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Rick Smith, CEO and founder of Axon. (Axon Photo)

Axon, which makes body cameras and smart weapons, will now let its employees bet parts of their compensation on company growth milestones such as revenue, profits and market capitalization, in a new strategy meant to give the company a leg up in the fierce competition for tech talent.

The new plan gives employees a choice to tie a portion of their compensation package — between and 5 percent for employees making over $100,000 per year — to company achievements, and they are only paid out if Axon hits those milestones. In an interview with GeekWire, Axon CEO Rick Smith said the plan is based on the compensation structure for Elon Musk at Tesla. Smith himself last year decided to give up his salary and get paid only if the company reaches certain milestones.

“We’d talk in company meetings, and I’d here people say, ‘we’ve got to figure out how to hit Rick’s milestones,'” Smith said. “And it put this pit in my stomach, because what’s motivating to employees about making the CEO wealthier?”

The program is different than a simple bonus and incentive structure, Smith said, because it gives employees “skin in the game.”

The full list of Axon’s new compensation milestones. (Axon Chart)

There are 12 potential levels of stock awards in the plan that could take up to 10 years to pay out. Smith said the return on investment could be around 15 to 1. For example, if someone puts $10,000 in compensation per year into the program and the company hits all the milestones, they could issued stock worth $1.5 million.

However, there is a risk that the company won’t hit the milestones, and employees won’t get paid out.

“It’s a plan that works for people who want startup risk/reward payoffs, but we have the advantages of being a public company, where you don’t have to worry about creating a channel, raising money or building a brand,” Smith said. “We bring all of that, and now with a startup-style comp plan that you can opt in or out of.”

The first revenue milestone is $710 million for the year. For reference, Axon is on pace to post about $400 million in revenue in 2018. The top revenue milestone is $2 billion.

The first profit milestone is $125 million before interest costs, taxes and depreciation, and scales up to a top level of $230 million.

Right now, Axon’s market cap is around $2.5 billion, and it set milestones for each additional $1 billion in valuation, up to $13.5 billion.

For each of the 12 stock “tranches,” the company has to hit one of the operating milestones — profit or revenue — and one market cap threshold.

Axon’s spaceship-themed office in Seattle.

Axon started as Taser International in 1993. Axon originally launched as a business unit, but in 2017 rebranded the company under the Axon name to reflect its focus on body cameras and the supporting evidence management software.

The publicly traded company is based in Arizona but it has a huge office in Seattle. The new compensation plan is the latest example of Axon’s creative attempts to attract and retain talent in the competitive Seattle market.

In 2016 the company sent a recruiting team floating down the Ship Canal in Seattle’s Fremont neighborhood past the waterfront offices of Google, Adobe and others. A sign draped on the rented electric boat read: “Write code. Save Lives.”

Editor’s note: This story has been updated to clarify details about the return on investment of the compensation program.

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