Interview with Kajabi’s CPO: The secret giant in the passion economy that has bootstrapped to $1B GMV run rate
The little-known company powering knowledge entrepreneurs
|Oct 5, 2020|| 16||5|
When discussing the biggest passion economy platforms, a few names are frequently mentioned: Shopify, Patreon, Teachable, and Cameo, among others.
But there are a few giants that are under-the-radar but have silently grown into behemoths. One of them is Kajabi. Founded in 2010, the Irvine, CA-based online course platform is one of the most established companies in the passion economy, aiding people that are looking to package and sell their knowledge. It calls its customers “knowledge entrepreneurs”—individuals who have an area of expertise that can be offered scalably and monetized online through knowledge products.
In online reviews, it has been referred to as “the Cadillac of online course platforms,” given its all-in-one platform functionality and premium price points of $149, $199, and $399 per month, versus competitors priced around $49 to $99 per month.
The platform has reached impressive scale:
Since its founding 10 years ago, Kajabi—which is bootstrapped—has empowered over 50,000 users in 120 countries to serve 60 million students and make over $1.5 billion in sales. (To put that into perspective, Patreon, which was founded in 2013, has raised $255 million to-date and just surpassed $2 billion in total payouts to creators)
Kajabi is on pace to reach a $1 billion annualized GMV—that’s $1 billion paid out to creators annually!
Given Kajabi’s decade-plus experience supporting online micro-entrepreneurs, I sat down with Jeremy Saenz, the Chief Product Officer of Kajabi, to learn more about the platform, who their customers are, and his predictions on the future of the passion economy.
Interview with Jeremy Saenz, CPO of Kajabi
How did Kajabi get started?
In 2009, our founder Kenny Rueter was building a children's outdoor toy that would connect to a hose and spray water in different ways. He got a lot of neighbors’ attention for this toy and wondered, “Maybe this is something I could turn into a business.” At that time, the options for selling things online were less developed. Kenny wanted to be able to teach people how to actually build this product themselves, and couldn’t find any way to do it.
He was a web developer himself, but found that it was really difficult to string together all the different technologies to create an online storefront, take payments, and serve videos. He talked to more people doing similar things online and found the opportunity to build a platform for people who are building large audiences that wanted to learn something.
What functionalities does Kajabi offer to users?
We split the platform into 3 core jobs to be done. We want all of our customers to be able to 1) build a business, 2) manage a business, and 3) grow their business.
For (1), we make all of the online business-building tools, like website creation, digital products, online courses, digital downloads, and community tools.
For (2), managing a business, we offer a CRM database and analytics.
For (3), the growth side of the business, we provide the marketing toolset to grow your business, like sales funnel builders, landing pages, and email marketing tools, all hosted inside of Kajabi.
All of these things are intertwined and connected together so that customers have one destination when it comes to building an online business.
The Kajabi platform includes all of the following features. Its tagline: “Why pay more for 10 separate tools when you can do the job better with one?”
How has the company evolved since its founding?
The first iteration of the platform hosted video content and did a little bit of funnel conversion.
Then, we worked with some of the bigger knowledge entrepreneurs who were selling video courses, like tennis lessons, marketing training, and coaching and consulting. Kajabi helped them run their launches and to sell online. That's how we got the first roughly 2,000 customers. Between 2010-2014, Kajabi was very much a lifestyle business and was growing well, but wasn’t on a hockey stick path.
In 2014, we decided to completely rebuild the platform from the ground up. We decided we were going to do a complete rewrite because the old platform was just insufficient. We also felt like we had learned a lot more about the online creator industry and had a better sense of where it was headed. And so in 2015, we launched what Kajabi is today: an all-in-one platform for knowledge entrepreneurs who want to build a business out of their knowledge.
There was a turning point in 2017 where we decided this was not a lifestyle business anymore, and we started to build and invest for scale and for growth.
Fast forward to 2020, with COVID, and we’ve seen tremendous growth, not only in people subscribing to the platform, but also their level of success on the platform.
What is Kajabi’s traction today?
In the next couple of months or so, our customers are going to be on pace to earn one billion dollars per year through the platform (GMV).
We’re growing like crazy, and we're seeing so many more stories of our customers transforming their lives by building businesses by leveraging what they know.
In terms of our largest customers, we have multiple people who are making tens of millions of dollars each year on the platform.
Here is a list of some successful entrepreneurs using Kajabi:
Brendon Burchard - Life Coach
Chalene Johnson - Health + Business Coach
Alex Becker - Marketing Coach
John Maxwell - Life Coach
Eric Worre - Marketing Coach
How has COVID impacted the business?
Our growth rate has always been healthy, but COVID has definitely accelerated it. Initially, we were worried that folks were going to panic buy software to build businesses online because they're desperate for another source of income. What we didn't anticipate is that their desperation to make something work, actually works in their favor as an entrepreneur—they’re going to find an opportunity and make it work.
So we haven't seen any dip in activation or time to first dollar [the time between someone signing up for Kajabi and making their first dollar on the platform]. And a lot of the qualitative feedback we get from customers is along the lines of: “This was something I’d been wanting to do for a while, and COVID helped solidify my decision to jump in and get started.’” This period of time has catalyzed a lot of entrepreneurship.
Describe your internal concepts of knowledge entrepreneurs and knowledge products.
When we first started, we went after all entrepreneurs and online businesses in general, but realized that it was way too broad of a category to compete in.
So we wanted to focus on knowledge because that was fundamentally what our customers were doing: they're taking what they know and turning it into a business, whether that’s through video training, podcasts, blogs, online courses, or digital downloads.
The “knowledge” part is obvious; we saw the trend that people realized there’s value in what they know and that they could turn it into products.
