This week, we will continue the theme of real-world AI by looking at a surprising player that has been capturing the software market for security operations, similar to the way Samsara has been able to scale into business operations.

The company was once known as TASER, the manufacturer of the electroshock weapon of the same brand. I clearly have not been paying a lot of attention to them since their rebrand into Axon, as in the last few years, they have built one of the fastest-growing software businesses and have a real opportunity to be one of the first to deliver AI-powered applications into a traditionally very conservative market.

Source: Number goes up according to Google

The key takeaway

For tech sales: The leadership team at Axon has understood that every company is a technology company today and applied that very literally, by becoming one of the highest growth software opportunities in the market today. This is a great opportunity for tech sales reps who want to sell software that makes a practical difference in the real world.

For investors: The team at Axon has shown a surprising level of shrewdness and competence in the last five years of starting their software business. Based on metrics alone, this is one of the best-managed and highest-growth companies in the industry.

Moonshot and other related topics

Source: Axon Investor Deck November 2024

The first thing that becomes obvious when looking at Axon is that, unlike most software companies, they actually have a purpose beyond printing returns (or more often, losses) for their investors. Their mission statement of "Moonshot" is the idea that they can have a direct impact on reducing gun-related deaths between law enforcement and the public through software and hardware.

The second thing that's clear is that Axon is probably what we would consider a customer-obsessed company, dedicated to building long-term relationships of trust with its customer base.

Now the above slide looks quite marketing-y but there are some practical truths behind it.

They've had 10 consecutive quarters of 25%+ growth and now have 17k customers.
Even their largest customers barely spend 3% of their budgets on the full suite of software and hardware.
They reached 36% growth on their cloud platform last quarter, which would put them in the top percentile of software companies right now.
They have $885M ARR right now, which for reference is the combined ARR of Deel and Ramp, two of the high-growth "darlings" in the industry right now.

Similar to Samsara, what makes their products very relatable to the sales teams is that they have real-world impacts. It's much easier to have conviction in your product when you move away from abstract KPIs or the "COST SAVINGS" meme.

Their flagship AI product is a very practical implementation called Draft One, which basically picks up the audio from the cameras worn by the officers and then converting it into a usable draft for a police report. The interesting way is that it’s not designed to churn reports automatically but to still rely for the most critical elements on the judgement of the police offer who is creating it. This is a good introduction into their approach:

Unlike Palantir and Anduril, who are entirely focused on making their customers win, Axon is taking a more nuanced approach, partially because the role of the police in upholding public safety doesn't start and end with the use of force. Accountability, being an active part of the community, and meaningful reduction of risks is a significant part of what makes a police force successful in their role.

Brittany Bagley (CFO): Some of them are still starting with TASER. Some of them might start with sensors, right?
So it's really getting very specific on the market, having great salespeople in those markets, really understanding what our customers are looking for, what they need how our solutions can help them problem solve.
And then once you get in the door, being customer obsessed and making sure that they're willing to buy more from you going forward.

This is also how the tech sales opportunity when selling to law enforcement requires both solving problems for them but also allowing them to perform their duties to a higher standard. In turn, this leads to stronger long-term relationships and growing their share of the budget.

Brittany Bagley: You can tell from that intro that we think drones are going to be big going forward.
So we've been doing a lot in drones actually. It really it started with our acquisition of Sky Hero, which was a little over a year ago. That's an indoor tactical drone product, really targeted at specialized markets where you can imagine you need an indoor tactical drone.
And back to my point about saving lives and having a real mission to do that, if you can send a drone into the room first instead of a person into the room first, that has pretty big opportunities in terms of deescalating a situation and keeping everybody safer.

The expansion into software for drones is another example of identifying new areas with strong synergies (not unlike the approach that Samsara takes with logistics and manufacturing). As drones become more widely utilized by law enforcement, there are a number of both operational and compliance-related requirements that are difficult to manage with commercial software. Offering a single platform that potentially could, over time, expand also into hardware would be a significant opportunity for Axon (particularly keeping in mind that the majority of drone technology right now comes from China).

The interesting thing is that not only do they have a well mapped-out roadmap for upselling into law enforcement at the local level, they are now expanding into a number of additional markets (federal, international and enterprise).

It's not difficult to see how they can scale if they continue to execute well in both product development and sales. If you can collect unstructured data from the cameras, sensors, and drones that you produce, then convert it into both actionable insights and solve tasks for practitioners in the field, then the opportunity is mostly limited by your capability to execute new ideas.

In a "picture perfect" future, officers will be able to walk around with Axon AR glasses that dynamically give them insights, record everything, coach them into the next steps and report back live to headquarters, where algorithms can give advanced warning on situations where the risk of the engagement is going beyond the capability of the individual present on the ground. Drones will provide advanced pathways and negotiate on behalf of humans.

Everything will be documented and available to both the state and the public defenders handling the case. In a distant, but not impossible future, sentencing will be automated based on the infraction, with appeals allowing for the "human judgment" precedent to take over.

The tech sales opportunity

Speaking of sales execution:

In general, the sentiment by the reps seems quite high, even if the quota attainment is not "outstanding" at 48%. There are some red flags raised around how comp is handled:

On the engineering side, it becomes clear that there is also a more active transition to RTO right now and a rather intense expectation of high performance:

Based on these dynamics, I think that it’s fair to say that this is an exciting tech sales opportunity right now, particularly when accounting for the rapid product development and minimal footprint relative to a very high opportunity ($0.9B ARR vs $77B TAM). Take a look at Motorola Solutions, one of the largest incumbents in the space and think trough the differences between what is clearly a legacy approach to the problem of public safety and what Axon is trying to achieve.

The bullishness is translated also in a rather positive sales culture, which by itself is rare right now in this market.

The Tech Sales Newsletter #79: Software and real-world security operations

The key takeaway

Moonshot and other related topics

The tech sales opportunity

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