May 7, 2021 – On today’s podcast, we welcome special guest Peter George, CEO of Evolv Technology. Evolv, the leader in AI touchless security screening, recently announced a merger with NewHold Investment in a $1.25 billion deal.
On the podcast, Peter discusses:
- How Evolv’s scanning and AI technology works to detect threats
- The role Evolv can play as the country reopens and in a post-pandemic world
- Details and insights into the merger with SPAC NewHold Investment Corp (NHIC)
- How the company landed Bill Gates as an investor
- Key growth opportunities
- And more
Welcome investors to the Absolute Return Podcast. Your source for stock market analysis, global macro musings and hedge fund investment strategies. Your hosts Julian Klymochko and Michael Kesslering aim to bring you the knowledge and analysis you need to become a more intelligent and wealthier investor. This episode is brought to you by Accelerate Financial Technologies. Accelerate, because performance matters. Find out more at www.Accelerateshares.com.
Julian Klymochko: All right, we have Peter from Evolve here on the show today, looking forward to getting into details with respect to the company, Evolve Technology, and some of that AI behind it. I’m super excited about artificial intelligence and practical applications that benefits society, which seems to be the case with Evolve. So, Peter, why don’t we start off by you walking us through the business, through Evolve, how the technology works? Specifically in terms of detecting threats and how your solution differs from conventional security screening, such as metal detector.
Peter George: Yeah, well, first of all, Julian, thank you so much for having me with you today. Thrilled to tell you about our story at Evolv Technology. Because we have an amazing story. The company was born seven or eight years ago and founded by one of our co-founders Mike Ellenbogen, who has a long and deep history in doing threat detection and aviation. In fact, he built a company called Reveal Technology right after 9/11 and they put their bag scanning technology in about 330 different airports around the globe. And it became very clear to them that there was a security opportunity outside of aviation, right? All the venues in the world that want their venues to be safe, but obviously don’t want to create some of the long lines and having people touched your belongings like you do when you have to get onto a plane.
So, they set out with this amazing theme, a bunch of really important patents. Funding from Bill Gates was one of our original funders, but General Catalyst and DCVC and Lux Capital, really great investors to go solve this problem. And it’s a really hard problem to solve.
Julian Klymochko: Right.
Peter George: Finding threats and concealed weapons on people while they’re moving at the pace of life without them divesting of their normal things. And there are normal things today include metal, right? Keys, phones, things that you actually have to take out. So, discriminating between a phone and a firearm is the magic that we came up with and it took, you know, advanced sensors, artificial, intelligence, cameras, a lot of contemporary technology to solve that problem. And we have, and so now we’re completely disrupting the physical security space because we can provide, I call it the mock equitizing security finally, but we can provide security to all those venues that want to make their venues safe, but don’t want to create lines and make the visitor experience be compromised. And we’ve been doing that now for many years. So, we’ve been really fortunate to be in the position we’re in.
Julian Klymochko: Yeah, nothing worse than waiting in a long lineup. And they scan you with the metal detector and then something beeps. They got to pat you down and you know, that whole entire rigmarole, that wastes countless hours. So, it’s great to see what you guys are up to and from a social impact, implication. Aside from saving people hours and hours at say an airport and other sensitive places like that, with respect to, you know, caring specific things that they shouldn’t be carrying, what are some of the social impact implications that Evolve is? You know, the problems that you’re solving within society?
Peter George: Sure. Well, it starts with our mission. I would say the central thing that brings people to this company and keeps us here so energized and driven is to make the world a safer place, right. A safer place to live and to work and to learn and to play. Even though we’re coming out of the pandemic, we have an epidemic in North America, we have a gun epidemic. And we have way too many mass shootings in North America. As you know, just in the last 30 days there have been over 50 mass shootings. And mass shooting is defined as four people or more dying, right, that’s awful, right. The fact that I have four children, my oldest daughter is a second-grade teacher and on the second day of school for her eight-year old’s, she’s under a desk showing her kids how to hide from an active shooter.
Julian Klymochko: Yeah, that’s awful.
