How Much is Worth? Establishing an IPO Valuation will be the second pure-play home automation IPO after Control4 (Nasdaq: CTRL). Potential valuation will draw from security RMR, SaaS acquisitions and of course IoT sentiment.'s acquisition of Building 36 will give it a DIY/retail home automation Z-Wave IP gateway that bypasses security dealers and professionally installed alarm panels ... a good move for a pre-IPO SHaaS (smart home as a service) provider.
Julie Jacobson · June 7, 2015

How much is, one of the original Internet of Things (IoT) companies, worth? That’s the million-dollar question – or maybe 900-million-dollar question – as the provider of SHaaS (smart home as a service) technology gears up for an IPO. When it goes public, will be only the second (worthwhile) pure-play home automation company to do so, following Control4 (Nasdaq: CTRL), which went public in 2013. provides only tiny hints as to valuation in its Form S-1, filed on May 22, 2015.

No price range was given for shares in the proposed $75 million public offering under the Nasdaq symbol ALRM; however, the filing does lay out outstanding shares, warrants, and options—in all about 77 million units come IPO time, taking into account that preferred shares will be converted into 35 million common shares (a financial person explains to me). On March 15, the S-1 notes, did a clean-up of its programs and authorized options in preparation for an IPO filing. At that time the company issued the options at $11.55, an amount that would have been calculated by an independent firm providing a valuation.

As such, it appears that values itself internally to be worth perhaps $850M to $900M. (Update: Figures do not take into consideration the $75M offering.)

RELATED: Poised for IPO; Files Form S-1 for $75M Offering

Last year, the Financial Times reported that ABS Capital, the private equity group that has owned since 2009, was “talking to banks about the best way to exit its investment and is also considering the possibility of a sale, according to people familiar with the process.”

The report cited “people familiar with the matter” who expected to be worth $1.5 billion to $2 billion. Then again, that was the time of hyper-valuation for Internet of Things companies.

The Times rightly noted then: “There has been a buzz around the sector since Google paid $3.2bn for Nest Labs ... [which] raised eyebrows among investors for what was perceived to be a high price.”

Nest went on to acquire Dropcam—a maker of nothing more than an IP camera—for $555 million. And then Samsung bought SmartThings for a slightly more reasonable but still hefty $200 million for an unproven start-up. is neither unproven nor a start-up. But it’s not worth $3.2 billion either. Financial folks interviewed for this piece thought $1.5 billion was even a stretch.

Here are some thoughts on how the investment community might value

In the end, of course, “The market is a funny mistress,” as one expert told me. “It will do what it wants at the moment.”

How much is worth? Whatever someone pays for it.

vs. Control4

Since Control4 is the closest comparable to, let’s start there.

Control4 makes professionally-installed solutions for the connected home, including subsystems such as lighting controls, multi-room audio/video, thermostats and a variety of interfaces from touchscreens to handheld remotes to keypads.

Like, Control4 enables remote home monitoring and control of cameras, thermostats, security and lighting. Unlike, Control4 also manages subsystems that does not touch—audio, video (TV) and motorized shades, for example.

Also unlike, Control4 enables rich integration, feedback and customization that is infinitely more robust than’s offering.

Both companies go to market through independent dealers as opposed to large service providers such as ADT (Pulse), Comcast (Xfinity Home) and AT&T (Digital Life).

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Opening/closing market cap on IPO day? Leave a comment below.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - will authorize virtually any qualified dealer. Control4 maintains tight control over its dealer base. sells software, including its cloud-based service and licenses for its SHaaS platform (although its hardware sales are increasing, now totaling 33% of revenue). Control4 sells hardware, which is somewhat misleading as the company’s real deliverable is software that happens to be encased in black boxes. enjoys a recurring revenue stream from more than two million end users. Control4’s recurring revenue is nominal through a remote monitoring service called 4Sight.

When Control4 went public, it had revenues similar to’s – over $100 million. Control4 at the time had never been profitable. On the other hand, boasted 2014 net income of $13.5 million and EBITDA of $28.3M.

Below is a table outlining the similarities and differences of the two companies.


As shown, there are many similarities between Control4 and, but looks much more attractive now than Control4 did in 2012/2013: is profitable. is scalable because of its cloud-based platform. has a steady stream of recurring revenue. had a higher trailing two-year revenue growth than Control4, although the trailing 12 months for Control4 fared slightly better.

Just looking at those numbers, it looks like should do better than Control4 did with an IPO. The big question is: How will Control4’s loss of value affect

Control4 had a market cap of more than $500 million on day 1 of the IPO; the company has lost about half its value since then.

