S7E3: William Santana Li and Knightscope are Using Robots to Drop Crime Rates on a Local and National Level

If you're a good person, you're smart, you've got a wonderful idea, you should not have to be going through this level of stupidity to put some capital to work. We just did the public listing on NASDAQ under ticker symbol KSCP earlier this year. And just before the listing, we had raised north of $120 million from 35,000 investors. No VCs, no hedge funds, no PE shops.

Welcome back to the 7th season of The Room Podcast. If you've been here for a while, you might remember Claudia and me have been on a journey to navigate our early 20s careers in Silicon Valley. We started this podcast about 2 years ago now, which is pretty wild, in the middle of a pandemic, recording from our bedrooms. Since then, a lot has changed both in the macro economy as well as in our own jobs and careers. So let's get you up to date on what's going on with us. Since 2020, Claudia has left Uber and become a full-time co-CEO and founder of Pryve, a startup unlocking and disrupting recurring revenue for e-commerce brands.

And Madison is now a partner over seed investments at Defy VC, an early-stage venture firm in the Bay Area. Totally crushing it, and I'm so lucky to have her as an investor in Pryve. We're two women navigating our careers and asking the people who inspire us to shed light on their stories. Unlocking Access starts with a conversation and context. We open the door to moments in technology history that traditionally happen behind closed doors. Mads, can you tell us what to look forward to this season?

Absolutely. This season, you can expect a really exciting 8-person roster of founders that you've definitely heard of. First up is Spencer Raskov and his journey to building Zillow. Second, we have Kelsey Millard and her vision for the future of primary care, which is being empowered by the Sitka platform. We also have a look into the future of the modern data stack with Kashish Gupta, the founder of Highspot, where he's going to share his belief in the need for reverse ETL. And amidst a backdrop of a lot of macroeconomic turmoil, our guests are going to bring you into the room where they're making important decisions on navigating a downturn. In real time. Claudia, where can people find more about our key themes and guests each week?

Great question, Mads. Every week we launch a newsletter and related resources alongside the episode that helps our listeners get tactical. If you're local to SF, hit us up. We have an exciting schedule of in-person events, fireside chats, and pop-ups where we would love to meet you. Well, sounds like we're ready to open the door to this week's room.

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Welcome back to another episode of The Room Podcast. We are so excited to share another inspiring conversation with the CEO and founder of publicly traded company Knightscope, William Santana Lee. Knightscope is on a mission to reduce crime in America with robots. If you've ever seen a robot patrolling a sidewalk near you, That robot is the product of Knightscope, which deploys fleets of robots as security guards across the country. Knightscope IPO'd in January of this year as it charges on in reshaping the future of security. On today's conversation with Bill, we chat about his unique founding story after being an entrepreneur and executive for 30 years and dive into topics such as different ways to get funded, how robots are fighting crime in the US, and the future of robotics and technology in public safety. Bill, thank you so much for joining us on the podcast today. We'd love to start at the beginning before we dive into the founding story of Nightscope. You went to Carnegie Mellon to study mechanical and electrical engineering and then spent the first 9 years of your career at Ford rising through the ranks until becoming the global director of M&A. Your experience at Ford then dovetailed into decades of experience as a founder, COO, CEO, chairman at various companies in the vehicle and motor space. I'm curious, did you have interest in this specific sector from a young age?

One of the things that drove me to automotive was it's one of the very few sectors where design, brand, engineering, finance, manufacturing, like it all comes together into something highly complex, but that has an emotional component to it. I remember interviewing with, I don't know, it was a bank or something. I was like, what am I gonna worry about? Like I installed the ATM machine today. Like this is not gonna get me excited, but hey, we built that and you get to get in it and drive it. That's a whole other experience. So that whole combination of technology and brand and design and everything always fascinated me, and actually building something tangible.

Early in my career, I thought I actually wanted to go into kind of physical product space as well, and then ended up as a product manager at Uber. And the one thing that made me excited about that company was the fact that there was a physical aspect to it of actual rides happening, cars driving down the street. And so I think it's I think it's a really interesting way to think around just how to disrupt the world around us, having not only the tech component, but also the physical. Madison and I live in San Francisco, and I walk home from work every day to my apartment by the Embarcadero. And every day I run into a Knightscope robot in front of Gap Inc.'s offices, right on the Embarcadero. And it's funny, because I had a friend who was visiting from New York recently, and we did the same walk. And she just stopped, took an Instagram video, texted people, took multiple photos. And it was a moment where I was having that physical sort of intervention and sort of experience in real life really yielded a very different impact than just scrolling and seeing something downloaded from the cloud, so to speak.