Peter George: I mean, we need to do better than that as a society. So, when I think about the big, you know, things that we’re doing, making the world a safer place, getting our kids to go to school and be able to learn safely, having us now after the pandemic. We all want to gather again, we want to be together, but the new kind of paradigm and proxy is, how do we be together and do it in a safe way? Safe from the pandemic, that threat. But say from all kinds of threat, including the guns and knives and the threats of bad people. And we’re very, very focused on that. And we feel super committed and super mission-driven about that for our customers and privilege that they choose us to do that. And we think, well, we know we’re making the world safer. We we’ve stopped 5,000 weapons from going into venues, since we were born. We find hundreds and hundreds more every single week and month that we work. We’ve done more scans over 50 million others than the TSA than anyone in the world. And every single day we’re finding weapons going into places they shouldn’t go, that’s all.
Julian Klymochko: Right, and so to fully understand how the technology works and how it differentiates itself from our conventional screening mechanisms is, you know, someone walks through and then that data is processed by your AI algorithms. And it’s able to basically provide insights and decode perhaps unwanted objects on some of the people walking through, is that correct?
Peter George: We can discriminate between all the things that people carry, including metal and find the needle in the haystack. And the needle is, we’re looking for weapons, right? Guns, bombs, large tactical knives. And back in April one of our customers came to us and said, Hey, we’re really worried about weapons coming in, but the pandemic has weaponized people. We can’t have COVID-19 come in here because you have this quartet AI software platform. Could you also screen for elevated body temperature? So about 60 days, we were able to add COVID-19 to one of the threats that we can discover. So, when people come through at very, very high flow and think Julian about people flowing in, like you’re in a rugby scrum, right? Flowing in unfettered without taking anything out, groups of people. We’re screening and looking for threats. And we can find all the threats I mentioned. Guns, bombs, and knives, but also you can set our system at the temperature you want. Let’s call it over a hundred. Somebody has an elevated body temperature, there’s a special camera and a tablet. We pull them aside and we can screen for that. So, you know, that allows us to have this agility to add new threats that may future-proof our customers going forward because you never know if there’s another thing to deal with another pandemic, another whatever. And they really appreciate that, right? Having us in there and being able to do multiple kinds of threats.
Julian Klymochko: That’s a pretty cool feature to be able to do it so efficiently. I’ve been to a number of stores where they stop you, wait in a line and they do an individual temperature test, but that’s about it. So, your product seems significantly more efficient than that type of a product that is conventionally offered. As for customers, I imagine airports, sports venues, but what are some of the best uses of the Evolve product and what type of venues would typically use it?
Peter George: Yeah. When people think of this problem, the first place they normally think about is the airports and aviation.
Julian Klymochko: Right.
Peter George: And the truth is, we’re not focused they’re actually, we’re focused. And because a lot of people are, right. And people will be willing to stand in a long line and take their stuff out because they’re getting the prohibited items list from the TSA to get on a plane is different than the threat factor that we’re worried about. We’re worried about threats to a [Inaudible 00:08:59].
Julian Klymochko: Right.
Peter George: So, if you think about those places, non-aviation, and by the way, some of the airports are using our technology for employee screening, other parts of the terminal screening, but we’re really focused on non-aviation of places where people are gathering. You mentioned them, Julian. Stadium, performing arts venues, hospitals, office buildings, any place, malls, where lots of people are coming and they want to be together. We make sure that those threats don’t get in and we do it without you breaking stride, going into the venue. And that’s, what’s so compelling is the visitor experience is second to none. You just walk in, but we can find that needle in the haystack and make sure you’re not carrying a weapon. And the truth is, we flipped the model on security because with the conventional technology, a metal detector that was invented 80 years ago. The only way that system operates is, they basically treat everybody like they have a weapon until they prove they don’t. And the truth is, most people don’t, but everyone has to stand in that long line and be frisked because of it. So, we’ve flipped the model and used artificial intelligence and sensors to find the weapons. And sometimes people bring them in and we always find them, but everybody else that’s not, guess what? They can come see their favorite band, come see their favorite show, come see their favorite sports team and not have to feel like they’re getting on a plane or going to a prison. And that’s game changing for the industry, it really is.
