Startup idol Axonify is training to thrill

July 30, 2012, 9:00 AM UTC

Axonify CEO Carol Leaman with her investor Rob Chaplinsky of Bridgescale Partners

FORTUNE — The problem with corporate training is obvious: Almost nobody pays attention. It’s not uncommon for employees to brag about coasting through sessions while doing something else at the same time. Worse, important policies and security procedures are typically presented once during a new worker’s training and seldom significantly revisited. In a workplace where manual labor is involved, that can mean serious injury or worse.

Axonify wants to change that. Instead of packing training into one grueling engagement, the startup, based, like RIM (RIMM), in Waterloo, Ont., breaks lessons into shorter, ongoing sessions. Consisting of trivia-style questions and mini-games, each training takes 90 seconds or less to complete. Over time, the cloud-based software picks up on areas that workers are having trouble with and personalizes training accordingly. The concept won over judges at this year’s Brainstorm Tech Startup Idol, an annual competition for innovative companies that are raising money.

Carol Leaman, Axonify’s CEO, has some experience with successful startups. Leaman, 46, sold her social media analytics company, PostRank, to Google (GOOG) in 2011 and was a mentor at incubator Accelerator Centre. (Last year’s winner was sold to Google.) Shortly after, she joined Axonify, transforming it from a struggling marketing business into a sprawling e-learning platform. The company snagged a round of funding from investors like Bridgescale Partners in March, bringing its total haul to around $2 million.

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Axonify claims it can save companies tens of millions in injury compensation because workers actually remember information presented to them in short bursts. Its customers include RadioShack (RSH), Toys “R” Us, and Wal-Mart (WMT). Auto retailer Pep Boys (PBY), which has more than 700 stores and over 18,000 workers, rewards employees with cash and merchandise for using Axonify. Some employees report that the culture in their workplace has improved as a result. Another large retailer using Axonify saw the number of incidents reportable to the Occupational Safety and Health Administration reduced by as much as 25% at some facilities. “They were shocked,” recalls Leaman.

Axonify beat out impressive and diverse competitors for the top spot. Story Coach, located in Palo Alto, provides interactive software that turns spoken yarns into electronic or physical books. Meanwhile, Bina Technologies, based in Redwood City, Calif., pitched its Apple-like business model for the rapidly expanding world of genomics. Ultimately, Axonify won. “I really like what it is you do here,” said Mamoon Hamid, a Startup Idol judge and general partner at the Social+Capital Partnership. “It’s easier to retrain than it is to rehire.”

Next year could be major for Axonify. The company may have only a handful of clients now, but it is talking to 75 retailers interested in deploying its software. Beyond retail, Leaman is exploring ways to expand into such areas as hospitality, entertainment, health care, and even oil and gas. Leaman says she sees opportunity wherever “lack of following procedure creates big loss.”

This story is from the August 13, 2012 issue of Fortune.