You're touching on something that's a little bit of a hot button for me. I may offend Madison here or may not, we'll see. But a bunch of investors usually run around, especially in Silicon Valley, all hardware is hard, hardware is hard. This is infuriating to me. It's like, oh, a bunch of lawyers decided to go work on open heart surgery. They started a company to do it and then they're like, oh my God, it's like really hard. It's of course it's hard. You have no experience in it. And I think that's one of the lopsided things in the venture community is like $100 billion goes into startups every year, plus or minus. And you've got way too much focus on is it software or hardware as opposed to can we fix this problem regardless of what discipline we're going to go focus on? And I think that needs to get corrected here at some point because the world, I'm sorry, doesn't operate completely in the cloud.

I don't disagree with that perspective. I think beyond that though is really every investor should know what they're good at and know what they're not good at and being cognizant of knowing that, hey, hardware is not going to be my lane. I can't effectively evaluate this company's opportunity set versus just saying, oh, I don't invest in hardware.

Bill, you've mentioned this thread of just experience a couple of times, and I'd love to dig a little bit deeper there. You've been a founder multiple times over. Tell us tell us a little bit more about your early experiences starting and running businesses and how that's helped you start Nightscope.

First of all, you gotta probably have a screw loose to be a founder in the first place. This is not a rational thing to be doing. Most founders are reasonably intelligent and driven, but this will drain you emotionally, psychologically, mentally, physically. You'll have the worst day of your life and the best day of your life probably on the same day within a few hours of each other. To me, the founder's diet is you get punched in the face for breakfast, you get kicked in the stomach for lunch, and then body slammed for dinner. And then you got to wake up the next morning all smiling and ready to go to do the next interview or recruit or pitch or whatever. And you got to have a screw loose to be doing that. I guess that's probably your first comment. Second, I got the entrepreneurial bug when I was at Ford Motor Company, actually. Ford was an awesome training ground. My Second to last job, I was director of mergers and acquisitions. My last job there, ill-advised, I was an entrepreneur. I did 23 pitch meetings over a period of 6 months to convince the board of directors to release a quarter billion dollars to me to do a roll-up in the used parts industry. If you don't know what a roll-up is, basically you buy one company that looks like the other company that looks like the other one and you make one big one that looks the same. So I built the second largest automotive recycler by buying 22 companies in 11 months. I had about 600 employees doing about $150 million in sales, and I had my own board, my own treasury, my own everything. And at the age of 28, I was the youngest senior executive at Ford. At the time, Ford had probably 430,000 employees. It was a crazy time, but you get to do that at a really young age, and then you're like, okay, well, if I did that, what else can I do? And that's what really kind of struck that entrepreneurial bug. Otherwise, probably would still be in Detroit somewhere.

The fundraising aspect is one thing I'd love to double-click on. I think it's one of the first things that founders are faced with and struggle with, raising that first kind of institutional check. And then I'm finding this myself, that as a founder, you're just constantly raising. You've raised and negotiated hundreds of millions in financing. Tell us some of the learnings that you would like to share with other founders like myself.

