try to do a few things. One, because we don't sell these things outright, they're always in our control. That just has a basic advantage there. Second, we change it often. So that gives us another advantage. Third, the team's working on hardening a lot of the stuff, making sure stuff's encrypted and we only transfer a certain amount of data that we really need or don't need type of things. And then we hire white hat hackers to try to hack the system and we make the changes accordingly. Everything, as you know, is hackable, but we try to do our job as best possible to make these systems as secure as possible. And so for the not hacker at the mall deployment, I mean, how should people interact with these things? How do people interact with these things in an environment where it's not necessarily the security guard who's trained and knows exactly what the capabilities are, but just kind of in the wild, whether it be in a parking lot or at the mall? I think there's a bunch of stuff. First, it's a kid magnet, right? So parents can now explain in the real world why you should probably be studying math and science and engineering is a really good thing. Second, we're about to release in production a concierge feature that allows a two-way dialogue between the human and the machine. So, you know, the mall's closing in 30 minutes or where is Macy's or, you know, what genes are on sale today, that sort of thing. We can also do that for authentication at a entrance for manufacturing facility. So let's say there's a K1 station and at the entrance for a manufacturing plant, the transmission parts, 18-wheeler shows up at three o'clock in the morning, compress the intercom button, have a two-way dialogue, get authenticated, we have the plates, we've got all the other signatures that we need, digital or otherwise, to allow that truck in, right? So there's all kinds of opportunities, again, to give the guards much more capability. So to go back to the math, you have two million guards and officers trying to secure 300 million people across 50 states. I don't care what math you're gonna come up with, it doesn't work. And oh, by the way, the population keeps growing and the tax base can't afford funding this stuff and you need something that's gonna be the game changer and this is that game changer. Crime has a trillion dollar negative economic impact on the U.S. every single year. It's a hidden tax we all pay in blood, tears and treasure and somehow society has found it acceptable that at these levels, it's okay. And I don't know about you, but I'm sick and tired of waking up every morning, looking on my newsfeed to find some horrific thing happen again and what do our political leaders do? We extend our thoughts and prayers. Hey, listen buddy, no amount of thoughts and prayers is gonna fix this problem. I've got a team of very dedicated engineers and patriots here working on trying to actually fix the problem, so we have the honor and privilege to be able to do that every single day here in Silicon Valley. Well, the passion comes through Bill and clearly it's a very important mission and congrats on the new funding and I can't wait to see how you deploy it. I appreciate it. All right. He's Bill, I'm Jeff. We're at Night's Go. Check it out, Mountain View, California. Thanks for watching. We'll catch you next time.