Free, freemium, or pay upfront?
Product owners, founders and investors: here’s a question I bet you can’t agree on.
(TLDR: there is a nice rule of thumb that can help.)
“Should you give your product away for free, or always capture payment details in advance?”
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Here are some common questions we get from our founders:
- How good to you make your free product?
- When do you ask users to create a profile?
- When do you start charging / upsell to a paid plan?
According to Greylock advisor, Casey Winters, these are the wrong questions.
Instead, a sound strategy for building a sustainable business is simply this:
Align revenue to the value that you’re creating, and always err on the side of creating more value than you capture.
It’s a great approach to onboarding customers, but it’s not always that simple.
Sometimes you won’t get enough opportunity to demonstrate value, so you must quickly show users the value they WILL get once they sign up.
(We have this exact scenario with one of our current portfolio companies.)
I’d love to hear some more opinions on this if anyone’s willing to share their own experience.
In the meantime, I’ll share a link to a short article in the comments, which anyone in this situation should find useful.
