Rough launch for can't-miss rifle maker

TrackingPoint's futuristic guns were not the hit that its founders had expected. As a result, the company is facing losses and frustrated customers.

By Forbes Digital Jan 7, 2014 4:24PM
Screenshot from Tracking Point's website of the XS1 Precision Guided Firearm (© TrackingPoint, Inc.)By Abram Brown, Forbes Staff

Customers who want to test-drive TrackingPoint's Precision Guided Firearm often go to an outdoor firing range in Texas Hill Country with Chase Sutton. 

A bearded 300-pound wildlife biologist and safari guide turned luxury-gun salesman, Sutton helps average Joes become G.I. Joes with just a 20-minute lecture and a demo. Peer through the scope and line up a small white dot (the center of the cross hairs) onto an orange disc 1,000 yards away. Then push a red button to lock the gun’s guidance system on the target, pull the trigger and . . . nothing. I've fumbled and moved the weapon off-target.

One more try and the rifle fires itself without warning the precise moment it has calculated perfect alignment. A loud metallic clang registers a hit. "Once you get these guns into someone's hands,"says Sutton, smiling widely, "they really sell themselves."

Not always. In its first year of operation TrackingPoint was hit with quality snafus that set it back -- and caused a ruckus in the C-suite. The Pflugerville, Texas, company says it's fixed all the problems. 

"Reliability and accuracy are what this company stands for," says acting CEO John Lupher, 50, who had to step into that role in November. As the guy who designed the gun, it was his game to win or lose.

Backed by $35 million in funding from founder John McHale, his buddies and Austin Ventures, TrackingPoint started 2013 with a bang. When it released its three versions of the gun, priced from $22,500 to $27,500, videos went viral online -- four YouTube clips have a million or so views -- pushed by rich fanboys who wanted one (Gov. Rick Perry is a big fan) and an angry outburst from the anti-gun crowd.

But the launch was anything but smooth. TrackingPoint had a tough time deciding its target customer -- the military or the affluent enthusiast? That, coupled with the product flaws, likely caused undisclosed losses last year on estimated revenue of $7 million.

TrackingPoint was created from a missed opportunity -- a missed shot, actually. McHale, 58, was spending time hunting, having sold four high-speed network and cybersecurity companies to the likes of Cisco Systems (CSCO) and the old Compaq. 

On a trip five years ago to Tanzania he had stalked a Thomson's gazelle and got within 350 yards of it, close enough to shoot. "My central nervous system just couldn't hold the gun steady enough," he says. He missed and spent the rest of the safari stewing about it. When he got home he looked up a tech guy in Austin.

Lupher's electronics-design firm had designed software for early versions of Siemens' cordless handsets and Motorola's DVR box. Assuming McHale wanted a supergun just for his own use, Lupher designed a prototype (a Remington hunting rifle hooked into a laptop). But it came together so well that the two agreed there might be a business in it. Lupher left his shop, took 11 employees with him and threw in with McHale, figuring it would pay off: "John's sold over a billion dollars' worth of companies he has personally founded."

What distinguishes the gun is its scope and trigger mechanism. TrackingPoint doesn't make the actual .300 Winchester Magnum rifle; it comes from Surgeon Rifles of Prague, Okla. The scope has a laser rangefinder that gauges distances; gyroscopes, an accelerometer and a magnetometer measure how much you're moving the gun.

Zoom in through a 14.6-megapixel camera, and once you select a target, fixed or otherwise (there's a stationary mode and a mover mode), a digital-signal processor calculates an equation 54 times a second to find the best time to fire. Built-in, Linux-based Wi-Fi means you can livestream a hunt onto your iPad.

But who would buy such a sophisticated and expensive toy? "We didn't know exactly where the market for this technology was," says Lupher. A demo for troops at Fort Benning brought some interest. The U.S. Army has an outstanding order for a few rifles. (The military declined to comment.) But given the endless stretch of time required for Pentagon procurement, TrackingPoint decided to look elsewhere–mainly to a population of 13.7 million hunters.

Many discovered the gun through the videos, gun blogs and the mainstream press. To show off the line, TrackingPoint's three salesmen toured gun and safari clubs throughout Texas (half of whose 10 million households have firearms), as well as Las Vegas for the SHOT Show and a charity gun event at the vineyard of Nascar tycoon Richard Childress. Other advertising venues weren't an option: Google (GOOG), for example, won't put firearms on its AdWords program.

An interested customer starts by filling out an online form. More than 2,000 have applied, the tiniest fraction of the $4 billion commercial gun and ammo industry in the U.S. Roughly half of all applicants get considered, once the sales guys do Google and Trulia searches on prospective customers and track them through public records. "If someone has a $600,000 house and a BMW, they're a good bet," says Sutton. Less-affluent buyers get entered into a database for later consideration, when TrackingPoint offers cheaper models. Once a buyer sends payment the company runs a background check and ships the gun to a licensed dealer for pickup.

Problems with the rifles surfaced last fall, as customers sent in videos documenting their complaints. Most had to do with a failure of accuracy in extreme hot and cold temperatures. After just six months as CEO, Jason Schauble, a Remington vice president handpicked by McHale, was out of a job, replaced by Lupher. He revamped the clean room and instructed designers to tweak the optical system by adding a different prism that allows greater temperature stability. That seems to have solved it. Now one in 20 products is tested before shipping, up from one in 100.

What's next? Vann Hasty, who oversees product development, is debuting a smart semiautomatic rifle at a lower price point in the first quarter. The ideal customer: deer and varmint hunters. But Hasty, plucked from Amazon's (AMZN) top-secret design labs, has another pie-in-the-sky notion. A multiblade drone sits in his office, the basis, perhaps, of an airborne tool that can relay video of game on the ground below to a hunter’s iPad.

All that futuristic stuff sounds cool. First, though, TrackingPoint needs to get past all those misfires.

More on Forbes
Jan 8, 2014 12:43PM
It sounds like this this product allows people of limited skill to become accurate shooters.  Seems a little dangerous to me.  If some crime syndicate invests in a few of these, law enforcement is going to have a rougher time.  At least if a shooter has to rely on his own skill, experience, and training, he will have earned his right to accuracy.  Also, that experience and training would (hopefully) bring with it some commitment and understanding.  As for the founder of the company missing his shot at a Thompson's gazelle:  boo hoo.  Practice more next time before you go on safari. Isn't the point of sport hunting to develop and demonstrate one's skill?  Apart from having a well-made, accurately-tooled weapon, should the average person be given a shortcut to an easy kill?  Takes the "sport" out of it, I would think - especially if one starts using other tools, like the iPad game-tracking option.  Might as well just put the animals in an enclosure and shoot them - maybe tie them up, too.  God forbid we should rely on our own skill.
Jan 8, 2014 10:42AM
Hey Repukelicans, make sure to test the product on yourselves before you buy.
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