Then we have the “entrepreneur” part. We have issues with the term “creators,” because we're not just necessarily looking for people who just want to create something. There's a lot of platforms going after content creation. We specifically choose to play in the space of entrepreneurship. One of my favorite quotes is from Jean-Baptiste Say, a French economist who first coined the word “entrepreneur” in 1800: “The entrepreneur shifts economic resources out of an area of lower and into an area of higher productivity and greater yield.”
That's exactly what we support: we see knowledge as something that one may already be utilizing, then shifting to an entrepreneurial mindset. It could be somebody who's already teaching a subject locally, or maybe they were flying 40 weeks out of the year offering seminars across the world, and they can get more leverage by offering it online.
How does Kajabi think about building vertically vs. horizontally for creators?
We think our customers are always growing. They have softer edges than the vertically-focused platforms imply. A lot of our customers would have problems with vertically-focused platforms because those platforms typically align to their own brand rather than highlighting the customer's brand.
We are a horizontal platform by design: entrepreneurs are coming in and serving all sorts of different niches. We’re not prescriptive on one magic formula of how to succeed. It’s all dependent on what the customer is charging and what value they’re offering.
There’s not a single checklist for how customers can be successful. We need to give them a set of flexible tools and make resources available for them to understand where the opportunity is in the market and how they can capitalize on it.
We are starting to see a lot more competition and new platforms pop up, especially vertically-focused ones offering a particular type of knowledge product. For instance, email newsletter platforms: I can easily see those companies cannibalize each other, trying to compete for more and more market share in that specific vertical.
A knowledge entrepreneur also wants to evolve over time as their audience matures and their needs change. Maybe somebody who's offering a newsletter today chooses to offer an online course or community tomorrow. That’s what we see happening among our customer base.
Who is the end customer and what are they motivated by?
The best knowledge entrepreneurs focus on addressing the end goal that the user wants to attain. That might be health and fitness, which has always been a huge category in transformation, or career coaching on how to nail an interview.
Knowledge entrepreneurs are tapping into this in different ways: some people are doing evergreen courses. There’s group coaching, where people check in with each other and hold each other accountable.
If you ask me about any vertical, I'll probably be able to pull out a customer. We have a customer who is a hairstylist and her network of other hairstylists really wanted to learn how to up their Instagram game. So she published a course and made $17,000 in a single weekend. And now she's made multiple millions of dollars on Kajabi and has expanded her course. She has an audience of people who trust her on how to run a hair salon and how to build an Instagram following and generate leads. She is so hyper-focused on making sure her customers are successful. It's a trickle-down of we empower our customers to empower their customers.
What are some new formats that we’ll see in the coming years from knowledge entrepreneurs?
There’s another term we use internally: knowledge product. For us, knowledge products are an expression of your knowledge, and it's packaged in a certain way. It's online courses, digital downloads, Cameo video messages, podcasts, or newsletters.
Some of these products are free; they’re front doors to your business. Other products are very high-priced, like 1:1 coaching sessions. Formats change all the time. We're dedicated to discovering what those new formats are and how to introduce them to our customers’ ecosystem.
We started with video courses, but there are so many more mediums that have emerged, that are cycling in and out and being invented. There have been some trends that we are on top of, but our customers are innovators too.
We keep an eye on our early adopters and what they’re offering, even in a hacky way—we watch that really closely.
Right now, one of the exciting formats is live video. Our customers are already doing live video over Zoom. It's one of the easiest ways to make content right now. So we ask ourselves, do we need more accessible video editors, or do we just need more accessible ways to record a video? We need to make sure that our platform can evolve and be flexible so that our customers can be relevant and competitive.
What are examples of knowledge entrepreneurs who aren’t necessarily creating content themselves?
We’re seeing entrepreneurs who are able to curate the right content or point people to the right place. We'll specifically see curators who find prominent experts in a particular industry and bring them in on a venture. People are doing revenue share models inside of Kajabi, where perhaps they're creating a marketplace for a very specific vertical, and they're bringing in experts and teaching them how to create content.
We have a customer, Knit Stars, who is making multiple millions of dollars a year doing live virtual summits for the online knitting community. And they got all these people in the knitting community to participate in these virtual summits, and they're just selling like hotcakes.
What advice would you offer to aspiring knowledge entrepreneurs who are looking to get started?
I always ask people to start with: what does success look like for you? And then, start formulating who your audience is even before building your product. Don’t just create a course and hope that people will pay for it. Instead, understand the customer and their problems and needs. This goes not just for knowledge entrepreneurs, it goes for all entrepreneurs.
We have Kajabi University, which is a resource for paying customers with courses on best practices on how to build their business online. And we also have a growing Customer Success team that strategizes with our customers on what success looks like. We're positioning our Customer Success team to help consult on goals and inform next steps.
Do you have any predictions for the future of the passion economy?
Firstly, people will increasingly identify with and trust other people rather than starting with a specific type of product or impersonal brand. We're putting the individual’s brand and their company’s brand forward. We compare Shopify and Etsy—there’s a difference in how overwhelming it is to go to somebody's Shopify store that you trust, vs. going to Etsy and seeing a million things and not being sure which ones are actually trustworthy. Etsy’s brand is very customer-facing, and subsumes all of the individual merchants’ brands, whereas the Shopify brand is invisible to the end consumer. The moment that the end customer no longer resonates with Etsy as a brand, they'll stop going and shopping with any of their merchants. We’d much rather be Shopify than Etsy.
Secondly, specific content formats will cannibalize each other, and they will come in and out of relevance. What is scalable is empowering individuals to build their business, to carve out a niche, and build their audience, rather than focusing on a specific content medium.