San Diego-based DriveCam Inc. seeks to expand its market and accelerate growth with its agreement to raise $85 million in investment capital from New York-based private equity firm Welsh, Carson, Anderson & Stowe XI L.P.
The private investment is expected to close in early December and will result in WCAS representation on DriveCam’s board of directors, consisting of existing investors Menlo Ventures, JMI Equity, Insight Venture Partners, and Triangle Peak Partners. WCAS manages $20 billion in capital and has a current portfolio of more than 30 companies, according to the firm’s website.
DriveCam CEO Brandon Nixon said WCAS was one of several investors that approached DriveCam with an offer. Nixon said WCAS was selected because of its history of building large and leading companies in its industries as well as its position as a leading firm in investing in the information-services business. Nixon said it became apparent through conversations that WCAS understood DriveCam’s efforts to prevent traffic accidents through its vehicle audio and video recording systems and the opportunity to fuel the company’s aggressive growth plans.
Buying Opportunity
Notably, the $85 million investment, announced Nov. 17, is being made in part to fund the acquisition of Brookfield, Wis.-based RAIR Technologies LLC, a provider of regulatory compliance solutions for Department of Transportation-regulated fleets.
“We selected that amount to do the acquisition of RAIR as well as fund our future growth initiatives and possible future acquisitions,” said Nixon, who declined to disclose the price of the acquisition, which is also expected to close in early December. “They (RAIR) are the leading brand in regulatory compliance services with particular strength in trucking, distribution and motor coach. We selected them as the perfect complement to the services we already provide.”
RAIR’s Web-based safety and compliance services, provided to many top fleets in trucking, which includes processing and auditing of hours-of-service logs and driver qualification file auditing, are seen as complementary to DriveCam’s audio and video recording systems aimed at preventing traffic accidents. DriveCam’s systems are mounted on a vehicle’s rear-view mirror with camera lenses pointing to the driver and outside the vehicle through the windshield. The recording equipment is triggered whenever a vehicle makes a sudden stop, accelerates too quickly, or deviates from a prescribed range of movement. The system is backed up with analysis and coaching to improve driving behaviors with the goal of reducing fleet risk and operating costs.
By combining DriveCam and RAIR’s services, clients will be able to take advantage of a suite of driver-centric services that will help fleet operators more efficiently manage their driver workforce, DriveCam’s announcement says.
“In DriveCam, we have found a strategic partner that shares our commitment to high-quality service and innovation — and is the unparalleled leader in driver safety,” RAIR CEO Greg Lofy said in a news release. “By joining forces, I’m confident we will be able to expand our technology and services to bring additional value to our customers.”
John Van Nortwick, RAIR chief operating officer and senior vice president, said that RAIR’s monitoring of compliance, safety, accountability for the Federal Motor Carrier Safety Administration is compatible with DriveCam’s monitoring of critical driving events. For example, the CSA safety measurement system rates drivers who sometimes have violations when inspected on the roadside. DriveCam would bolster that monitoring through its in-vehicle presence.
“DriveCam and RAIR share a common vision for safety and risk management,” said Van Nortwick, adding that DriveCam offers resources to help the company continue to grow. “There’s no overlap of products (or customers) so there’s a lot of opportunities to provide combined services to existing customers on both sides.”
Although privately held DriveCam doesn’t reveal revenues, Nixon said the company has had 10 consecutive quarters of profitability and has experienced orders growth in 2010 of 87 percent with similar growth continuing in 2011. New customers are contributing to the increasing order rate, he said, and existing customers are expanding the number of vehicles they have on subscription. At 130 employees, staffing has doubled from 2009, according to Nixon, who says the RAIR acquisition brings aboard an additional 40 employees.
DriveCam’s solution, installed in more than 170,000 commercial and passenger vehicles, gives drivers and fleet operators a way of addressing the causes of poor driving and preventing wasted fuel, collisions and fraudulent claims, according to DriveCam Senior Marketing Manager Eric Cohen.
Road Hazards
Statistics highlight the need for such a system: A motor collision occurs every five seconds in the United States and a traffic-related fatality occurs every 12 minutes, says Nixon. It adds up to $230 billion of expenses related to traffic collisions each year in the domestic U.S., he says.
“Ninety percent of this is avoidable,” Nixon said. “It’s based on drivers making poor choices. Our business is centered around catching poor choices and adjusting their (drivers’) behavior.”
Kevin Carroll, regional vice president for technology trade association TechAmerica San Diego, says DriveCam’s diversity in fuel management, fleet tracking and driving insights makes it an attractive company to Welsh, Carson, Anderson & Stowe, which is betting that DriveCam can rise above its niche competitors such as Safety Vision LLC and GreenRoad.
“DriveCam has always seemed to be on the brink of busting out,” Carroll said. “They’ve helped define the market, and they’ve been a market leader. I’m sure that’s what the firm is looking at. It shows a lot of faith not only in its business model but its management team as well.”