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REVENUE MODEL: What best way to charge your customers? Bonus Topic: (Startup) Company/Office Culture Dave Schappell - @daveschappell
Who am I? Founder – TeachStreet Angel-funded / VC-backed Founded in ‘07 – Profitable in ‘11 ex-Amazon, JibJab Former CPA NEVER built a profitable business on my own (yet)
Transform the Lifelong Learning Marketplace 49M 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)
Why Should You Listen to Me? You I’ve ,[object Object]
Don’t want biz to go bankrupt
Think customers will pay
Aren’t sure how they’ll pay
Not sure how to find out/testdone that almost did that thought that too (& was wrong) wasn’t positive either
What Type of Business? Direct Indirect ,[object Object]
Subscriptions
Virtual GoodsAds Lead-Gen Affiliates/CPA
5 Steps to Business Planning Plan next 2-3 Years of your Biz What HAS to come first?   - Features, Assets, Office, Employees * Make a Good/Great Product!           * What’s your MVP (Minimum Viable Product)? Remove unnecessary items Create a timeline Add 3-6 months to everything http://www.seattle20.com/blog/Business-Beta-2013-Prioritizing-Startup-Features.aspx
Product / Market Fit
80% on Optimization
Revenue When?
Don’t Put Ads on your Site!
Don’t Worry about Viral
5 Tips to TransitionfromFree to PAID
5 Tips to go Free to PAID Give plenty of notice & (real) chance for feedback Price it ‘fairly’ (probably still at a deep discount) Offer customers a way to get product for free Provide Grandfather’d Pricing Make transition gradual People should/will only pay if you’re delivering value
#1-Give Notice & Chance for Feedback http://www.flickr.com/photos/whitehouse/4753634006
#2-Price it Fairly http://www.flickr.com/photos/emilyandthemagic/4974797851
#3-Give Customers a Way to get Free http://vincee87.wordpress.com/2009/09/12/will-work-for-beer/
#4-Provide Grandfather’d Pricing http://www.flickr.com/photos/orinrobertjohn/4297220022
#5-Make Transition Gradual http://www.flickr.com/photos/sepblog/3570992970
So, How’s TeachStreet? Launched ‘All Paid’ in late April 2010 Pro/Sub Revenue up 56% Listing Fee Rev is now 75% of Pro/Sub Rev And, it’s 2x’d since May 2010 Operational Revenue up >120% Leads to Teachers up >115%

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Taking your Startup from Free to Paid

  • 1. REVENUE MODEL: What best way to charge your customers? Bonus Topic: (Startup) Company/Office Culture Dave Schappell - @daveschappell
  • 2. Who am I? Founder – TeachStreet Angel-funded / VC-backed Founded in ‘07 – Profitable in ‘11 ex-Amazon, JibJab Former CPA NEVER built a profitable business on my own (yet)
  • 3. Transform the Lifelong Learning Marketplace 49M 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.
  • 5. Don’t want biz to go bankrupt
  • 7. Aren’t sure how they’ll pay
  • 8. Not sure how to find out/testdone that almost did that thought that too (& was wrong) wasn’t positive either
  • 9.
  • 11. Virtual GoodsAds Lead-Gen Affiliates/CPA
  • 12. 5 Steps to Business Planning Plan next 2-3 Years of your Biz What HAS to come first? - Features, Assets, Office, Employees * Make a Good/Great Product! * What’s your MVP (Minimum Viable Product)? Remove unnecessary items Create a timeline Add 3-6 months to everything http://www.seattle20.com/blog/Business-Beta-2013-Prioritizing-Startup-Features.aspx
  • 13.
  • 17. Don’t Put Ads on your Site!
  • 19. 5 Tips to TransitionfromFree to PAID
  • 20. 5 Tips to go Free to PAID Give plenty of notice & (real) chance for feedback Price it ‘fairly’ (probably still at a deep discount) Offer customers a way to get product for free Provide Grandfather’d Pricing Make transition gradual People should/will only pay if you’re delivering value
  • 21. #1-Give Notice & Chance for Feedback http://www.flickr.com/photos/whitehouse/4753634006
  • 22. #2-Price it Fairly http://www.flickr.com/photos/emilyandthemagic/4974797851
  • 23. #3-Give Customers a Way to get Free http://vincee87.wordpress.com/2009/09/12/will-work-for-beer/
  • 24. #4-Provide Grandfather’d Pricing http://www.flickr.com/photos/orinrobertjohn/4297220022
  • 25.
  • 26. #5-Make Transition Gradual http://www.flickr.com/photos/sepblog/3570992970
  • 27. So, How’s TeachStreet? Launched ‘All Paid’ in late April 2010 Pro/Sub Revenue up 56% Listing Fee Rev is now 75% of Pro/Sub Rev And, it’s 2x’d since May 2010 Operational Revenue up >120% Leads to Teachers up >115%
  • 28.
  • 29. “Overnight” Timeline to ‘Semi-Success’ Jun ‘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 – addt’l lead-tracking – believed we’d never earn biz if didn’t deliver value (more, new students) to teachers (still free to add listings) Apr 7, 2010 - “pre-announce” introduction of fees for all new class listings April 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 - Traffic’s growing, Revenue's ramped sharply, and we’re 100% sure that we’re going to have to keep pivoting. Because that’s what startups do.
  • 30. Rules We Break Both Direct & Indirect Subscriptions & Listing Fees Lead-Gen, Affiliates & Ads We have (some) Ads We don’t Weblab/test enough Too few resources / too many ideas  Still are attracted to shiny objects
  • 33. Office Culture Reco’s Office Space for Cheap / Free Real Estate advisors work for free! Door Desks + Craigslist = Awesome Salary = $$$  Snacks = “nothing” Paint (and big-screen TV) are cheap Office Cleaning saves Marriages Weekly Beers & ‘vision connect’ Dogs, Art & Fun Rent out your space!
  • 34. Resources Andrew Chen – www.andrewchenblog.com Dave McClure – 500hats.typepad.com Alyssa 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

  1. Give plenty of notice & (real) chance for feedbackAs expected, many angry (that’s life…)Some were HAPPY about fees:to reduce clutter/listings from non-serious teacherswe’d be around over long-termwe’d have money to pay for advertising (more students)Learned we weren’t sharing metrics with themFixed this, with better reportingFeature request  enable EARNING ‘free’ listings (#3)
  2. 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
  3. 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
  4. Provide Grandfather’d 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)
  5. Make transition gradualpeople should only pay if you’re 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)
  6. You’re not going to make big-company mistakesWork from Home / Flex-time / Work-Life BalanceNo MeetingsDemocracy
  7. You’re not going to make big-company mistakesWork from Home / Flex-time / Work-Life BalanceNo MeetingsDemocracy