If you go with 4.56x revenues for Control4 in 2013, that would give you a $762M valuation for CTRL currently is trading at about 2x 2014 FY revenues after a disappointing Q1 2015. In terms, that would be a $320M valuation, all things being equal besides revenue.

Of course, all things here are not equal. gets big bonus points for profitability, operating margins, recurring revenue, the lovable cloud and software, software, software.

The market is unlikely, I believe, to penalize for Control4’s uncharacteristically week quarter. So if you give the benefit of Control4’s IPO valuation (4.56x revenue), plus an arbitrary $100 to $200 million in bonus points ... we’re still looking at a valuation of $850M to $950M.

Later we delve into the softer side of’s IPO prospects – the opportunities and the challenges – but first: Some other valuation tools:


Institutional investors might view like a traditional SaaS (software as a service) provider in the IT space. There is a wealth of data in that sector. See, for example, this aptly named piece, “A Closer Look at SaaS Valuations.”

The study looks at several SaaS companies with pre-IPO trailing twelve months (TTM) revenues of about $80M. One chart shows that the median revenue multiple for companies with TTM growth of 10-20% ( is at 13.3%) is 4.7x, putting a valuation on of about $785 million.

I am told that 4.7x could be on the low side for SaaS providers, which may see valuations of 4x to 6x.

The study referenced here provides additional, useful data on SaaS valuations for 2014.

Security RMR

There are many years of data for the value of residential security accounts based on RMR, the recurring monthly revenue of dealers who charge for security monitoring and interactive home automation services like

Typical multiples for decent-sized security dealers with good accounts is about 30x to 40x RMR.

Exceptional multiples might be around 60x for a high volume of high-quality accounts (e.g., solid contracts, low historical attrition rates). Vivint, for example, fetched multiples of 50x to 60x RMR when it sold to Blackstone Capital in 2012.

We expect big things from on the DIY/retail front, as the company has acquired/is acquiring Building 36 Technologies, a start-up maker of a Z-Wave IP gateway that uses as the back end.

Earlier this year, LiveWatch – a hybrid DIY/Pro security reseller that happens to use on the back end – sold for more than 70x RMR to Monitronics, a giant central monitoring station and subsidiary of Ascent Capital Group.

But Monitronics in that case was buying more than accounts; It acquired a scalable platform for DIY sales and service. Likewise, would be selling much more than paper. would probably argue for (and deserve) the same 70x RMR, for a valuation of $700M for its software/licensing alone. Then there’s hardware sales of $55M. Valuing hardware at 1.5x to 3x ($80M to $160M), we again arrive at a potential valuation of $850M to $900M.

See this excellent 2012 report (pdf) on alarm company valuation by Barnes & Associates.

Other Related Transactions

Since Control4’s IPO, several equity events have occurred that might inform a valuation for

Savant is a newer home control company that started out at the high end like Crestron, but also like Crestron is coming out with more affordable systems that are easier to configure than ever. That puts it into a very similar category as Control4.

Last year, KKR acquired a $90M stake in Savant. That investment suggested a $215M valuation for Savant, according to the Wall Street Journal. At that time, Control4 had a market cap of $350M, or roughly 2.7x revenues.

Savant revenues then were rumored to be about $100M but I’ve heard that the sales were more like $65M to $75M at the time, making the valuation about 3x revenues.

Earlier this year, AlertMe was acquired by British Gas for £44M ($67M). AlertMe is the SHaaS platform that has powered Lowe’s Iris, which most likely has sold fewer than 100,000 units since its 2013 lunch. AlertMe also powers an energy management service from British Gas, currently deployed to about 100,000 customers.

AlertMe is quite similar to in the platform it provides, but unlike, it has sold its solution to major providers (only two that we know of), not thousands of independent dealers.

  About the Author

Julie Jacobson is founding editor of CE Pro, the leading media brand for the home-technology channel. She has covered the smart-home industry since 1994, long before there was much of an Internet, let alone an Internet of things. Currently she studies, speaks, writes and rabble-rouses in the areas of home automation, security, networked A/V, wellness-related technology, biophilic design, and the business of home technology. Julie majored in Economics at the University of Michigan, spent a year abroad at Cambridge University, and earned an MBA from the University of Texas at Austin. She is a recipient of the annual CTA TechHome Leadership Award, and a CEDIA Fellows honoree. A washed-up Ultimate Frisbee player, Julie currently resides in San Antonio, Texas and sometimes St. Paul, Minn. Follow on Twitter: @juliejacobson Email Julie at

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  Article Topics

Security · News · · Control4 · Honeywell · iControl · IPO · All Topics
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