Surveillance Gear in Demand

Austin's Supercircuits sees success in selling video monitoring equipment that's less costly and hard to detect

By Kirk Ladendorf
AMERICAN-STATESMAN STAFF

Monday, June 18, 2007

It's not just paranoia anymore.

With improvements and cost reductions in video surveillance technology, more people than ever may be watching you, from the retailer whose store you shop at to the police officer who pulls you over.

And Austin's Supercircuits Inc. is helping them watch more effectively and for less cost than ever.

The company, which moved from California to Austin as a hole-in-the-wall operation 15 years ago, has grown into perhaps the biggest discounter in the video surveillance industry. And business is booming as the world grows more security-conscious in the wake of increased terrorist attacks.

Supercircuits deals directly with technology suppliers in Asia and Europe and sells its gear to law enforcement agencies, private security firms, military forces, hobbyists and large and small retailers that are trying to minimize theft from customers or employees.

It sells low-cost cameras that can fit inside a baseball cap or be sewn into clothing. Its smallest cameras are about the size of a button and are used in undercover police work.

The company is pushing to grow faster than ever. Founder Steve Klindworth sold three-quarters of the company to the giant Carlyle Group private equity investment company in a deal that was concluded last fall. The deal put a total value on the company of more than $30 million.

"Supercircuits is the leader in the direct model for video surveillance," said Gene Lowenthal, a vice president with Growth Capital Partners, the Houston investment bank that advised the company when it sought an investor last year. "Klindworth is a pretty clever guy, and he saw the handwriting on the wall. He said why should people pay these big premiums for video technology, because the stuff is getting pretty cheap."

Klindworth remains on the company board and consults with management on special projects.

Since the sale, the company has moved to expanded quarters on North MoPac Boulevard (Loop 1), added to its sales force, enhanced its e-commerce Web site and pushed harder to sell its equipment to large corporate buyers, including major retail chains. The company is aiming for $50 million in sales this year.

The company also makes its gear available to customers of more modest means, including the International Justice Mission, a Washington-based nonprofit group that uses portable video equipment to document international cases of forced prostitution, bonded slavery and police brutality in countries such as Thailand and Kenya.

Threat to criminals

More conventional customers are like the Fayetteville, Ga., police department that wanted to upgrade the aging video equipment in its 30 patrol cars with better cameras and more sophisticated recording equipment. Because police car videos frequently are used as evidence in court, the department thought higher-quality video footage would generate better evidence.

A few equipment vendors quoted prices for new equipment that Mike Yearty, the department's systems specialist, thought were too high. So he turned to Supercircuits.

"The new technology is a lot different from what it was several years ago," Yearty said. "The video is recorded onto a hard drive and it is locked into a case," he said. "You can't delete it and you can't take it out. It takes the hiccup out of the old system."

Supercircuits let Yearty evaluate different kinds of equipment before he chose what he wanted. "It cost us one-third of what it would have cost from another supplier," he said.

The company's cameras have been used to discover and prosecute shoplifters, thieving employees, illegal toxic waste dumpers and fish-and-game violators, among others.

Its product catalogs carry numerous customer endorsements, including one from professional tennis legend Cliff Drysdale, who said one of his tennis shops several years ago used a covert desktop clock-camera to catch a troublesome thief, who turned out to be a security guard.

Aiming high

In 1999, Supercircuits came under a U.S. Customs Service investigation, and in 2003 it was forced to pay a $250,000 federal fine for selling covert video equipment that also had audio recording capabilities. Klindworth said the company quickly eliminated the offending products from its portfolio and went on to have record sales that year.

Supercircuits has sold surveillance gear to the U.S. Army to use in mobile interrogation rooms headed for Iraq.

CEO Mark Thompson said Carlyle gives his company the resources, financial backing and corporate credibility to pursue multimillion-dollar equipment deals with larger customers, including retail chains.

Supercircuits expects to become a much bigger player in the video surveillance equipment market, which analysts say could grow to $2.6 billion in yearly sales by 2010.

The company says it has some of the same attributes of Dell Inc.: close ties to cutting-edge equipment makers in Asia and Europe, the clout to get products customized to meet the needs of large customers, historical ties to thousands of law enforcement and security industry professionals and the resources to pursue bigger deals with government agencies and large corporations.

"Historically, Supercircuits has been able to outpace the growth of the industry," Thompson said. "We're confident that the trend will only accelerate."

About Growth Capital Partners, L.P.
Founded in 1992, GCP is an investment and merchant banking firm that provides financial advisory services to both private and public middle-market companies, with a specialty practice devoted specifically to the energy industry.  GCP also focuses extensively on the private equity marketplace. Since its inception, GCP has completed in excess of 250 transactions, raised more than $1 billion of institutional capital (through private placements of equity, subordinated, and senior debt), and completed M&A transactions with an aggregate value in excess of $3.0 billion.

For additional information, please contact:

Growth Capital Partners, L.P.
281-445-6611

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