Dear SaaStr: Should I Start My SaaS App Off As Totally Free?

Dear SaaStr: Should I Start My SaaS App Off Totally Free?

Almost always — no matter how freemium you want to go in SaaS, you should at least have a paid edition on Day 1.  Even if you are going pure freemium.

My top 50 biggest mistakes include not charging at all for our first few months.

Free “customers” for many SaaS apps can be a waste of a fair amount of time and energy — and, in fact, worse than that:

  • First, you usually don’t get that many free users in B2B. Not overnight.  Yes, it worked for Slack and Zoom.  But most of us are a touch more enterprise — and less viral.  We just don’t ever get millions of free users at the top of our funnels.  So free isn’t a big enough user acquisition channel. Freemium can be harder in SaaS because the top of the funnel isn’t big enough, and the viral effects are slower / more limited.
  • Second, free users can burn through a lot of your resources. You have to treat them like paying customers, but they aren’t.
  • Third, free users often they can give you the wrong feedback. Free customers want stuff that free users want. They want different features, different integrations, different everything, than paying customers. So you have to be careful to triage their feedback.
  • And most importantly, freemium is rarely a magical marketing strategy on its own.  Even today, too many founders get them wrong.,  “Free” doesn’t get them to come today, in the age of 100,000 SaaS apps.  If it ever did.

Freemium sometimes works — if it’s a product everyone can use, that ideally, has a viral component.  Again, Slack and Zoom, Canva, and Grammarly.  And when it works at scale, when millions and millions and millions will use your product every single day — well, that’s magic.

This is rare in SaaS, however.  More of us end up getting to $100m+ ARR on the back of solution sales and a bit more enterprise strategy, or at least a hybrid model a la Asana.

So 98 times out of 100 in SaaS, I’d take 5 paying customers over 500 or even 5,000 “free” users and 0 paying customers. 98/100, those 5,000 free users won’t even turn into 5 paying customers. And they’ll suck up so much time.

(try me image from here)

Published on October 28, 2022

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