Our Pivot & Counter-Pivot: From RetentionGrid to AVARI & Back Again

…and why we’re more excited than ever.

Co-authored with my co-founder Kevin Dykes.

We all know that building a startup is completely mad — especially in deep tech businesses where the market is moving so fast and often erratically. But, as we also know, this is one of the things that draws us in as founders.

From our start three years ago to now, we’ve had an exciting daily growth rate of RetentionGrid’s free users (e-commerce SMBs). Getting them to pay us for software alone however, has been another story. As a SaaS startup, we tested various pricing schemes with promising early results. Then, we watched everything change as the market became hyper competitive.

When we joined the Shopify ecosystem in April 2013, there were less than 500 apps in the partner marketplace and only four related to customer retention. Nine months later there were thousands and we had 25 direct competitors. Many were slashing prices and bribing customers for reviews. It was a growing pool of VC-funded SaaS piranhas desperate for growth.

Alternative channels were equally frenzied and price sensitivity increased to unrealistic levels. We launched superior features, partnered with other vendors and experimented with offering services to lure in subscribers. However, we couldn’t find a path to the kind of growth we’d need to raise our Series A round.

So, we followed the startup playbook — iterate your product and business model until you find true market fit — AND scalable growth — or you run out of money.

We agonized over it, but as founders with venture capital in the bank we felt there was only one choice. Fly this plane over the mountain or crash into the side trying. We doubled down on advancing our technology and pushed up market to serve much larger customers.

The Big ’P’ Word

In January 2015, we moved beyond e-commerce and launched AVARI, a spinoff from RetentionGrid’s predictive data technology. AVARI allows marketing teams at much larger brands to easily add personalized content to any email campaign on any marketing platform.

We had less than a year of runway left and the risks were high, but the AVARI pivot opened up a 25x bigger market. It leveraged what we gained over two years, but it was still a huge change and gutsy (i.e. crazy) move. We believed it was the chance to produce the growth we needed.

It was one hell of a ride. We knew we’d need to hit all critical milestones or we’d run out of cash. We came close — with a $36 million sales pipeline right in front of us — but unfortunately, we didn’t find our way to an A.

Too Late AND Too Early

With AVARI, we shifted to a channel sales model targeting marketing clouds who served large marketing teams and email service providers (ESPs). We knew they’d have slower buying cycles, but this was aggravated by what was shaping up to be a big market shakeout.

The largest marketing clouds were already making their build/buy decisions for technology enhancements like AVARI, earlier than we and many others predicted. This rapidly evolving situation even undermined a major distribution partnership with a New York company who sells into these ecosystems. The partnership was expected to be our company maker — until it wasn’t.

Then, we moved onto the mid-market ESPs who were fighting for customers against the above major marketing clouds. There was tremendous interest, as evidenced by a sales pipeline that would make your momma cry.

But, over and over we heard from partners that the rollout of capabilities like AVARI was planned as “an initiative for first half of 2016.” The big clouds had not yet launched their equivalent features, and there wasn’t enough pressure on the mid-market for them to push forward faster.

It was the most challenging experience of our lives. Amazing people working day and night to bring such an exciting product to the market — and watching the market respond with massive interest and demand… but too damn SLOWLY.

Time To Find A Home

Not surprisingly, many of our distribution conversations turned into M&A exploration. We were ultimately involved in deep negotiations with five major martech players and watched them flame out one by one until the last finally resulted in a deal.

We learned a ton in the process. Frankly, we were underprepared for M&A and that slowed us down when we needed to expedite due diligence. After painful months of negotiations, we found a great home for the AVARI technology with an adtech company from NYC, and many of our team went along. The deal didn’t make the founders or our investors rich, but it allowed the AVARI story to continue in great hands and gave our people a tremendous path forward.

What’s Next? “The Counter-Pivot”

All this time, RetentionGrid has been quietly growing on it’s own in the background — and, it was not sold as part of the AVARI transaction. Today, it supports 10,000 e-commerce businesses who use the free Grid-based analytics to increase the loyalty of their 20 million consumers.

Cohort analysis of RetentionGrid users at 2.5 years shows 73% active in the last 30-days — meaning we have lots of loyal users who stick with “their Grids” year after year. So, we’re making a move that we’re calling “the counter pivot” back to where we began — serving SMB e-commerce with RetentionGrid, but this time with a different business model.

As mentioned, we were unable to build a sustainably growing revenue stream from SMBs with software alone. Back during our second year, we experimented with offering services to help attract subscribers. During that time, we discovered that time-starved SMBs will pay for recurring marketing support much more easily than software alone.

In fact, we’ve found a few companies serving a very similar (albeit non-competitive) SMB audience in a rapidly growing fashion. Two of these companies — Outbound Engine and Main Street Hub — are among the fastest growing companies in Austin and the top 200 in America… If we add that to what we’ve learned in the past, we think the model can’t be all wrong!

They realized, as we’ve also learned, that small business owners are willing to pay for a complete marketing solution. By providing a combination of great technology, strategy, productized services and execution it’s possible to create fast growing businesses with a fantastic margin.

So we’re following their lead and our next chapter begins — we’re excited to see where this adventure takes us next…