EP 145: Rick Smith (CEO, Axon): The Wild Ride From Near-Bankruptcy to $50B+

**Rick Smith** (0:00)
The first outside dollar I ever raised was in an IPO. Until then, every professional investor told us we were crazy, that building electrical weapons, whose portfolio does that fit if you're a VC? The distinction between crazy and successful, I think, is just some element of survivorship. I had a mole that was hired into the company. It was actively sending material non-public information to short sellers. I love my investors, but if we're doing things to please the investors, that's just focusing in the wrong area. Are you creating value? Are you creating a sustainable business? Focus on just doing it and then tell people what you've done. Welcome to The Logan Bartlett Show. On this episode, what you're going to hear is a conversation I have with Rick Smith, the founder and CEO of Axon. Axon is a name you might not know, but it is a nearly $50 billion public company. That's products include the Taser that people are probably familiar with, in addition to body cameras and in-car cameras for police officers, as well as providing a platform called evidence.com. And finally, a new AI product called Draft One that helps police officers with their drafting of police reports. Rick and I have a fascinating discussion about taking the company public in the very early days of Axon's journey, as well as what it's been like going from something of a penny stock to a business now worth $50 billion. Really fun conversation with one of the more unique founders that I have had the fortunate opportunity to have a conversation with that you'll hear now.
Rick, thank you for doing this. Yeah, I'm excited to be here. I don't know how many people are familiar with the Axon story. For people that aren't, can you just give a little bit of a primer of what your business does? Yeah, so we are in the business of trying to reduce violence through technology. Broadly, we like to say, we're out to make the bullet obsolete. We envision a world that you can see in science fiction, right? If we had Captain Kirk Staser, we wouldn't be shooting bullets at each other anymore. And I started this business after two people I knew from high school were shot and killed. And I became very interested in how we think about gun violence, but not as a political problem, as a technology problem. And so the products today are what? What are the main products that you derive revenue from? Yeah, so our most famous product is the Taser, which is an electrical weapon that's designed to incapacitate temporarily. From there, we expanded into body cameras, because frankly, once tasers became successful, they became quite controversial. And there were a lot of concerns about how police were using them, et cetera. And so we basically said, hey, rather than argue about whether cops are good or bad in the abstract, let's record what they're doing, and then we'll know. So we created the body camera industry. With that, we got into cloud software, because we realized the real challenge wasn't going to be making cameras. It was going to be, what do you do with all the data? And so we created a cloud-hosted system called evidence.com that now we believe today hosts more video than YouTube in terms of content. We don't have nearly as many viewers, but we have around a million police officers worldwide wearing body cameras uploading about two hours of video every day. We then got into in-car cameras, drones, counter drone systems. We acquired the world leader called D-Drone in tracking small drones. We protect all the NFL stadiums, and much of the many of the cities in Ukraine have those same sensors. Then we've got a whole host of software and AI products. As you can imagine, with the AI revolution that's happening, we're in this incredible position where we can take the audio video feed of what an officer is seeing and hearing, and use AI to process that. Starting with our first major product there, we do the first draft of their police report, which cuts the amount of time police spend on bureaucracy by about 50 percent. That's a product called Draft One, and then we have a whole host of new AI products we're launching as well. So it's a pretty broad ecosystem, all focused around this theme of how do we help police do their job better while protecting and preserving privacy, and doing it in ways that build the kind of society we want to raise our kids in. I'll circle back to some of the questions about the evolution of the journey, but just so people have it. So a company founded in 1993 called Taser through 2017? Did you have other products through that period of time? When did the evolution of body cameras actually come and roll out? So we started the body camera journey around 2008 That took about seven years to really take off, as did the first round. It seems to me like major tech changes in this industry seem to take about seven years to sink in. And then that's, we changed, so it was 2015 that the body cameras and the software stack was really taking off. So we changed the name to Axon, just because Taser is such a powerful brand that connotes the idea of an electric weapon. It wasn't broad enough for the company anymore. So we made that a product brand and took the name Axon to the company. And then along the way, you went public in what year? May 8th of 2001 2001, so May 8th, wow. Interesting time to be going public. I'm sure their first couple of quarters there was an interesting period of time with the market fallout and all that stuff. Oh yeah, I think actually the only reason we were able to go public is because the internet bubble had burst. And so Wall Street was desperate for deals that were not internet. And we were a company that made a physical product. We had growing sales, we had actual revenue, and we had line of sight to profitability. Which before then, to be honest, the first outside dollar I ever raised was in an IPO. Until then, every professional investor told us we were crazy, that building electrical weapons just... Whose portfolio does that fit if you're a VC? And so our first outside dollar was an IPO. The distinction between crazy and successful, I think, is just some element of survivorship. Which side of the line you end up falling on. Yeah, for sure. And so IPO at that point, and the journey initially, I mean, there's different ups and downs, penny stock all the way up. When you launched the body camera, do you remember roughly market cap at that point? Oh, let's see. When we launched the body camera, we were doing about 100 million in revenues. It was probably maybe three to 500 million of market cap. But then it came down. Our investors did not like this little weapon company that was making electronic weapons, trying to do software and video. And to be honest, I can see why looking back, that was a very difficult transition. We had to just fundamentally change the DNA of the company. And so we were in the penalty box for a few years with investors. Obviously now that it's turned around and we're hovering around a $50 billion market cap, which is only possible because we made the transition from a pure hardware to a hardware and software, and now AI play. Is it fair to say AI has obviously been a big part of your journey? And I know investors are really excited about Draft One and the potential that I think AI can bring. It's a very cool use case that I want to talk about. But AI seems to have been a big accelerator, at least in terms of valuation and intrigue as well. And then there was the whole defund the police element of body cameras becoming in prominence. Did that raise your profile and lead to increase demand from a revenue standpoint on the body cam side? Yeah, really following Ferguson, Missouri, that was the seminal moment for us. That's where an officer shot, a white officer shot a black man. Let's just point out, it was very racially charged. The man he shot was unarmed. However, they were apparently fighting over the officer's gun. There was a very controversial case. What made it controversial is the officer claimed he was fighting for his life with a much larger man that was trying to take his gun away. Yet some of Michael Brown's family claimed, if you remember Hands Up, Don't Shoot, he was surrendering and he was executed. Depending on who you believe, that was either a justified self-defense of that officer or a horrific execution.