Michael Kesslering: And so, by flipping the model like that, I mean there has to be cost savings from the venue standpoint, but also probably increased revenue generation. If you’re thinking of the sporting event, the sooner that fan is in their stadium, the sooner they’re buying concessions and whatnot. How does this change the customer economics?
Peter George: Great, great question, Michael. And you’re right on, right. So, the three things that people choose us for and want. Number one, and the primary thing is, I want my security posture to get better, right? I want people to come in and feel safer and be safer. We do that, right. We use technology to do things at scale that other technology can’t do. So, number one, I need a better security in my venue. Number two, I want my visitor fan experience to be second to none, walk in and not break stride, but can I also save money too? Wouldn’t that be awesome? And the truth is particularly when we’re replacing metal detectors, conventional technology, we save all of our customers at least 70% or more on security. And that comes in the form of dramatically reducing the number of systems you need, right. Where 10 times faster than a metal detector, but every one of those old mags requires three or four security guards to man it, right. And because it’s so labor intensive, not only do they get alert fatigue, and aren’t really doing security the way that they like to. But it’s expensive because you have a lot of people. To get 80,000 people in a football game at a major stadium today. Some of our stadium customers have hundreds and hundreds of metal detectors and 400 or 500 guards. We can reduce that to 25 of our systems, remember 3,600 people an hour dramatically reduces the number of guards they now need. And it makes the guards better because the alarm doesn’t go off every time.
Julian, you started out by giving the example, we all know which is take everything out. The alarm always goes off in the metal detector, and then there’s is somebody warning you. And it’s, it’s not a good experience for anybody, but it always alarms, right. And if they get alarm fatigue, and of course it means that the security is not very good because it’s hard to pay attention to 82,000 people that are alarming, right. When we use technology to find the needle in the haystack, when there is an alarm, you can bet that those security guards are paying attention. So, it makes security better. The fan experience is great. It’s less expensive. And Michael, to your point, not only do your fans get in and have this great experience, guest services love us because they’re standing at the concession store. They’re standing at the swag store, spending money and in their seat, ready for the opening whistle of the game. And oftentimes you’re standing in the security line when the kickoff happens and they’re not happy, right? It’s the worst part of getting into a game. So, we’re completely transforming that experience for fans and for venues and both the physical security decision makers really appreciate what we do because we make their job better. But also, guest’s services to your point loves us because they have happy fans and they were spending money and driving new revenue and everyone likes that.
And let me just make one other comment. We see going forward, there are two friction points that exists when you think about going into a ticketed venue, let’s use the stadium, but this could be a performing arts venue. One of our customers Lincoln Center or any ticket venue, the two friction points that you stop are. One, to ticket screened and two for your ticket. And so now we’ve solved. We’ve unlocked the friction point for screening. Our customers are saying, Hey, is there any way that you could also do smart ticketing? So, somebody could get out of their car and walk from the parking lot into their seat and walk through our system. And not only be screened for threats, but rip their smart ticket and get into the stadium and not break stride. And we have plans to add that capability to our platform before the end of 2021. So, we think that’s really going to unlock a lot of opportunity because as people are beginning to open up again and we’ve helped some of the major league baseball teams open up in baseball season, the last couple of weeks. Their fans are coming back in a frictionless way. They want touchless ticketing; they want touchless screening and they want touchless apps for food. And we’re right in the middle of providing, you know, those kinds of capabilities. So, we’re excited about the future and the new kind of proxy for people to come back together as to come back that way, want to be safer, but I don’t want to stop it. I don’t want anyone to touch my things. And we have some technology that can allow that.
Julian Klymochko: So, touching on the whole reopening theme that hopefully we all get to experience in summer 2021 and going forward, how can Evolv Technology and products assist with that? Do you really see this as a, you know, a key time for the company in terms of rolling out its products into the market?
Peter George: So, look, absolutely. And look, one of the things that we learned, all of us learned during the pandemic is that we all figured out how to operate from a different place, right? We’re working and Zooming from home. We are eating over Uber Eats. We’re watching our videos over Netflix and companies recognized. This is the time to accelerate their digital transformation efforts and their businesses. And we believe, we know there’s been a seismic chain in the world around how people want to gather again. And so, we’re taking advantage of that. We’ve had a really good business prior to the COVID, but COVID has accelerated the need and the requirement to come back and gather in a touchless and frictionless way.
