The most successful companies in vertical markets pair product innovation with go-to-market disruption. In this series we explore that marriage, how companies many have never heard of came to dominate their markets, and how they scaled with distinct tactics. These history lessons inform what we look for when investing in vertical markets at Scale Venture Partners, and hopefully provide blueprints for the next generation of vertical market winners.
Company name: Axon (2017-present), TASER International (1993-2017)
Founder: Rick Smith
Year founded: 1993
Company vertical: Public sector
Market dominance: TASERs, body cameras, and operations software for local public safety agencies
What do they actually do: Axon sells hardware and software to local public safety agencies. Their hardware suite is primarily TASERs, body cameras, vehicle cameras, and drones. Their software platform has three parts: Axon Evidence, the core system of record for digital evidence management, sharing, and compliance; Axon Respond and Fusus, the RTCC (real time crime center) that helps officers in the field and at the station monitor and react to situations as they unfold; and Axon Records and Report that help officers document encounters after they happen.
Product innovation: Axon’s key insight over the last 20 years was bundling hardware and software to create an end-to-end platform for law enforcement. Pre-2010s, Axon’s core hardware innovations were commercializing the taser and popularizing the policy body camera. Axon has since leveraged its hardware install base to launch a software operating system for public safety. During an incident, field data from both Axon hardware (body, car, and drone cameras) and non-Axon sensors (community cameras, gunshot detection sensors, etc.) feeds into the Axon RTCC (real time crime center) that the agency uses to coordinate their response in real-time. After an incident, the RTCC has the ground truth of what occurred, which then feeds into Axon Report for documentation and Axon Evidence for storage and management. Axon’s hardware + software bundle puts them at the center of both the action and the administration.
Scaling magic moment: Axon’s scaling is a story of product expansion, government regulation, and strategic M&A.
- Early days: channel distribution. Our story starts in 1993 with Taser International selling the TASER. The TASER was originally a consumer product that struggled with sales. Taser International’s first magic moment was in 1998 when they started selling TASERs to police departments as a less-than-lethal alternative to gun violence that was less volatile than pepper spray and less brutal than a billy club. Word-of-mouth spread quickly, and they leveraged police equipment distributors to rapidly reach police departments with limited capital, and by 2005 approximately 6,000 (~⅓ of police departments in the US!) police departments had purchased ~130k tasers (source).
- Litigation era: product expansion. TASERs, despite being less lethal than guns and safer than pepper sprays and beatings, attracted a litany of lawsuits as they became industry standard. Axon faced personal injury suits from situations when the TASER was involved and police departments received negative press when TASERs were involved in a few accidental deaths. Taser sales dropped, litigation costs soared, and net income dropped over 90% from 2004 to 2005. To combat this, Taser International introduced the TASER CAM: every time a taser was pulled out, the TASER CAM would record the event, creating a source of truth for what occurred and deterring frivolous lawsuits. The strategy worked. Litigation ground to a halt, sales resumed, and by 2007 sales reached a new high.
- EVIDENCE.com and body-worn camera legislation: government regulation and more product expansion. The TASER CAM was Axon’s first step to becoming a platform company. Police departments loved the cameras, so they introduced their first non-TASER product: AXON, an audio/visual system to record happenings in the field. Police departments quickly adopted this, but lacked the IT infrastructure to store or make use of the recordings, which led to the second product, EVIDENCE.com: cloud software for police departments to store footage from AXON devices. EVIDENCE.com was released in 2009 and was remarkably forward thinking. Taser International’s software approach was a differentiated offering vs. competitors (who were literally storing DVDs in warehouses), and by 2015 when the Obama administration introduced body-worn camera legislation, Taser Intl. was in the pole position to take advantage of the new government regulations.
- Rebrand to Axon: M&A and even more product expansion. By the mid-2010s, Taser International was becoming more than a less-than-lethal weapons maker: in 2016, TASERs were a ~$200M revenue segment growing ~15% and AXON cameras + Evidence.com was a ~$65M revenue segment growing ~85%. The future of the business was the integrated hardware + software offering, not just TASERs. To reflect this, in 2017 Taser International rebranded as Axon and doubled down on software. R&D expenses grew (nearly doubled in 2017 alone!) and they launched the Axon Cloud suite: a software platform that went beyond EVIDENCE.com to computer assisted dispatch, report writing, real-time operations, and more. They also leveraged M&A to defend their market dominance and add new TAM. Defensive acquisitions include their primary US body cam competitor and a key UK vendor, both in 2018. TAM expansive acquisitions include VR studio in 2022, a camera data platform in 2024, and a counter-drone system in 2024.
Where are they now: Axon is a publicly traded company. Over a million public safety officials use their software globally and over a million TASERs are sold yearly. Axon’s revenue has more than 10x’d in the last 10 years, growing from $164M in 2014 to $2.1Bn in 2024.