How viable is Control4 as a company?

[bog]

Is Control4 cash flow positive or do they still rely on venture capital?

When was their last round of funding?

[zaphod]

Good questions since pretty much any business even remotely connected to construction has been hammered and I would think that there is a correlation between housing starts and C4 revenue. When you go the C4 web site it lists "For New Homes" as the first of five types of solutions so one would think it is the most important if it is getting first billing.

[bog]

It's no secret that Control4 relies on venture capital. I believe June 2008 was their last round of funding for $20 million from Foundation Capital (their largest investor).

Any company not cash flow positive and without a serious commitment from venture capitalists is at risk of collapsing. This would be devastating for consumers who have invested so much time and money.

The best way to protect consumers (and dealers!) would be to open up third-party development and put their source code into escrow to be released into the public domain should they go bankrupt.

During these economic times I am very concerned about Control4 and my investment of time and money in their products. I wont be saatisfied with unsubstatiated claims of "they'll be fine".

What do you think Control4 is doing to be more self-sustaining? What more could/should they be doing? Did they find a Flash action script developer yet? How fast were they burning through cash before they laid off 10% of their staff last yet?

[RyanE]

Control4 obviously doesn't make public statements about these sorts of things, and I don't speak for the company on funding issues.

These are certainly concerns with any company, start-up mode or not. As far as the 10% layoff, nearly none of it was from engineering, and the company is still very proactive and forward-looking in terms of development.

Satisfied or not, until Control4 becomes a public company or is purchased by one, unfortunately, all I can offer is an unsubstantiated claim of 'Control4 will be fine'.

Spreading FUD about Control4 is pretty much pointless, because as a private company, you can't know that there's doom ahead any better than you can know that things are all rosy.

Control4 just held a quarterly all hands meeting, and *I'm* satisfied, unfortunately, you all don't get invited to those meetings.

Like any company, Control4 has challenges ahead, personally I think Control4 is well prepared to meet them.

RyanE

[Max]

If you look at what they've been doing from a business strategy, diversifying from a dealer network focused on residential home projects into lodging/hospitality, you have to expect that they are investing semi-heavily into both additional product development and channel development. Channels are expensive to develop but given the price point and functionality of Control 4 vs. the more expensive competition (DMX, Crestron, etc), this is an intelligent move by the management team.

I'm on a Board with a gentleman that use to run DMX and we discussed C4. Basically, DMX/Crestron have a limited target market where C4 addresses a larger market segment. In times where people are conservative where/how much they spend, I would expect C4 to fare much better than the competition.

Looking at their investors, they have fairly large funds that are relatively new which means they show have sufficient dry powder to support C4 through these times. In the meantime, being apparently well capitalized (which sufficient dry powder in reserve) they should be able to transition through these times and likely come out a lot stronger than many of their competition. One of the benefits of a downturn is if your competition suffers, you can frequently pick up quality personnel and more reasonable compensation levels.

The net is based on what you can see, I would anticipate C4 being around for a long time. Absent the economy completely falling off a cliff, an adverse intellectual property lawsuit, overspending on G&A expenses, or other significant event, I wouldn't be worrying about them much at this point. As I mentioned before, my day job is as an institutional investor for a fund (not an investor in C4) and if a deal like C4 came across, we would be very interested in taking a look at it, even in these times.

Perhaps a bit intangible support for you still, but they have an attractive profile for investors and I would expect that they will be able to continue to attract capital so long as they execute. Given the new products, new market segment, etc. those are the types of measureable milestones we expect of companies at this stage. If they did go down for some reason, I would expect someone to pick up the intellectual property (e.g. software code, patents, etc) in a bankruptcy/liquidation sale and I would expect some version to continue. In the meantime, I'm sure the open source community might also tackle reverse engineering some of it as well.

[waynechi]

I would concur with Max. C4 is past a stage where they would go completely under without someone buying their products and user base. Most companies in this space have slowed their R&D investment and rollout schedule a little as a way to play it safe, and C4 fits that bill. Still new Composer updates are coming as fast and furiously as ever, and they just got a big website update, so they are not showing real signs of distress on that front.

Like any VC funded company thats been in the portfolio a few years I would have to think that the investors are looking for someplace to sell, but that's not a bad thing.

Net-net, I have been wondering the same thing and haven't seen anything that's worried me.... I wouldnt hesitate to by C4 based on that issue.