So, you know, we have very, very strong demand in our business right now because people are opening up. They’ve rethought, how they want to do that. They know that to bring visitors back to their museum or their stadium, it’s going to require a new way. And we obviously have a way that nobody in the world has today. And we’re helping venues in all kinds of verticals in every kind of industry. And we feel fortunate to be in this position and privilege to make sure that people can come back and gather and do it in a safe way, so bad things don’t happen.
Julian Klymochko: And conceptually, of course, that makes sense from a value proposition standpoint, and it’s part of this reopening play. You can foresee the company really ramping up in sales and just looking at the proforma financial projections that came out with respect to this SPAC merger recently announced, and it looks like you appear a significant growth spurt heading into the future 2021/2022 here. And I assume that played into the decision to go public through SPAC, NewHold Investment Corp, and will NHIC trading in the market. That’s at a $1.7 billion dollar valuation, big step change for the company. Good time for the business as part of this whole reopening macro thesis. Ultimately, why did you choose to go public via a special purpose acquisition company? Why NHIC specifically? Did you guys look at any other deals, any other SPACs, traditional IPO, staying private?
Peter George: So, you know, we had plans to go public in the next couple of years anyway. When we learned about the SPAC vehicle and saw the compressed timeframe and the certainty to capital, it became a very obvious vehicle for us to go meet the moment, right. And we’ve just been talking about this moment of reopening now, right. Almost every day, a new venue. It was outdoor venues where people were moving, theme parks and we did really well there. Now, indoor venues are opening. So, we wanted to have be a fully capitalized company and invest in our go to market, our partnerships to meet the moment of people reopening. And we felt like the SPAC vehicle was absolutely the perfect way to do that. And the timing for this to happen, couldn’t be better as you know, our plan is to be a public company sometime in June, and we’re on track to do that.
So, yes, that’s why we chose that. And we’re thrilled about it. Regarding NewHold, our SPAC process went very, very well. We have a very compelling business here and a really exciting opportunity. The Tam is measured at about $20 billion. Only $2 billion of that is regulated. So, we started out by talking about airports. Airports, prisons, and professional sports are the only places that mandate you have to have security. The other $18 billion of that with Greenfield? Those are places that may have a security guard or somebody checking a bag. But there’s no technology there and that’s the place that we’re focused. It’s a huge open market and no other technology out there that does what we do to go get it. So, we’re focused on that market and we want to go reach the market.
So, our story resonates and our business model resonated with everybody. We actually had four offers for the company in about two weeks. The NewHold offer was not the highest offer. And in fact, I tease Kevin and the team that it was the lowest offer. But it was still a really good offer, but we were very, very drawn to the professional experience they have around SPACs. Kevin done four or five before, they’ve been doing it for 10 years. They’re professional investors in SPAC people, we saw that, it was clear. The due diligence process they put us through was exhaustive. It was their team, but they hired a really strong team of consultants. Checking our IP, checking our go to market, really thorough. When they made their offer. They were in our day room. They made a very, very informed offer. And we knew that this would be an amazing partner to go through the rest of this SPAC process with. Get the pipe done, go through the de SPAC process and stand the company up. We couldn’t have been happier with that. So, we’re thrilled about that. And they were not looking for a science project. They were looking for real technology. They talk a lot of our customers. As you know, they have a focus around in the industrial tech sector. We fit their methodology and they stayed, you know, they looked at something like 200 companies and we ended up checking 29 of the 30 boxes that were the requirement for their selection. So, it was really a perfect fit when we met each other. And you know, since that time, you know, we’ve been working really, really closely to make sure that we execute well throughout the SPAC process and stay in the company up. And we were really thrilled with how that’s going.
Julian Klymochko: Yeah, sounds like it was a very smooth process, well received and four offers for the company. Can’t go wrong with that. So, with respect to, you know, once this de SPAC closes and you’re up in trading, you know, some of the things that you learned from this SPAC process, would you recommend it to other private companies? And what were some tips and tricks, so to speak that you learned that you could describe to someone who hasn’t gone through it yet?