So I've done now more financial engineering in my life than actual engineering. Certainly not proud of that. I think that speaks to the broken capital formation process in the country and globally for entrepreneurs and startups. If you're a good person, you're smart, you've got a wonderful idea, you should not have to be going through this level of stupidity to put some capital to work. I think that's a big problem. We just did the public listing on NASDAQ under ticker symbol KSCP earlier this year. And just before the listing, we had raised north of $120 million from 35,000 investors. No VCs, no hedge funds, no PE shops. That's a different way to raise capital. In our parlance, I think we're a little bit odd. We have a stated mission that's a little ludicrous. We want to see if we can make the United States of America the safest country in the world. You are not going to do that with 4 institutional investors in some ivory tower somewhere. You're going to have to run effectively a political campaign. To convince society to change its ways. The country's over 200 years old. We're on our 46th president. The first role of government is to protect its citizens. And crime and terrorism has a $2 trillion negative economic impact on the US every single year. It's a hidden tax that we pay in blood, tears, and treasure. And when someone shoots up a school, shoots up a mall or a movie theater, like, who gets fired? No one, because no one's accountable. And you are not going to take the normal path to put tens or hundreds of millions of dollars to work and think you're just going to do that in a vacuum and you're going to fix society. You're going to have to engage and motivate a ton of people, a massive cross-section of society to effectively force a change. So we took a very different path to finance the company. That said, if we were building a social media app, and there's Zuckerberg had retired and he's got 3 partners that work on social media stuff and they gave you a term sheet and you're doing a social media app, like you should just do the deal. But I think that's one thing that founders and entrepreneurs don't spend a lot of time in early days because they're coached to do what? Product-market fit. And no one, literally no one raises the question of what is the right capital for my company? What is the capital to corporate fit? You need to have that conversation with yourself and your founder, co-founders, or whoever early on, and then decide what is the right kind of money you want in here. And high risk of offending Madison again, let's see if it happens. In a lot of cases, venture capital can be highly toxic. The business model is to be wrong 9 times out of 10, literally. That's fine. You should go in eyes wide open, but that industry shouldn't walk around with an attitude like they're right 9 times out of 10. And in a lot of cases, you end up with a really flawed capital structure and a governance structure. How do boards get set up in startupville? Oh, the person that wrote the largest check steals the board seat. Just because you can write the biggest check in a round doesn't give you the right, nor do you have necessarily the right demeanor, skill mix, right time in your career experience to be taking that board seat. And then you need to not be voting your class of shares inconsistent with the rest of the shareholders, which is also inconsistent with your fiduciary responsibilities as a board member. And that gets violated to the nth degree across the organization. And no one will say that out loud because why? All the entrepreneurs like yourself are like, I don't want to offend the capital formation process all around me. I can say that. Because I've got a fundamental issue on how I've seen the industry treat entrepreneurs. And there are other ways to raise capital. And hopefully the path that we took might have inspired one or two people to at least have a think about the capital formation process.

So what I'm hearing is it's not necessarily a question around like, how much are you raising? When are you raising? But even what type of capital you're raising from something that founders should definitely think through.

Yeah, there's a difference. What path you want to take. You want to do friends and family, that's fine. You want to go hardcore VC, for some companies it's highly appropriate. You want to go strategic corporate, that'll take off some other types of capital. If you got capital to work and you don't want to go through this, you know, rigmarole, you might partner with a PE shop, which is a whole other kind of way to do things. I hate the word crowdfunding. There's that path as well. And we can dig deep there if you'd like, but there's other ways to fund a company. And it is unfortunate that founders are spending way too much time doing fundraising and not actually working on the business.

Yeah. And if I may, just from the investor side, I think it's a huge part of what our podcast is about in terms of opening the door and creating access to unpacking some of these financial structures and financial incentives to get your company to have have what is ultimately a commodity at this point, capital, to get you from your vision of what might be to a reality of making that impact on the world. And so, it's great to hear that with what you've been building over the past few years, you've been able to think beyond what, as you alluded to, many current entrepreneurs think about as the core structure, financial structure available to them.

Another thing that's super frustrating is VCs— And this is going to end up turning into not a good tone but you know, VCs spend all their time doing what? Let's go disrupt the education system. Let's go disrupt the financial industry. Let's go disrupt the healthcare industry. Let's go disrupt everything. Transportation. Let's turn everything upside down.

Oh whoa!

You want to change the fundraising process? No, we can't do that. I need to see your deck. Here's my owner's term sheet. Nice dirty term sheet please sign here. If you're that brilliant and you've raised raised that amount of capital and you've got whatever, $6 billion AUM, and you haven't thought through the process of how to better fund entrepreneurs because, oh, I don't know how to create more Elon Musks. I just don't know. It's too hard. Funding a Tesla or SpaceX is an anomaly. We don't know how to do that repeatedly. You put founders through hell on their own businesses and you, the entire industry, can't innovate and come up with a better way to finance this. You don't understand project financing. You don't understand other structures. You don't know— understand risk capital. You do. You just don't have the nerve to actually put a different structure in place because you're not financially incentivized to do so. Right. You need your 2 and 20. And this is all I'm going to worry about. Highly inappropriate.

Bill, you a few minutes ago touched on the mission of Knightscope. And so I'd love to dig a little bit deeper into how you've developed this passion to disrupt essentially the crime crime ecosystem. After 10 years as chairman and CEO at Carbon Motors Corporation, you developed the world's first purpose-built law enforcement vehicle, and then from there you went and started Knightscope shortly after. Was Carbon where you first started learning about the crime ecosystem?

