5 ms·

The audacity of charging from day one.

50 points by g0atbutt 16y ago

bpeters 16y ago
Good point for startups who have value to offer day one, but some startups do not add value until a certain level of activity is reached or a certain state of stability is reached, take Twitter for example. However, I believe they have reached a point that it should start to charge. Those who see it as a value have spoken up about wanting and willing to pay.
- blake8086 16y ago
  Twitter could have started charging for ads from day one, couldn't they?
- g0atbutt 16y ago
  Good point. However, in this case, the startup needed money and already had a fantastic product that saved small business owners a lot of time. They had customers that wanted to pay for premium access, yet they were content to just keep scrapping by because they were afraid what their community would think if they charged for their product and I found that line of thinking utterly ridiculous.
NinetyNine 16y ago
Personally, my reservations with charging are two fold: 1) That I come from the open source community, where charging is successful and the value of your code is often personal rather than looking at the user's value. Also, much of my knowledge of coding has come from reading others' code, does this mean whatever I create is an extension of their creations, which they offered free of charge? 2) That I wasn't sure I was good enough to charge. If users started paying money and my database went down when they needed it most, how would I respond? I'm not a legal expert or even a trained business person.
- dean 16y ago
  "... does this mean whatever I create is an extension of their creations? ..." Yes it does. Everything ever created is an extension of what someone else created. And someone may create something new based partly on learning from you. Don't worry about it.
- michaeldhopkins 16y ago
  The solution to your second reservation is to have users agree to a software license/terms of use. Usually, there is no guarantee of uptime. If you want to guarantee uptime, then you can do that. In that case you'd define the terms of your guarantee to be something like, say, $10/day of downtime up to the amount of the monthly bill. The solution to your first question is to realize that all professional developers have learned from other developers. It's a pay it forward system. Someday, someone will look at your code or receive free advice from you that helps that person make a living off of software. That said, if you think you are deeply indebted to a particular person, you could thank that person with a monetary gift or even purchase rights/license to use the code.
  - dhimes 16y ago
    The solution to your first question is to realize that all professional developers have learned from other developer All professional anything have learned from others: teachers, doctors, lawyers, authors.... It's how society gets better. Business is the engine that powers it (even if indirectly), and money is the fuel that allows it. There's absolutely no harm in charging for something of value you create because of what you have learned. Besides, you can always give back to the open source community- maybe even moreso if you are in a position to provide a little funding for some projects (because you charged for your product).
sp_ 16y ago
I used to work at zynamics (http://www.crunchbase.com/company/zynamics http://www.crunchbase.com/company/zynamics) for a long time and while I was not part of the initial team, I still have a good idea of what went on in the early stages. The company charged hundreds and thousands of dollars for software licenses from day 1 even though the first versions of the products were pretty bad. In fact, we even had customers who bought these early versions not because they wanted us to succeed. I remember at least one customer who bought licenses for many tens of thousands of Euro telling us 'we won't use your software yet because it is not good enough but we believe that you will deliver great software one day and by buying early version we will keep you alive'. So yeah, charging right from the start worked out tremendously for us. Without it we would not have survived.
- conorgil145 16y ago
  The rest of your comment makes this point obvious, but I think that you meant to say "In fact, we even had customers who bought these early versions because they wanted us to succeed." Its great that the customer believed in you and your product so much that they basically funded you by buying initial versions that were "bad". What was the product? Were there few or no competitors in the market? I assume the company which purchased your initial versions would have just gone with your competitor otherwise.
  - sp_ 16y ago
    Good typo catch, yeah. :) The product was BinNavi (http://www.zynamics.com/binnavi.html http://www.zynamics.com/binnavi.html) which sold for (I believe) roughly 3000 Euro per license despite being really terrible for the first two years of its existence. The only competition was IDA Pro (http://www.hex-rays.com/idapro/ http://www.hex-rays.com/idapro/), the standard tool for binary code security researchers, but BinNavi aspired to be much more than IDA Pro and our customer was aware of our vision and bought many licenses to support us.
pauldisneyiv 16y ago
Dr. Ian Malcolm: I'll tell you the problem with the business model that you're using here - it doesn't require any discipline to give it away for free. You read what others had done and you took the next step. You didn't earn the knowledge for yourselves, so you don't take any responsibility...charging for it. You stood on the shoulders of geniuses to accomplish something as fast as you could and before you even knew what you had you patented it and packaged it and slapped it on TechCrunch, and now [pounds table with fists] Dr. Ian Malcolm: you're giving it away, [pounds table again] Dr. Ian Malcolm: you want to give it away!
originalgeek 16y ago
> Why is there apprehension about making money in startup land? Because then there would be real reference points for calculating valuation, which is counterproductive in an industry that relies on bubble economics.
chops 16y ago
I started charging from day one. I've never had a free version. I've been profitable from day one. That said, business has slowed for me mostly because now I have more competitors, their software is better than my competitors at the time, and most of my competitors offer free versions, which I still do not (though I am contemplating). (this is all in relation to my guild hosting site, link in my profile)
Tycho 16y ago
I think something like Historio.us might be the way to go. They give you 300 bookmark slots free when you sign up, which is a fair amount even if you import old bookmarks. As I inch closer to the limit, I can see myself just biting the bullet and buying the monthly subscription. It's just a few £s to avoid a lot of hassle and continue using a useful service. However, I doubt I would have paid from day 1 when there are free alternatives (which may even have been just as good, I'm not sure. I may never know.).
matthewslotkin 16y ago
The problem with charging from day 1 is that the entry cost on the Internet is so low. That means that even if I make a great product and start charging for it, someone else can easily make a copy-cat product and make it free. The logic behind charging in version 2 or 3 is simply that by that time there will be a loyal customer base that would not be as easily swayed by a free copy-cat product. This has nothing to do with being a "sell-out" in the startup community, it's just about being an aware entrepreneur.
- idlewords 16y ago
  Charging money reassures users that you might be around longer than those free copycats, and can be a counterintuitive selling point of your service.
dcosson 16y ago
It seems like the title of this post doesn't quite agree with the example given. The company started charging for their version 1, but they already had a not-insignificant user base of 1000 people that seemed to like the product. It's possible that their growth might have been a lot slower if they had literally charged from day one; of course, it's also possible that this would not have been the case. Either way, I think that people's hesitance to charge for their products is probably more often motivated by the fear of slow/non-existent growth rather than the fear of coming across as a sell-out.
thomson 16y ago
I'm reminded of dhh's talk at Startup School 2008 where he talks about the 'revolutionary idea' of charging for your products for a profit: http://www.justin.tv/hackertv/b/259414909 http://www.justin.tv/hackertv/b/259414909