Peter George: Yeah. So, I would, and of course, you know, the SPAC market has been a choppy market recently, right. There’ve been some ups and downs and lots of companies doing it. And on the broad spectrum of that market, right. Big companies that are going out, small companies in all different kinds of sectors, you know, all I can tell you is the experience that we had was a really, really good experience. Everything about it. Our timing may have been good, but the most important thing is our businesses good. We have a really, really strong business and a really, really big opportunity. And that was so obvious to everyone we told our story to. All the people we did, the SPAC outreach to, all the people in the pipe, all the investors we spoke to, totally got our message. And we know when we become a public company, like all of your listeners today, they’re going to get what we do too.
Right? Because we’ve all stood in that stupid line. We all hate going through those metal detectors. This was just a market ripe for disruption and we’ve been able to do it and everybody gets it, right. So, when we go public and people hear our story, and today we’re a bit of the best kept secret in the physical security space, because not everybody knows us. You think when we go public, obviously we’re going to have a platform when people think about this problem and how do I make my venue safe in a touchless way and frictionless way. We want them to think about us because we can provide them capability they couldn’t have before. And as I said, I call it democratizing security because our business model also guys is just as compelling as our technology because we provide this security as a service. We’re a SAS based company. It’s a four-year subscription. So, if you want this capability, we put the system in your entryway and we provide this as a security, as a service for 48 months, the barrier to entry as well. It’s not expensive. It’s very easy for us to deploy. We own the systems and they have their venue safe. So, it’s available to everybody. Cost doesn’t get in the way; everyone wants their venue to be safe. And, you know, oftentimes people ask me about the competition. And you know, the biggest competition we’ve had to date is, do nothing. And the cost of do nothing goes up every day now. Because of the escalating threats in the world. And that’s why our business has been so strong recently and will continue to be strong for a long, long time.
Julian Klymochko: Yeah, and with respect to the SPAC market, it certainly has been choppy lately, a bit of a hangover after our frenzy earlier this year, but ultimately, it’s the fundamentals that shine through. And we’ve seen some SPAC deals that more so based on, you know, hype and things of that nature. But no, it’s ultimately, it’s the business model that matters. Now concurrently with this SPAC merger, you raised a $300 million dollar pipe financing, which will be utilized for growing the company. So, what are some of the specific uses of proceeds with respect to the cash on the balance sheet that you’ll have once this deal closes?
Peter George: Yeah. So obviously this land and expand strategy, which has become so important to us, right? Because there’s a thing that people go through. I like to liken ourselves to what Peloton is doing to fitness and Tesla is doing too automotive. We’re doing to physical security, combining sensors and artificial intelligence in a very contemporary and cutting-edge way to solve a really big, important problem. So, one of the things that we’ve learned in a proven land and expand strategy. When people choose us and we’re there and other people go through it, that becomes a catalyst for, it’s so experiential and so different than they’re used to when we land in a place like we did in Lincoln Center. And people went to the shows and went through there, the physical security people who all know each other because they’re former retired police officers or CIA or Secret Service, they trust each other.
They’ve gone through this experience and it has this force multiplier effects that everybody else wants them. So, we were able to win lots and lots of opportunities, for example, in New York, because of that connected tissue between the decision makers and that experiential sell. And we’ve done that in many cities across North America. So, a lot of the proceeds are going to be used to expand our land in and expand strategy, get people on the ground in all the geographies that we need to have them in. Expand internationally, we have teams of people in Europe and Asia pack, but we need more. And we have partnerships with companies like Motorola and Stanley Black & Decker. They’re also investors that we want to double down on and make sure that we get the scale and reach that we need to meet the moment, right. That we’re having today and get our message out there and then be able to get our systems in these digital thresholds, these entryways, so people can have their venues open up in a safe and new way. So, the capital will be used for that.