I was born in New York City. Someone hit my town on 9/11. I'm still profoundly pissed off about it. And so at that time, I decided I was going to dedicate the rest of my life to better securing our country. Coincidentally, like a couple months after, or literally out of the blue, a first responder, a police officer pinged me and said, "Hey, listen, we're dying out here. We don't have the appropriate equipment to be doing our jobs." And I'm like, "I think I need to go just do this." And Stacy Dean Stevens is my co-founder, and he rightly so pointed out that This is a mess. Most countries around the world, law enforcement, public safety is typically at the national level, similar to the military, right? In our country, that is not the case. So the military has a Secretary of Department of Defense. He has an $800 billion budget to give the 2+ million troops every level of capability you might ever imagine or would never be able to imagine. And there's a Lockheed Martin, a Raytheon, a Boeing, Northrop Grumman to build whatever widget you want, whatever a soldier might need in a theater of war. We've got it plus some, right? You need a new jet fighter, new submarine, new stealth, whatever. It costs a lot of money. It takes forever. But the widget comes out the other side and there's an actual innovation strategy. There's a process, there's risk capital, there's all that good stuff. On our own soil, we do not have that. The US Department of Justice and the US Department of Homeland Security effectively have no federal jurisdiction, over 19,000 law enforcement agencies, and 8,000 private security firms. Literally, there's no one in charge. There's no innovation process. There's no risk capital. And that's why in the year 2022, there's a security guard sitting out in the parking lot with literally a number 2 pencil and a notepad. And then we wonder why, if you go look up the FBI crime clock, every few seconds there's a horrific violent crime. Or property crime occurring in our nation. You've got a million officers and a million guards trying to secure 332 million people across 50 states with a number 2 pencil. You're going to have a problem. And I don't believe the founders of our country ever expected us to build a society where going to work, going to school literally came with the risk of being shot or killed. Do you think that's successful? I don't. I am going to make it very painful over the next 2 or 3 decades for people to have that really difficult conversation. Hey, Congressman, Senator, is this really what we intended to build? Is this really the society that we're willing to accept? And I think the way to fix it is you need to give the officers and guards some technology for them to actually be able to do their jobs. And when I started the company back in 2013, I was told the following amongst all this grandiose folks here in Silicon Valley, "Hey, Bill, you're out of your mind. This will never work. It's hardware and software, too complicated. You should pick one." And then, "Physical security is not an investment thesis. You need to go away." Okay, interesting. Wrong answer. So we ended up doing what most good entrepreneurs would do is go like, "All right, forget you guys. We'll go do it ourselves and we're going to force the win." It's been a very long first chapter, But we got the technology working. We hold contracts from Hawaii through Texas to North Carolina. We've operated over 1.5 million hours, took the company public, and now work on the second chapter, which is growth. But this is the important thing for me to tell other entrepreneurs and founders is basically you need to pick something that you really not just love or enamored, you are extremely passionate about and you're willing to go to the mat because building a company is really hard. 95% fail. And if 95% fail, you better pick something that you are willing at 3 o'clock in the morning when all hell's breaking loose, everything is going wrong, your lawyers don't care, your auditors don't care, your teammates don't care, your clients don't care, the suppliers don't care, you have to go fix this. You're going to have to get enough stamina to be able to weather the ongoing never-ending storm. And that's why folks that want to come to Silicon Valley and think it's Hollywood and I'm just going to go have fun at a startup, it sounds cool.

Wrong.

Yeah, Silicon Valley is not Hollywood, both for that reason and also for the weather. But people have had to learn that one the hard way a couple times over. But thinking about those early days where you and your co-founder had this vision and had this mission for changing the way that public security was made possible, Walk us through that zero to one phase, particularly on the robot itself and the early prototyping journey.

I'll say proudly that the founding management team that was there on April 4th, 2013 is the same management team that's in place today. It's just happened to grow. So you need to surround yourself with just as lunatic folks that'll continue to see the mission through. Certainly grateful for all that effort that's been put forth and continues to this day. It took me 364 days to raise the seed round. Yuriy-ingly so. You're just trying to raise a million bucks to build a prototype to help the country, something of national interest. And what was even more inflammatory is right after Sandy Hook, a bunch of VCs literally went on camera and said, we're going to go do something about this. You should go interview those folks. What did you actually do out of your funds? We approached one of them and they said, we don't actually do that. Interesting. So you went in public and basically said you're going to go do something for the country and then it's time to do something and you're going to renege on that? Interesting approach. So to us, it was really painful. We were working at a Starbucks, we were working at someone's house. We were at Hacker Dojo. In Mountain View at the coworking space. We kept applying to one particular accelerator, Plug and Play, and then we finally got into the insurance accelerator there. So we finally got a roof over our heads and we scrounged up just enough capital to start building the first prototype. And then we unveiled it December of 2013. We won Demo Day with the most miserable prototype you've ever seen in your life. We could remote control it. It could show the shape, it could show the video, and you can remote control it, but that was it. That was the extent of it. Then from there, for the Star Wars fans listening in, we deployed the first real one in the real world, May 4th, 2015. So may the Force be with you. And we were scared out of our minds because we didn't know if society would allow us to do this? Like, you're gonna go put a robot in the middle of public area? So we didn't know if people would freak out or what would happen. And what happened was not what I expected, which is what Claudia was mentioning earlier, a bunch of people showing up, taking selfies. I remember parents driving their kids 4 hours to take pictures with the robot. A couple girls left big kisses on the machine, like bright red lipstick. And I thought to myself, okay, we don't have this 100%, but we're at least in the right quadrant if we didn't get at least thrown out. I think the other problem I remember was we— this is autonomous technology, right? It's 2022. No one's actually shipped anything yet still. So imagine in 2013 where the status of the technology might have been. So we would like literally sleep at the office all night long. As we put the machine outside our own building in Mountain View, worried that something would go wrong. And then so we go put this at a mall. And so the team ended up sleeping in the van all night long. I mean, it was just miserable. I think either a person or the entire company did an all-nighter 4 nights in a row trying to keep this couple machines up and running. It was horrifying.