50 points by g0atbutt 16y ago

Good point for startups who have value to offer day one, but some startups do not add value until a certain level of activity is reached or a certain state of stability is reached, take Twitter for example. However, I believe they have reached a point that it should start to charge. Those who see it as a value have spoken up about wanting and willing to pay.

blake8086 16y ago
Twitter could have started charging for ads from day one, couldn't they?
g0atbutt 16y ago
Good point. However, in this case, the startup needed money and already had a fantastic product that saved small business owners a lot of time. They had customers that wanted to pay for premium access, yet they were content to just keep scrapping by because they were afraid what their community would think if they charged for their product and I found that line of thinking utterly ridiculous.

NinetyNine 16y ago

Personally, my reservations with charging are two fold: 1) That I come from the open source community, where charging is successful and the value of your code is often personal rather than looking at the user's value. Also, much of my knowledge of coding has come from reading others' code, does this mean whatever I create is an extension of their creations, which they offered free of charge? 2) That I wasn't sure I was good enough to charge. If users started paying money and my database went down when they needed it most, how would I respond? I'm not a legal expert or even a trained business person.

dean 16y ago
"... does this mean whatever I create is an extension of their creations? ..." Yes it does. Everything ever created is an extension of what someone else created. And someone may create something new based partly on learning from you. Don't worry about it.
michaeldhopkins 16y ago
The solution to your second reservation is to have users agree to a software license/terms of use. Usually, there is no guarantee of uptime. If you want to guarantee uptime, then you can do that. In that case you'd define the terms of your guarantee to be something like, say, $10/day of downtime up to the amount of the monthly bill. The solution to your first question is to realize that all professional developers have learned from other developers. It's a pay it forward system. Someday, someone will look at your code or receive free advice from you that helps that person make a living off of software. That said, if you think you are deeply indebted to a particular person, you could thank that person with a monetary gift or even purchase rights/license to use the code.
- dhimes 16y ago
  The solution to your first question is to realize that all professional developers have learned from other developer All professional anything have learned from others: teachers, doctors, lawyers, authors.... It's how society gets better. Business is the engine that powers it (even if indirectly), and money is the fuel that allows it. There's absolutely no harm in charging for something of value you create because of what you have learned. Besides, you can always give back to the open source community- maybe even moreso if you are in a position to provide a little funding for some projects (because you charged for your product).

