like kids with ADD, companies can suffer from market attention deficit disorder. but nail your niche and you can through the noise. check out this case study from my new book with jason lemkin, “From Impossible to Inevitable“.
How Avanoo Nailed It
Avanoo is a company hitting the hyper-growth track early, going from $0 in revenue to $5 million in its first full year of selling. Their business is delivering video-based training to improve employee performance. Corporate training: talk about a busy, noisy market!
Daniel Jacobs and Prosper Nwankpa founded Avanoo in September, 2013. Daniel distinctly remembers Prosper saying as they began, “The key to this first phase is to never be afraid of blowing something up. It’ll get us quicker to where we want to be.”
In the first 78 months, they came up with, and then threw away, four different product approaches. By March 2014, they had a core product. It was a service offering 30day educational programs, with one 3minute video a day. This one was a winner, yet it still took the company a few more swings and misses before it nailed its own sales niche and actually made money.
Niche Try #1: Consumers
They began with four programs: Happiness, Focus, Life Purpose, and Weight Loss, all created by Daniel. They ran a “Name your own price” deal, and by getting some top posts on Reddit, they managed to sell 2,000 programs in the first two months for $10,000 (average of $5 per course).
What They Learned in Launching
1) The product worked. People used and consumed the courses, and they were reporting improvements. Great. It’s a huge accomplishment. But…
2) A great product wasn’t enough. Even though people used and loved it…they didn’t share it. Avanoo was going to have to find other ways to grow besides creating great product. And going on Reddit again and again wouldn’t work – they’d mostly tapped out that audience. As Daniel put it, “You can only do so many #1 posts before the Reddit people want to throw pitchforks at you.”
3) They needed to expand their content. Daniel wasn’t a recognized expert in these areas. They decided they needed more experts and variety in the topics beyond the first four courses.
The Hunt for Sustainable Lead Generation
They tried all kinds of lead generation programs to find one that would sustain growth. “By July 2014, besides Reddit we’d also tested Google/PPC ads, Facebook ads, SEO, Twitter and Pinterest techniques – but none of that was doing anything for us.” They also contacted various experts in fields that were interesting to them personally, like leadership, stepping outside your comfort zone, and happiness.
In a working session, one expert said, “This would be perfect as a follow-up program to my corporate speaking engagements.” This was an “aha!” moment: could this be a way to reach customers? From July to September 2014, Avanoo worked hard to make this happen – to help speakers create courses, and to see if speakers could sell them to their clients. They landed their first sale that way, to Kaiser Permanente, for $1,300.
Then, for the next four months, Daniel worked tirelessly with speakers to help them sell their programs. Unfortunately, he saw that, “they could sell, but it was ad hoc and unrepeatable. We couldn‘t depend on it for growth. We realized that we have to own this process, of marketing and selling directly to companies. If we own the process, we can scale it. If they own it, we’ll never scale.”
By now it was December 2014. It had been 2.5 years since Daniel had the initial idea, and almost 1.5 years since they legally founded the company. They have just $2,000 in monthly revenue. Daniel said he had “no idea what he was doing” but he started learning about direct sales:
The difference between a problem and a solution. Benefits vs. pains. How to sell to businesses, especially when the sale involves multiple people instead of a single buyer. How to put together a sales team of outbound prospectors to drive new leads. And how to create Customer Success after the initial sale. They initially thought their niche was consumer sales. When that didn’t work, they moved on to…
Niche Try #2: Growing Businesses With 50300 Employees
“When selling to consumers didn’t work as we wished, we thought the next best target to go after would be businesses with 50300 people that were growing quickly. We figured they wouldn’t have put in much training yet, but now that they were growing, they should have the resources and the desire to do it easily.” They started reaching out to their networks and through outbound prospecting to get appointments, but…
“It turned out we were massively wrong: If they’ve had no experience with training, with nothing to compare it to, it was incredibly hard for them to decide to do anything. There wasn’t a concrete pain that they felt yet.”
Niche Try #3: Fortune 2000
After that first corporate sale of $1,300, just months later they hit a run rate of $1M, mostly comprising four and five-figure deals.They plan on continuing to move upmarket to be able to close six and seven-figure deals. So how did they get there?
They retargeted their outbound prospecting and network outreach, pointing their efforts towards bigger companies. And they were able to get appointments. In these companies, being able to offer a guarantee of employee improvement proved to be invaluable in building trust with buyers.
“Surprisingly,” Daniel says, “the people who jumped on us were big companies like NBC, KMPG, and Cisco. No one was more surprised than us to find out that the first niche we nailed was selling to senior Human Resources executives in the Fortune 2000.
In fact, the pain we addressed wasn’t one I ever would have understood until we were solving it: VPs of HR at those companies spend millions on training, and they had inadequate measurement tools to see the benefits. They didn’t get much beyond participation, completion data, and employee reviews. As employees move through our programs, we measure data that HR departments don’t have access to – data that goes well beyond participation and completion numbers, and measures performance in quantifiable ways.”