I can only imagine what the early lookers thought of what was going on. And then on top of that, just the process of getting to a working prototype as well. Today you have hundreds, if not thousands, of these products all over. Take us a step back and share with our listeners about how you guys thought about product development with this combined nature of hardware and software in the early days, and then what that's meant for your product suite today.

We release new software every 2 weeks, new hardware every 3, 6, 9 months, and we're kind of iterating iterating and iterating and iterating, and it feels like it never ends. And the strong viewpoint was you cannot build this technology in a laboratory or in a proving ground. You're going to have to do this out in the wild and you're going to bump your head. I try to assure all the investors like bad stuff's going to happen. We're going to make mistakes. And the problem is, and it came to fruition, was all the stuff that we were worried about, like, that was going to go wrong, never happened or wasn't as bad as it was going to be. And the stuff that was never on the list, no one ever thought about, is the thing that almost killed you. And that, to me, is why the million and a half hours of field experience over 6 winters and 6 summers across 4 or 5 time zones— we know a thing or two because we've seen a thing or two. Now we get to apply that on the next iteration of the next iteration of the technology. And I just don't see that changing. Everywhere we deploy, every new place we go to, we learn something new. And you're in Silicon Valley, you understand that self-driving autonomous technology, robotics, kind of hard. AI, hard. Electric vehicles, hard. For us, it's combine all 4 of those that are really difficult. And oh, by the way, you need to operate 24/7, 365 in the rain, No excuses with a client down your throat who's actually paying you. That's not easy, but we got it this far, so we will get it across the finish line.

Absolutely. And you alluded to earlier the fragmented nature of local law enforcement, and that doesn't necessarily lend itself to the simplest go-to-market strategy, as Claudia learned at Uber. Curious about what insights you would have from this fragmented, hyper-local market approach that you've taken away for entrepreneurs who are maybe similarly thinking about how to support at a local level with a nationwide product.

In fragmentation, therein lies some gold in them hills, because you don't have one person to tell you no, you got thousands of opportunities for yeses is the first kind of point. The second was actually you know, as a highly fragmented industry and the competitor that I was going up against at the time had done a ton of roll-ups. For those who— entrepreneurs that want to dig into history a little bit, you might want to read up on Wayne Huizenga and all the craziness there. If you know about Waste Management, if you heard of Blockbuster or AutoNation, those are all roll-ups. Basically, let's go buy one trash hauling company, buy another one and buy another one. And all of a sudden you have this massive company. Company called Waste Management. Same with the video stores. Hey, there's a mom-and-pop video store down the street. Let's roll these all up. Hey, voilà, now we have Blockbuster. Same with used cars. It's not exactly the same, but if you look at the law enforcement industry and security, it's so fragmented, it's so messed up. Therein lies the opportunity. A lot of investors hate that. Oh no, I want to call Deloitte or KPMG. Can you give me the quarterly report on this sector so I can better study what's going on? If no one's covering the sector, like, to me, that's a huge opportunity to go after. It's going to be a headache. It's going to be painful. Most institutional investors are not going to like it, but I don't work for them. I kind of work for the client that I'm trying to fix the problem of. And so I wouldn't shy away from fragmented marketplace. Like, there are some companies that actually like it when it's really messy like that because there's a lot of likely inefficiencies there.

