Due Diligence For

CROWDFUNDING

Safety First Arms

By February 20, 2017Due Diligence

Company Overview –

Secure user-authorized firearms for personal defense.
*Souce: DreamFunded

Company Investment
Name: Safety First Arms Minimum Raise: $500K
CEO: Robert Allan Maximum Raise: $1M
Company Founded: 2012 Structure of Raise: SAFE
Location: San Diego, CA Valuation: $15M Valuation Cap
Crowdfunding Portal: DreamFunded Minimum Investment: $100
Crowdfunding Link: https://dreamfunded.com/companies/safety-first-arms  
Website: http://safetyfirstarms.com/  

Review Overview

Positives Risks and Reservations
Firearm safety is a high priority for consumers. $15 million valuation seems very high for a company with no revenue.  If all $1,000,000 is raised, investors only own 6.25% of the Company.
The company has a number of patents to protect its designs. The firearms industry is very competitive and many other companies have attempted but failed to market firearms with built in locks.
There are few competitors offering “smart” firearms Firearms are highly regulated by both federal and state authorities and regulations vary state by state and can change unexpectedly.
Relationships with large California firearms stores Company management team is small with little firearms industry experience and there are no independent board members.

The company has few, if any, resources to defend its intellectual property position or defend itself against claims of infringement.

Problem

Every year 200,000 guns are stolen and almost 1,000 teens commit suicide with a parent’s gun. Accessibility vs. safety is an issue gun owners with children face.

Solution

Current:
Safety First Arms created a gun has a PIN-code operated locking mechanism that prevents unauthorized firing and a programmable motion-sensitive alarm that protects against tampering and deters theft.

Long Term:
Develop guns beyond the Smart2 and Smart AR, such as a Smart Revolver and Smart Shotgun.

Business Model

Safety First Arms will sell their guns direct to consumer, direct to institution/large retailer, and through distributors. Direct to consumer has a $1,395 MSRP, revenue through direct to institution channel is $1,086 and revenue through a distributor is $1,036. The total COGS for each revenue channel is $550.75.

Traction

  • Over $1M in pre-orders already received
  • The Glock Store of San Diego, CA has an initial PO of $518,000, 500 units of Smart 2
  • Gunther Gun Shop of Carlsbad, CA has a future commitment of approximately 500 units of Smart 2 for first year or $543,000 estimated sales projection
  • Poway Weapons and Gear in Poway, Ca has a commitment to carry Smart 2 and Smart AR when ready
    *Source: Company provided in attached documents

Senior Management Team

  Robert Allan Brian Weinberg
Position: CEO COO
Ownership Percent: 75% 20%
Linkedin: N/A https://www.linkedin.com/in/enclavetechnologies/ 

Advisors:

  • Marshall Waters II – Alton Consulting Group, Advisor: Startup Plan
  • Lenny Magill – CEO of GlockStore, Advisor: Retail, Distribution, Product

Summary:
While management does have significant business experience, they have little direct experience in the firearms industry, including manufacturing at scale, supply chain management or marketing and sales.  There are no independent board members.

Market Analysis

Industry: Firearms

TAM (Total Addressable Market):

  • 35M current gun owners would consider purchasing a smart or childproof gun
  • 105M non-gun owners would consider purchasing a smart or childproof gun
    *Souce: Portal Page in Provided Documents

Industry Opinion:
The firearms industry is large and has experienced significant growth over the last few years, including sales of firearms to people who may otherwise be unused to firearms and thus prone to accidents.  Public awareness of and concern about firearm accidents has lead to many companies trying to build a “safe” firearm, however, most efforts have failed for a variety of reasons.  There is also considerable resistance within the firearms industry to “safe” firearms over concerns about reliability and public perception that guns are not otherwise “safe.”  A company that can produce and sell a firearm that can overcome these issues may be able to succeed.

Competition

Differentiator:
The company’s product seems to be unique because it combines the elements of an external safe with a keypad lock within the actual firearm.  Most other competitors are external devices such as trigger locks or gun safes.  Other companies that have tried to incorporate safety features such as fingerprint or RFID into the gun itself have failed to date.

Main Competitor

  Armatix Trigger Smart Identilock
Price $1,798 N/A $239

Company Financials

Revenue to date: $0

Revenue Last Fiscal Year: $0

Previous Funds Raised: $0

Use of Funds

  • Complete development
  • Produce beta guns for testing and marketing
  • Prepare business entity for sales transactions
  • Develop and launch website
  • Soft-launch with a web based pre-sale campaign

Exit Opportunities

Due to the highly competitive nature of the firearms industry, large companies often seek to acquire successful technologies that provide differentiation.  If the company is able to prove the reliability of its products, it may be an acquisition candidate.

Expert Opinion Summary

The firearms industry is highly competitive, heavily regulated and risk adverse about new technology adoption.  While a reliable “safe” firearm would likely be well received by the public, previous attempts have failed and no major firearms manufacturer is pursuing such technology currently.  In addition, the company’s valuation is extremely high considering they have no revenue and state they have no expectation of revenue for a considerable period of time.  While management seems to have a great deal of experience in business in general, they have little or no direct experience with firearms manufacturing, sales or marketing.

 AngelList: https://angel.co/safety-first-arms
Crunchbase: N/A

Disclaimer

Crowdfund Research is a publisher and does not offer investment advice to any specific individual.  Crowdfund Research and its authors do not receive any compensation for the due diligence reports. 
 Crowdfund Research and its authors do not offer investment advice, nor do we endorse or recommend investments in any company or the suitability of an investment for any particular investor. Crowdfund Research is not registered as a broker-dealer or financial or investment advisor and does not provide any services requiring such registration. The information in this report or on our website regarding any company is based on publicly available information or directly from the subject company.  Crowdfund Research makes no representation or warrant as to the adequacy, accuracy or completeness of such information. Any opinions or forecasts expressed herein are our own, are not intended as investment advice and are subject to change without notice. This report has been prepared solely for informative purposes and is not a solicitation of an offer to buy or an offer to sell any security.
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Todd Taylor

Todd Taylor

Senior Business Attorney at JUX Law Firm
Todd helps entrepreneurs with challenging legal issues facing their businesses. For almost 20 years, Todd has provided practice legal advice on business formation, angel and venture financing, contracts and buying and selling businesses. Todd enjoys working with technology companies, including those in cleantech, energy, food and agtech, IoT and manufacturing. Todd also represents investors in early stage companies and has been involved as a co-founder in a number of start up companies.
Todd Taylor

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