Taking your Startup from Free to Paid

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  • 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)
  • 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
  • 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
  • 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)
  • 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)
  • You’re not going to make big-company mistakesWork from Home / Flex-time / Work-Life BalanceNo MeetingsDemocracy
  • You’re not going to make big-company mistakesWork from Home / Flex-time / Work-Life BalanceNo MeetingsDemocracy
  • Taking your Startup from Free to Paid

    1. REVENUE MODEL: What best way to charge your customers?<br />Bonus Topic: (Startup) Company/Office Culture<br />Dave Schappell - @daveschappell<br />
    2. Who am I?<br />Founder – TeachStreet<br />Angel-funded / VC-backed<br />Founded in ‘07 – Profitable in ‘11<br />ex-Amazon, JibJab<br />Former CPA<br />NEVER built a profitable business on my own (yet)<br />
    3. Transform the Lifelong Learning Marketplace<br />49M College Grads / 77M Baby Boomers / 31M Retirees<br />>$30B/year spent by 54M in U.S. taking personal interest classes<br />$5B/year TAM (Marketing, Transaction Fees, Affiliate Sales)<br />
    4. Why Should You Listen to Me?<br />You<br />I’ve<br /><ul><li>Want to start a (web) business
    5. Don’t want biz to go bankrupt
    6. Think customers will pay
    7. Aren’t sure how they’ll pay
    8. Not sure how to find out/test</li></ul>done that<br />almost did that<br />thought that too (& was wrong)<br />wasn’t positive either<br />
    9. What Type of Business?<br />Direct<br />Indirect<br /><ul><li>E-commerce
    10. Subscriptions
    11. Virtual Goods</li></ul>Ads<br />Lead-Gen<br />Affiliates/CPA<br />
    12. 5 Steps to Business Planning<br />Plan next 2-3 Years of your Biz<br />What HAS to come first?<br /> - Features, Assets, Office, Employees<br />* Make a Good/Great Product!<br /> * What’s your MVP (Minimum Viable Product)?<br />Remove unnecessary items<br />Create a timeline<br />Add 3-6 months to everything<br />http://www.seattle20.com/blog/Business-Beta-2013-Prioritizing-Startup-Features.aspx<br />
    13. Product / Market Fit<br />
    14. 80% on Optimization<br />
    15. Revenue When?<br />
    16. Don’t Put Ads on your Site!<br />
    17. Don’t Worry about Viral<br />
    18. 5 Tips to TransitionfromFree to PAID<br />
    19. 5 Tips to go Free to PAID<br />Give plenty of notice & (real) chance for feedback<br />Price it ‘fairly’ (probably still at a deep discount)<br />Offer customers a way to get product for free<br />Provide Grandfather’d Pricing<br />Make transition gradual<br />People should/will only pay if you’re delivering value<br />
    20. #1-Give Notice & Chance for Feedback<br />http://www.flickr.com/photos/whitehouse/4753634006<br />
    21. #2-Price it Fairly<br />http://www.flickr.com/photos/emilyandthemagic/4974797851<br />
    22. #3-Give Customers a Way to get Free<br />http://vincee87.wordpress.com/2009/09/12/will-work-for-beer/<br />
    23. #4-Provide Grandfather’d Pricing<br />http://www.flickr.com/photos/orinrobertjohn/4297220022<br />
    24. #5-Make Transition Gradual<br />http://www.flickr.com/photos/sepblog/3570992970<br />
    25. So, How’s TeachStreet?<br />Launched ‘All Paid’ in late April 2010<br />Pro/Sub Revenue up 56%<br />Listing Fee Rev is now 75% of Pro/Sub Rev<br />And, it’s 2x’d since May 2010<br />Operational Revenue up >120%<br />Leads to Teachers up >115%<br />
    26. “Overnight” Timeline to ‘Semi-Success’<br />Jun ‘07 - founded company; raised Angel $<br />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)<br />Apr ’09 - +7 cities; expanded tools (phone tracking, teacher metrics) (100% free)<br />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)<br />Sep ‘09 - Pro teacher $29.99/month; extra promo, marketing tools, free payments. (still 100% free to add listings; revenues are building from services)<br /> 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)<br />Apr 7, 2010 - “pre-announce” introduction of fees for all new class listings<br />April 27, 2010 - “turned on” listing fees (100% new listings paid; All rev-enabled)<br />May 12, 2010 - last day of $10/month “Pro”-motion (100% new listings paid)<br />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.<br />
    27. Rules We Break<br />Both Direct & Indirect<br />Subscriptions & Listing Fees<br />Lead-Gen, Affiliates & Ads<br />We have (some) Ads<br />We don’t Weblab/test enough<br />Too few resources / too many ideas <br />Still are attracted to shiny objects<br />
    28. Startup Culture(Myths & Reality)<br />
    29. Startup Culture Conundrum<br />
    30. Office Culture Reco’s<br />Office Space for Cheap / Free<br />Real Estate advisors work for free!<br />Door Desks + Craigslist = Awesome<br />Salary = $$$  Snacks = “nothing”<br />Paint (and big-screen TV) are cheap<br />Office Cleaning saves Marriages<br />Weekly Beers & ‘vision connect’<br />Dogs, Art & Fun<br />Rent out your space!<br />
    31. Resources<br />Andrew Chen – www.andrewchenblog.com<br />Dave McClure – 500hats.typepad.com<br />Alyssa Royse – Seattle 2.0 Post(s)<br />My TechCrunch Post on ‘Free to Paid’ http://techcrunch.com/2010/06/13/free-to-paid-tips/<br />My 500Startups Office Culture post:http://blog.500startups.com/2010/10/11/how-to-sustainably-make-the-startup-office-more-livable/<br />Hops & Chops Startup Happy Hour (Thursdays)<br />www.hopsandchops.com<br />

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