That makes a ton of sense. Opportunity, diamonds in the rough, so to speak, which has clearly been a part of the Knightscope success story. But you alluded to things going wrong where you thought they might go right, and then where you thought they might go wrong. But rather than talking about a challenge, maybe tell us about a time when an early Knightscope robot didn't do what it was supposed to do, or it didn't go as planned.

Oh, geez, there's been so many. There's the famous one that we had a bad software engineering assumption. It wasn't bad engineering, it was just someone made an assumption and somehow ended up going into a fountain. And the assumption, if I recall this correctly, something along the lines of, can we assume that the earth doesn't move, meaning the ground underneath the robot doesn't move. And I'm like, it's a hallway conversation, I was like, yeah, I think we can assume that the ground's not moving. So we ended up deploying at a place where there was a bunch of brick cobblestone kind of things. And like every other brick, we found out later, was not properly adhered to the ground. So said assumption was incorrect, the ground does move. And therefore you might end up in an area you're not supposed to be. And what was interesting was it went all over the internet globally and it just went crazy. And then we got family and friends calling, "Are you guys okay?" and everything else. And on the flip side, underneath all this was hilarious was there's no such thing as bad press. We ended up getting more contracts and more investors and more recruits out of the thing than people were worried about the robot in the water or whatever. If all those folks that challenged us that this would never work or make an impact, go to nightscope.com/crime. Just go to the crime page and go to the nice long list of things that there's been a positive impact from these machines, from helping solve a domestic abuse kind of situation, issuing an arrest warrant for a sexual predator, stopping an armed gunman. The list goes on and on. And I thought, hey, I thought this wasn't going to work. And we're just getting started. So, you know, this is a wonderful opportunity to apply all kinds of crazy technology to actually make a difference. And that's why we have the honor and privilege of waking up every morning now in 17 different states where we have employees to go work on the actual problem. We can actually go make a difference.

It's incredibly cool to hear the impact that these robots have had on crime thus far. And it is really only the beginning. I'd love for us to zoom out a little bit. And as we think about the future of Knightscope, I'd love to get your take on on the future of public safety more broadly. How do you think robots and robotics in the next few years will actually tactically change the face of public security and safety voids in the U.S.?

There's a couple ways to think about that. So first of all, I'm not a roboticist. We do build robots, that happens to be in our portfolio. I just want to fix the damn problem, so I really don't care what technology we utilize. If you were to fast forward back to what I was ranting about on the Department of Defense side of things. The $30 billion company I'm looking to build is analogous to a Northrop Grumman or a Lockheed Martin, but instead of focusing on the Department of Defense, we're going to focus on Homeland Security, Justice, the 19,000 law enforcement agencies, and the 8,000 security firms. And that company needs to have a, I guess, along the x-axis, a very wide portfolio of crudely hardware, criminals and terrorists can basically be anywhere. So if you're serious about the mission, Knightscope needs to be everywhere. And in order to be everywhere, you need every size and form factor to cover every indoor and outdoor location possible to better secure the places you live, work, study, and visit. And then on the y-axis, you need to get these massive portfolio products to do 100 times more than a human could ever possibly do. And you need to get them to see, feel, hear, and smell and be able to give that guard or that officer almost superhuman capabilities. Because one of the biggest problems is, as I mentioned, there's a million guards, there's a million officers, right? The little quick math problem is they're running 24/7. You can't triple shift a human. So if you want to cover a post 24/7, you actually need 4 people. So you need to take those 2 million, divide by 4. So any given time across the country, there are only 500,000 people trying to secure 332 million Americans across 50 states. That's not plausible. And I can assure you it doesn't work because we got all the statistics to prove it. But if you could put a million machines in network, if you put a million robots out there to give those 2 million humans actual ability to cover more ground, put their eyes, ears, and voice in multiple locations at the same time, and in a lot of cases de-escalate situations, right? Showing up an armed uniformed officer putting him or herself at risk can sometimes escalate a situation. So in a lot of cases, actually having the robot there helps de-escalate the problem and stop the negative behavior in the first place. I think then we've got a shot to actually make a real difference. And that's not me asserting, that's facts on the ground. You can go and look at law enforcement agencies that are reporting, you know, 50% reduction in criminal activity once we deployed, or down to zero. If I put a marked law enforcement vehicle in front of your home or your office, what happens to criminal behavior? It will change. You pull up into a hospital parking lot, there's a 5-foot-tall, 400-pound machine roaming around. There's no one there remote controlling. It's fully autonomous. The strobe light's going, it says security or police on the side, it's making some interesting sounds, it might greet you, you have no idea what it does, like, you're probably going to steal the car somewhere else or not steal it at all. And that's literally what's been happening across the country and across our client base. So I think to answer your question, I think there's a massive opportunity to make a big positive impact.