sp_ 16y ago

I used to work at zynamics (http://www.crunchbase.com/company/zynamics http://www.crunchbase.com/company/zynamics) for a long time and while I was not part of the initial team, I still have a good idea of what went on in the early stages. The company charged hundreds and thousands of dollars for software licenses from day 1 even though the first versions of the products were pretty bad. In fact, we even had customers who bought these early versions not because they wanted us to succeed. I remember at least one customer who bought licenses for many tens of thousands of Euro telling us 'we won't use your software yet because it is not good enough but we believe that you will deliver great software one day and by buying early version we will keep you alive'. So yeah, charging right from the start worked out tremendously for us. Without it we would not have survived.

conorgil145 16y ago
The rest of your comment makes this point obvious, but I think that you meant to say "In fact, we even had customers who bought these early versions because they wanted us to succeed." Its great that the customer believed in you and your product so much that they basically funded you by buying initial versions that were "bad". What was the product? Were there few or no competitors in the market? I assume the company which purchased your initial versions would have just gone with your competitor otherwise.
- sp_ 16y ago
  Good typo catch, yeah. :) The product was BinNavi (http://www.zynamics.com/binnavi.html http://www.zynamics.com/binnavi.html) which sold for (I believe) roughly 3000 Euro per license despite being really terrible for the first two years of its existence. The only competition was IDA Pro (http://www.hex-rays.com/idapro/ http://www.hex-rays.com/idapro/), the standard tool for binary code security researchers, but BinNavi aspired to be much more than IDA Pro and our customer was aware of our vision and bought many licenses to support us.

pauldisneyiv 16y ago

Dr. Ian Malcolm: I'll tell you the problem with the business model that you're using here - it doesn't require any discipline to give it away for free. You read what others had done and you took the next step. You didn't earn the knowledge for yourselves, so you don't take any responsibility...charging for it. You stood on the shoulders of geniuses to accomplish something as fast as you could and before you even knew what you had you patented it and packaged it and slapped it on TechCrunch, and now [pounds table with fists] Dr. Ian Malcolm: you're giving it away, [pounds table again] Dr. Ian Malcolm: you want to give it away!

originalgeek 16y ago

> Why is there apprehension about making money in startup land? Because then there would be real reference points for calculating valuation, which is counterproductive in an industry that relies on bubble economics.

chops 16y ago

I started charging from day one. I've never had a free version. I've been profitable from day one. That said, business has slowed for me mostly because now I have more competitors, their software is better than my competitors at the time, and most of my competitors offer free versions, which I still do not (though I am contemplating). (this is all in relation to my guild hosting site, link in my profile)

Tycho 16y ago

I think something like Historio.us might be the way to go. They give you 300 bookmark slots free when you sign up, which is a fair amount even if you import old bookmarks. As I inch closer to the limit, I can see myself just biting the bullet and buying the monthly subscription. It's just a few £s to avoid a lot of hassle and continue using a useful service. However, I doubt I would have paid from day 1 when there are free alternatives (which may even have been just as good, I'm not sure. I may never know.).

matthewslotkin 16y ago

The problem with charging from day 1 is that the entry cost on the Internet is so low. That means that even if I make a great product and start charging for it, someone else can easily make a copy-cat product and make it free. The logic behind charging in version 2 or 3 is simply that by that time there will be a loyal customer base that would not be as easily swayed by a free copy-cat product. This has nothing to do with being a "sell-out" in the startup community, it's just about being an aware entrepreneur.

idlewords 16y ago
Charging money reassures users that you might be around longer than those free copycats, and can be a counterintuitive selling point of your service.

dcosson 16y ago

It seems like the title of this post doesn't quite agree with the example given. The company started charging for their version 1, but they already had a not-insignificant user base of 1000 people that seemed to like the product. It's possible that their growth might have been a lot slower if they had literally charged from day one; of course, it's also possible that this would not have been the case. Either way, I think that people's hesitance to charge for their products is probably more often motivated by the fear of slow/non-existent growth rather than the fear of coming across as a sell-out.

thomson 16y ago

I'm reminded of dhh's talk at Startup School 2008 where he talks about the 'revolutionary idea' of charging for your products for a profit: http://www.justin.tv/hackertv/b/259414909 http://www.justin.tv/hackertv/b/259414909