Taking your Startup from Free to Paid
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This document discusses revenue models and company culture for startups. It provides tips for transitioning from a free to a paid model based on the founder's experience taking their company TeachStreet from free to paid. It recommends giving notice before transitions, pricing fairly, allowing free access, grandfathering pricing, and making the transition gradual. It also discusses myths and realities of startup culture and offers recommendations for affordable office space.
Taking your Startup from Free to Paid
- 1. REVENUE MODEL: What best way to charge your customers?Bonus Topic: (Startup) Company/Office CultureDave Schappell - @daveschappell
- 2. Who am I?Founder TeachStreetAngel-funded / VC-backedFounded in 07 Profitable in 11ex-Amazon, JibJabFormer CPANEVER built a profitable business on my own (yet)
- 3. Transform the Lifelong Learning Marketplace49M College Grads / 77M Baby Boomers / 31M Retirees>$30B/year spent by 54M in U.S. taking personal interest classes$5B/year TAM (Marketing, Transaction Fees, Affiliate Sales)
- 4. Why Should You Listen to Me?YouIveWant to start a (web) business
- 5. Dont want biz to go bankrupt
- 6. Think customers will pay
- 7. Arent sure how theyll pay
- 8. Not sure how to find out/testdone thatalmost did thatthought that too (& was wrong)wasnt positive either
- 9. What Type of Business?DirectIndirectE-commerce
- 10. Subscriptions
- 12. 5 Steps to Business PlanningPlan next 2-3 Years of your BizWhat HAS to come first? - Features, Assets, Office, Employees* Make a Good/Great Product! * Whats your MVP (Minimum Viable Product)?Remove unnecessary itemsCreate a timelineAdd 3-6 months to everythinghttp://www.seattle20.com/blog/Business-Beta-2013-Prioritizing-Startup-Features.aspx
- 14. Product / Market Fit
- 16. Revenue When?
- 17. Dont Put Ads on your Site!
- 18. Dont Worry about Viral
- 19. 5 Tips to TransitionfromFree to PAID
- 20. 5 Tips to go Free to PAIDGive plenty of notice & (real) chance for feedbackPrice it fairly (probably still at a deep discount)Offer customers a way to get product for freeProvide Grandfatherd PricingMake transition gradualPeople should/will only pay if youre delivering value
- 21. #1-Give Notice & Chance for Feedbackhttp://www.flickr.com/photos/whitehouse/4753634006
- 23. #3-Give Customers a Way to get Freehttp://vincee87.wordpress.com/2009/09/12/will-work-for-beer/
- 27. So, Hows TeachStreet?Launched All Paid in late April 2010Pro/Sub Revenue up 56%Listing Fee Rev is now 75% of Pro/Sub RevAnd, its 2xd since May 2010Operational Revenue up >120%Leads to Teachers up >115%
- 29. Overnight Timeline to Semi-SuccessJun 07 - founded company; raised Angel $Apr 08 - ~25k classes & teachers in Seattle teachers could add unlimited classes; students could contact teachers. Limited functionality. Let us demonstrate value & learn (100% free)Apr 09 - +7 cities; expanded tools (phone tracking, teacher metrics) (100% free)Jul 09 - Student-to-Teacher payments. 15 months to launch?!? Believed needed to demonstrate value-add. Students paid small booking fee (to cover costs); Teachers paid commission (still free to add listings)Sep 09 - Pro teacher $29.99/month; extra promo, marketing tools, free payments. (still 100% free to add listings; revenues are building from services) Apr 10 - optimize/weblab addtl lead-tracking believed wed never earn biz if didnt deliver value (more, new students) to teachers (still free to add listings)Apr 7, 2010 - pre-announce introduction of fees for all new class listingsApril 27, 2010 - turned on listing fees (100% new listings paid; All rev-enabled)May 12, 2010 - last day of $10/month Pro-motion (100% new listings paid)At present - Traffics growing, Revenue's ramped sharply, and were 100% sure that were going to have to keep pivoting. Because thats what startups do.
- 30. Rules We BreakBoth Direct & IndirectSubscriptions & Listing FeesLead-Gen, Affiliates & AdsWe have (some) AdsWe dont Weblab/test enoughToo few resources / too many ideas Still are attracted to shiny objects
- 31. Startup Culture(Myths & Reality)
- 33. Office Culture RecosOffice Space for Cheap / FreeReal Estate advisors work for free!Door Desks + Craigslist = AwesomeSalary = $$$ Snacks = nothingPaint (and big-screen TV) are cheapOffice Cleaning saves MarriagesWeekly Beers & vision connectDogs, Art & FunRent out your space!
- 34. ResourcesAndrew Chen www.andrewchenblog.comDave McClure 500hats.typepad.comAlyssa Royse Seattle 2.0 Post(s)My TechCrunch Post on Free to Paid http://techcrunch.com/2010/06/13/free-to-paid-tips/My 500Startups Office Culture post:http://blog.500startups.com/2010/10/11/how-to-sustainably-make-the-startup-office-more-livable/Hops & Chops Startup Happy Hour (Thursdays)www.hopsandchops.com
Editor's Notes
- #16: Give plenty of notice & (real) chance for feedbackAs expected, many angry (thats life)Some were HAPPY about fees:to reduce clutter/listings from non-serious teacherswed be around over long-termwed have money to pay for advertising (more students)Learned we werent sharing metrics with themFixed this, with better reportingFeature request enable EARNING free listings (#3)
- #17: Price it fairly (probably still at a deep discount)$3 = Starbucks Latte!Lasts 30 days, or 10 leads ($0.30 per lead)$3 still expensive vs. Free (Craigslist, WOM)More than just an Ad:SEO benefitsMarketing tools (Craigslist Ads, Flyers)Payments
- #18: Offer customers a way to get product for freeVirtual Currency Write Articles / Answer QuestionsLaunched with 5=Free ListingReduced f/5 to 3 & Doubled Content Creation (Iterating!)Win-WinGreat Content is Good for SEO (Traffic)Content helps to merchandise the Teacher (Leads)Lost $3 is minor in the short- to medium-term
- #19: Provide Grandfatherd PricingOffered 6 month Pro pricing for $10 (vs. $30)GOOD - SEOMoz locks Annual Fees of $299 vs. $799BAD Airlines changing rules for Miles (20k vs. 40k)
- #21: Make transition gradualpeople should only pay if youre delivering valueCRITICAL DECISION FOR US!Only force listing payment if Lead Delivered in last 30 daysMaintained our Class Listing Inventory (SEO benefits)Triggered a Payment Decision only with Value (Conversion)
- #27: Youre not going to make big-company mistakesWork from Home / Flex-time / Work-Life BalanceNo MeetingsDemocracy
- #28: Youre not going to make big-company mistakesWork from Home / Flex-time / Work-Life BalanceNo MeetingsDemocracy