I certainly wave every time I see the Knightscope bot. I'm sure a few others who see them roaming around do the same.

But Claudia, the robots are supposed to come take everyone's job and kill everybody. Like, why are you waving to the robot? Come on.

I know. I was frankly quite surprised that it didn't run me over. But I definitely hear how the physical presence of this security guard definitely changes just behavior very naturally, even if the bot doesn't do anything. But could you speak a little bit more to some of the actions that it does take that end up helping report crime and build more safety in communities?

So you've got 360-degree eye-level live streaming, high-definition video and recorded. Eye-level is kind of important. Everyone puts all these CCTV cameras up in the air. They're really good at tracking everyone's top of their head, but like it's completely useless. Second, they can read several hundred license plates a minute. Most guards are not going to memorize every single license plate and know that vehicle's been there 17 hours, 22 minutes, and 32 seconds, and that's tied to a person of interest. For some of them have facial recognition on it. Guards or officers can speak through the machine as if it's a mobile PA system. So you've got eyes, ears, and voice on the ground. So let's say one of our corporate clients, I don't know, fired someone last week and it didn't go well. You can then upload the profile pic, the license plate, and all the mobile devices that are associated with that person. Now the machines are literally on the lookout 24/7. They're not texting, they're not sleeping, they will show up for work. That will show up for work is a problem. So the security industry has 100% to 400% employee turnover rates. That's worse than the fast food industry. I think something like 20% or 30% of the new hires for security guards don't make it past 30 days of being on the job. So what if we were to promote those folks? Hey, I know you have no technology today, but what if we gave you this app and now these 7 robots now report to you and you have the tools to actually do your job. Might you stay in the job? Might you get paid appropriately? This whole concept of the robots are going to go replace everyone. Can we have a serious conversation? Like, the machines are really good at doing the monotonous, computationally heavy stuff. We need the humans to do the enforcement and decision-making. As fun and silly as it might be, Hollywood is helped us in some ways and been a disservice in, in others, in terms of what technology can actually do. And over time, these will get smarter and better, as technology is, runs at a fast pace, and you can imagine in 2, 3, 4, 5 years what these machines might be capable of doing.

I could never imagine anyone memorizing hundreds of license plates at a time, so incredibly cool from just both the preventative screening perspective all the way to being proactive about like real-time crime. Zooming out and switching gears a little bit, less around the product, more around around your company and governance. We've talked a lot about the role of a board on this podcast and what boards do. There's something quite unique about your board, which is that everyone but you identifies as a woman. Walk us through how that came to be and what that's like.