And then over the course of the next five years, because we can do so many things on our platform because we’re digital. First, we can connect to all the things that are there, your video surveillance, your license plate readers, any kind of infrastructure, turnstiles, badge readers. We can connect to all that. And then our customers want other things, right. I mentioned elevated body temperature, we did that. We can add facial recognition, if people choose to have that. We can add other capabilities like we’re working on e-ticketing and identity. And there’s a whole set of other capabilities that if our customers want it, we want to be able to either develop it ourselves and invest in R&D or partner with somebody that’s best in class or potentially, you know, buy a company if that’s an option as well. So being fully capitalizing, the company gives us the opportunity to bring those capabilities, expand our capabilities for our customers so that we can make their venues a place where when visitors return, it’s going to be safe and frictionless and touchless and personal because we have data that nobody else has, that’s going to be really valuable for everybody. And that’s our mission and our goal. And we see a big opportunity to help tens of thousands of companies to do that.
Michael Kesslering: Certainly, a lot of very interesting growth prospects. And I mean, as a sports fan, the smart ticketing aspect is something that is very interesting from my perspective. So, I certainly look forward to that, but something that probably perked a lot of our listeners ears would have been something that you mentioned in passing, was that the Bill Gates investment.
Now, could you provide a little bit of background on how that came about?
Peter George: Yeah, well, he was one of the earliest investors in the company. So, the company was born, as I mentioned, seven and a half years ago. Two of our founders were entrepreneurs and residents at General Catalyst. And when they came out with the business model and the plan for the company. Bill Gates was looking for an investment in physical security because as you know, he’s doing, you know, he’s solving some of the big problems around the world from climate change to polio, sanitation, and he wants to make the world safer, right. And you may know that he was one of the leading people that predicted the pandemic that we ended up being in the last year. He predicted a couple of years ago. So, he’s quite an amazing person, we all know that. We have an enormous amount of respect for, you know, his continued effort to try to make life better for people. And he uses his big brain and his capital and all this capacity to do it. And he chose us for physical security to [Inaudible 00:31:06] that. So, it’s one of the earliest investors. He’s been investing in every round that we’ve had. We just did a convertible note prior to doing the SPAC. He led that along with FinBack, Jeb Bush company and we feel absolutely privileged. And he’s, you know, all of our investors from Bill and Jeb Bush and FinBack to Lux Capital to DCVC to General Catalyst are all staying in the company throughout this SPAC process. So, they’re going long with us because they believe in what we’re doing. Number one, our mission, but also what’s possible in terms of building the leading and market-leading cut social security screening. That’s been long overdue, and now we have the technology and the business model to go do it. So, we’re thrilled about that. And we think Bill will go along with us.
Julian Klymochko: Yeah, and certainly the people utilizing it will be thrilled with being safer and having a more efficient process in terms of getting into these facilities, no doubt. But Peter, before we let you go today, can you tell our investors where they can find out more about Evolve?
Peter George: Well, you can come to the evolve website. But you also can go to the NewHold website, NHIC and all the public company information about our story, our financial, our business model, democratizing security is all there for you to see. And I think there’s also some really great videos. There’s nothing like seeing people flowing into a venue. It’s so different than what happens when you’re standing in a long line. It’s great to see the videos. And I think my talk track, my narrative on the slides is there as well. So, you can learn a lot if you go see that, and we welcome people going there or coming to our website and learning more about us and staying close to us because we think we’re doing something super important here. And there’s a big opportunity to do the two things that as a CEO, you dream to have, which is to build a big market leading an important company, but also make the world a little safer. And we have the chance to do that here. So, we’re thrilled about that. And I appreciate the time Julian and Michael, with both of you to tell that story, so thank you.
Julian Klymochko: Yeah, and thank you Peter for coming on the show. For investors listening, the SPAC merger partners, symbol, NHIC, the deal is expected to close later in the second quarter, the new symbol will be EVLV once it’s all wrapped up and up and trading. So, Peter, thank you for coming on the show. You have a very interesting story with respect to what you’re offering at Evolve, and hopefully I can see it out in the wild as we get to the great reopening later this year. So, thank you very much and wish you guys the best of luck in the future.
Peter George: Yeah., thanks so much Julian and Michael. Really appreciate the time and the great questions.
Julian Klymochko: Okay, bye everybody.
Peter George: Okay
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