How Startups Sell More Product Using a Trojan Horse Approach

I’m willing to bet that there’s at least one software app that you use regularly for work that got on your radar because someone you know was already using it.

The most obvious culprit is Zoom, which became the de facto means of remote communication during the pandemic lockdown. Even though GoToMeeting and Webex were already the industry standard for company web conferencing and Microsoft’s Teams and Google’s Meet had begun their evolution from personal video chat to business tool, Zoom became as ubiquitous to video meetings as Google was to search.

But there are a host of other apps in that category. Slack and Trello are two of the more high-profile examples of products that invaded the enterprise like a trojan horse: A single person brings a free version to a small team, that team connects to other teams, then suddenly the company is buying 1,000 seats.

There’s a little bit of lightning-in-a-bottle luck to this organic and viral means of infiltrating a large enterprise customer. But there’s also a massive amount of strategy, including in the design of the product itself.

I’ve broken down that strategy into its components, and I’ll use my experience with my own startups and those I advise to give you an idea of how you can help your product sell itself to large and deep-pocketed enterprises.

The Viral Lure: Doing Big Things a Better Way

I knew I had something special with Teaching Startup when two people with the same URL in their email address joined within the same month. The first person from the company signed up for a free trial and ended up converting to a paid membership. Then the second person signed up. Then they also converted.

This small signal, which I wasn’t looking for, opened up all kinds of new ideas for what I could do with the product. I could evolve Teaching Startup from a solution for individuals to a solution for an entire organization.

I was an early adopter of both Slack and Zoom, before those two products became universal. I watched as Slack was misunderstood as a very robust instant messenger. But I always thought of Slack as a replacement for 90 percent of the work-related email chains I was on. To me, Slack was more of an instant email substitute for real-time collaboration, a weapon in the battle against inbox overload.

Once people saw that those hated email chains were being eliminated, it became a no-brainer to have Slack open on your laptop.

Before the pandemic, Zoom was a quick way to share your screen in a browser without having everyone in your meeting have to download the same bloated app you were using. It was rare, if ever, that I turned on my camera for a Zoom meeting.

But then we started being able to reduce meetings by having quick Zoom check-ins with screen sharing. Everyone was on board with fewer meetings, so everyone started using Zoom. So much so that now we have “Zoom fatigue.”

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The Viral Strategy: Build the Product to Be a Trojan Horse

Again, a lot of this success was due to these companies organically being in the right place at the right time. Today, armies of new startups try to ride the viral wave without the viral strategy.

There are cautionary tales about startups going all in to get the most awareness for their product, getting people talking about it, getting people to use it, catching this huge viral wave, but not being able to monetize. Clubhouse is currently in that boat, originally an app designed for podcasts that made the evolution to a social network for audio. This created a huge viral wave, but no one is paying for the product. Yet.

When it ends badly, the viral wave crashes like WeWork, which rode a viral tsunami but was never profitable and had to be torn down and built back up. When it ends well, it ends like Zoom, which was profitable before it went public.

But besides aiming to be profitable as early as possible, here are some things to think about as you build out your profitable product strategy.

Find and Reward Your Early Adopters

When I first built Teaching Startup, the people who got it the quickest were the first-time entrepreneurs. Teaching Startup is a sort of two-sided marketplace of entrepreneurs and advisors, but the advisors didn’t understand the value right away, because it wasn’t what they were used to.

So I started with the entrepreneurs. They didn’t have to unlearn anything. They’re my early adopters.

Reward the early adopters. Give them more value than what they’re paying for. Even if it’s just enrolling them into a beta program. Get them talking about their involvement.

The goal is to build a bridge between what the customer is used to and the new and better way. Do this by allowing one or more early adopters to use the product from the inside. If the early adopter is benefiting from the product  —  doing their job better, talking about it, and showing others the value they’re getting from your product  —  then you’re in like a virus.

Attack the Incumbent You’re Trying to Replace

The best way to build the bridge between "used to" and "better than" is to make the customer feel like they’re gaining a lot without giving up a lot.

In Slack’s case, if you’re replacing email, make the product feel like the email incumbent’s product when it has to, including threads and chains and reply-alls that don’t have to be pre-built groups.

In Zoom’s case, if you’re replacing meetings, make sure the screen sharing can act like the conference room whiteboard. Make it easy for the pen to change hands, make it simple to screenshot, and so on.

Once you have all or most of the functionality of the incumbent’s product — in other words, once you’ve built most of the bridge — then focus on the components that show why it’s a better solution.

Allow the Customer to Bridge Off of the Incumbent Path

One surefire way to sink a product is by making it yet another item your customers need to buy within the same category. In other words, your product needs to be a full replacement for something else.

You don’t have to copy all the functionality of the product you aim to replace, but your solution needs to solve all of the problems that the incumbent product solves.

Zoom did this really well. Even before the pandemic accelerated its use, Zoom was gaining ground against GoToMeeting and Webex at work. When the lockdowns started, people started finding entirely new use cases for Zoom, thanks to its no-software-needed features.

Zoom concerts, Zoom reunions, Zoom fan conferences, Zoom parties. Suddenly, everyone had Zoom, and the use cases were unlimited. The trojan horse approach wasn’t just invading enterprises, it was invading fan bases, families, even the general public.

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Help the Product Spread

Your trojan horse should be free to use and drop-dead simple to get started. You want to make it easy for the virus to spread from your early adopters to everyone in their sphere of influence.

That doesn’t happen automatically.

First, think about why it makes sense to have more than one person using the product. Slack and Zoom are both communication products, which makes enterprise peer spread more organic. But even if a product isn't designed for communication, almost every product has a reason to allow its users to collaborate.

Teaching Startup is about entrepreneurs asking questions and getting answers. But as one might expect, their questions arise around issues they're currently having within their startup, and the answers can help them address those issues with other employees at their startup. By allowing an entrepreneur to freely share questions and answers with other employees, I'm allowing them to collaborate, and giving them a reason to spread the virus within their enterprise.

Build Enterprise Value

There are two reasons why profitability doesn’t happen with a freemium-to-enterprise model. 

1. The product provides too much value at the free tier.
    
2. The product doesn’t provide enterprise value at an enterprise price point.

There are products I use where I never have and never will leave the free tier. This is almost always due to those products not offering compelling value at the enterprise level. This is usually a holdover from the enterprise software-as-a-service era.

The cloud has won, and there is little reason for a company to charge extra for additional seats for a software product if there is no collaboration between the users in those seats. In a cloud-dominant world, the economics require collaborative functionality at the enterprise level, so that functionality, as described in the last section, needs to be in the DNA of your product for viral sales to work.

Then, once you build the model that allows the virus to spread, it’s time to think about how paying customers can spread the virus to non-paying enterprises. You want FOMO to happen on the free tier, and anyone who has ever had to shut down a Zoom after the free tier time limit has gotten a taste of that FOMO: My company has the paid tier and can talk as long as we want, yours does not.

The benefit to adding collaborative enterprise value is that when you do, you can make it insanely cheap for an enterprise to add more product because you can eliminate most of the sales and marketing costs.

Once that happens, the trojan horse model, executed correctly, will have your customers selling your product for you.