Axle.ai is raising via SAFE equity at a $9 million valuation cap with a 20% discount. Given the company’s traction, this pricing seems fair. Therefore, the pricing score for the business comes in near the high end of our one-to-five scale.

Investors would be wise to consider axle.ai a global business because its services can be used anywhere on the planet. One source estimates that the global video management software market was worth $1.5 billion in 2018. It forecast the industry would continue growing at a rate of 18.8% per annum to reach $7 billion by 2025. A second source pegged the market at about $3 billion in 2019 with growth of 18% per annum taking it to $9.56 billion by 2026. A third source estimated the market to be worth $5.9 billion in 2019. It forecast the industry would grow at a rate of 19.5% per annum to reach $18.5 billion by 2026. The rapid growth rate expected from all of these sources is encouraging, but the overall size of the market helps to drag down the rating to just below average on our scale.

Axle.ai is headed by three co-founders. CEO and co-founder Sam Bogoch serves as an advisor at Oncolab in addition to his axle.ai role. He advises the cancer diagnostics company on business strategy, marketing, and partnership opportunities. Previously, he was the CEO of Axle Video, the initial incarnation of the current axle.ai. He also worked as a director of worldwide enterprise sales programs and as a director for design, media, and production asset management systems at Avid. Prior to that, he was the founder and CEO of SeeFile Software, a collaborative tool for advertising and marketing agencies. His role before that was as the co-founder of BigStorage, which provided storage infrastructure to web-based startups in the form of open storage systems. He was also the co-founder and CEO of Torque Systems, a systems integrator for the graphics industry.

Patrice Gouttebel is axle.ai’s second co-founder and its product manager. Gouttebel’s experience includes serving as a global account manager and business development professional at SeeFile Software. That role included marketing, inspired website design, and partnership activities. Before that, he was an accounting tutor at Bunker Hill Community College. 

Katy Scott is axle.ai’s third co-founder and its operations manager. She is also a freelance photographer. Previously, she worked as a media intern at Lowell Spinners and as an administrative assistant for alumni relations at Wentworth Institute of Technology. Some of the event planning activities and related marketing might translate to her role at axle.ai.

Bogoch’s experiences are the most relevant to axle.ai, but even those are not particularly strong. Still, our system has rated the team aspect of the company above average on our scale.

At the end of the day, axle.ai’s offerings are not unique or highly differentiated from other competing products. The company claims its product is easier to use, and its prices should be accessible to a larger variety of customers. But it has some competition. There’s Vimeo, with its Video Library, and Quantum, which acquired Square Box Systems. There is also Frame.io, which offers a cloud-based collaboration platform for video projects. Despite the significant competition, using accessibility as a selling point could give axle.ai an advantage over more complicated, expensive alternatives. Because of this, our system has rated the differentiation of the company just a bit above average on our scale.

Operationally, axle.ai is quite far along. It boasts more than 700 customers and is already generating revenue. Not only that, the revenue comes from multiple services, not just one feature. That all decreases risk for investors. On the financial side, the picture is a little more complex. In 2019, axle.ai generated revenue of $859,455. Likely because of the COVID-19 pandemic, this figure decreased to $667,119 in 2020. On the bottom line, however, financial performance has improved over the last two years. In 2019, the business generated a net loss of $442,804. This narrowed significantly to a loss of $209,608 in 2020. Axle.ai claims on its raise page that it has generated $416,000 in revenue for the first five months of 2021, but audited financial statements are unavailable.

Investors should note that scaling may become a challenge for axle.ai. It will need a much larger customer base in order to grow revenue significantly. Overall, though, there are encouraging signs that the worst might be behind axle.ai. Thus, our system has rated the business’s performance near the high end of our scale.

Our system has rated axle.ai’s overall risk near the low end of our scale. Financial risk is the only category that’s elevated. This is mainly due to its fast burn rate, significant net losses and significant cash outflows. These things appear to be improving, but until the company can generate positive cash flow on a consistent basis, this risk will remain marginally elevated.

Sources generally seem to indicate that axle.ai is operating in a small market. This could limit its potential in the long run, especially considering there are already a number of competitors in that small space. Another concern is that the team running it has only some relevant experience and could benefit from members with more industry expertise. Axle.ai has also experienced noteworthy net losses and net cash outflows.

On the positive side, axle.ai has succeeded in launching its platform and has multiple revenue streams. Although it operates in a small market, that market is rapidly growing. The company has a large user base. Its 2021 financial performance is also looking up, if the company’s claims are to be believed. And its $9 million price is fair.

Axle.ai has done well for itself and its current investors. The business looks ready to resume growth, and so long as that continues, there is upside potential. The company has already launched its platform and is generating revenue. In addition, management is offering a fair valuation for this raise, and the risk seems to be low overall. 

There are also some concerns to keep in mind. Although the market is growing, it’s still pretty small and already has active players, which could limit axle.ai’s potential in the long run. The team could benefit from having more members with relevant experience, and the company has seen a worrisome amount of net losses and cash outflows. Because of this, we feel that the good and the bad more or less even out, leading us to assign the company a Neutral rating.

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com.

Analysis written by Daniel Jones.