So, I had raised over $120 million over numerous rounds of financing, and I was the sole director of the company. I was unwilling to sell a board seat to the highest bidder. One, I think it's inappropriate. Two, in a lot of cases, especially if it's a strategic investor, that's the last thing you need to be doing. If you need to fire somebody and they're sitting on your board, like, that's a problem. I have a fundamental problem with the governance setup for a startup. I don't understand why founders have the right to pick the brand, pick the URL, hire the team, pick the facility, figure out the technology, or do everything. Like, you can make pretty much every single decision, but you are not allowed to architect the right board at the right time with the right demeanor and the right skill mix. Like, how is that in the best interest of the shareholders? That to me is infuriating. It gets worse, which is the good old boys nonsense in finance and VCs, in particular in Silicon Valley. Okay, so the one who led the round gets the board seat, calls up his buddy to get the next board seat, gets up the next buddy to get the next board seat, file the S-1, do the IPO. All the buddies are now at the table. And then everyone at NASDAQ and NYSE is going, why the hell don't we have an appropriate level of governance in terms of diversity amongst all these publicly traded companies. Maybe because they grew up incorrectly. And so what I did was hold out for the longest of time, and I got criticized to the nth degree, as you might imagine, for doing this. I believe that if you've got the power to do something or try to right a wrong or try to set an example, even though if you're going to get criticized to the nth degree for doing it, just do it. So I'm like, okay, I went through my Rolodex, maybe 134 candidates that I went through, started interviewing some of them. For the record, the first offer that went out was actually to a male African American. He declined. And I really wanted to make a point. I want to find directors that are aligned with the mission. Probably in the right stage of their career, maybe have a very interesting Rolodex, have been successful founders that built companies and sold them for a billion or so, might have had a lot of experience on Homeland Security or innovation or experts on sales and revenue and business to business. Okay, let me go handpick a bunch of folks and happen to have 6 directors that, as you mentioned, happen to be female. And I'm willing to go pick a fight. So now we have a board that is 85% female, uh, 43% minority, and 100% diverse. I'm half Asian, half Latin. And so now I want to challenge the other publicly traded companies, all these highly powerful CEOs on NYSE and NASDAQ. It's not that hard. Like, you could make a change. And I find it disappointing, depressing that someone like a Nasdaq needs to actually put rules in place for someone to actually do things the right way. Like, people passing laws to do this, like, are you kidding me? And then I'm competitive. We need to recruit awesome talent. And if a potential recruit ends up looking at our board going, wow, I can identify with that group. Oh my God, their amount of experience is insane. I want to be part of that, and I think that helps us as well. At the end of the day, there's 6 awesome board members. Like, I can call them, I can rely on them, I can cry on their shoulder. They know what we're trying to accomplish, they know how hard it is. Some of them I've known for decades, and most importantly, they are all collegial in demeanor. And when we have a board meeting, it's not a Type A personality, way too much testosterone. I mean, I had one board a long time ago— forget the gender for a moment— all operating executives. None of them had ever built anything in their entire life and were having nonsensical discussions because it's startup versus an operator and they don't understand the difference. And you don't ever want to be in that situation. Doesn't mean every board needs to be full of founders and lunatics. You need some level of sanity, but you need to have one or two people that have sat in your seat so you can have a sane discussion. And so I would encourage founders to be very careful who you invite on the board. And I'll wrap it up with one last thing, which is if someone buys 5% of your shares in the public market, what happens? Emergency board meeting. Call crisis communications. Get the PR people in here. We need to figure out— we have an activist single shareholder. You can figure out the acronym. All right. In Silicon Valley, someone buys 20% of your company, steals 2 board seats, and somehow the CEO sends out a celebratory press release the next day. Like, my head wants to explode. And I've said a bunch of stuff that most founders would never say for a bunch of reasons, but I'm hoping that there's one or two entrepreneurs that go, at least have the conversation about where you got your capital. At least think through their governance structure and don't get forced into stuff.

You're definitely challenging the status quo on multiple axes with what you've built with Nightscope, and it's incredible to see what that's meant for the board expansion and then ultimately the exciting chance to go public earlier this year. So a big congratulations on what 2022 has meant for the advancement of Nightscope. Wrapping up our time today, we have one last question, which we ask all of our guests. We ask that it be someone in the professional context, but who is a woman in your life that has had a profound impact on you and your career?

Oh, that's easy. That's my wife, Mercedes Soria. She's an award-winning technologist. She's ex-Deloitte. She is extremely driven. She's made me a better person. And most importantly, she is one of the founding members of the management team of Nightscope, and she will do whatever it takes to be successful. Most executives would never do the level of insanity that she's gone through over the last 9 years, to sitting there having to figure out some code herself, to recruiting, to, oh great, here comes the R&D tax credit. Nightmare to dealing with really sticky issues. The company's gone through a lot of difficulties. Elon has done some tremendous work at Tesla and SpaceX, and we've unfortunately have had a lot of run-ins in terms of liquidity and cash on hand and having to deal with really difficult situations. And she stuck through the whole thing. If you were to ask me like, you get to marry your dream girl and you're going to go build a company together, like you're out of your mind. That will never happen. But somehow we made it work. I was concerned. She was concerned. Neither of us ever thought that we would be doing something like this together. And I know probably the next question is like, how did you get it to work? So it's simple. It was easier pre-COVID. So at the office, I'm the boss. At home, she's the boss. Simple, easy peasy. But she definitely has had the most impact on my life. Easy.

That's incredible to hear and an inspiration for any founder. Claudia might resonate building something with their life partner as well. So thank you so much, Bill, for sharing that and really spending time with us today to share about your vision and how Nightscope is helping to empower a more safe community for all of us here in the States.

States today.

No, absolutely. And if you want to learn more, go to nightscope.com/roadshow. So we actually have this crazy robot aquarium going across the country filled with robots. Um, we've gone like, I think, more than 3 dozen states now, and the schedule is getting packed up for the balance of the year. So if we're in your neighborhood, come over and get a robot selfie.

Awesome. Thank you so much, Phil.

Absolutely.

Thank you so much for joining us at The Room Podcast. If you want more from The Room, every week, subscribe to our newsletter at theroompodcast.com/newsletter. We'll be back next week with a new episode Tuesday, 10 AM Eastern, 7 AM Pacific. See you in the room.

All opinions expressed by Claudia Madison and podcast guests are solely their own opinions and do not reflect the opinion of The5EC. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.