Dear SaaStr: Should We Introduce Freemium in Our B2B SaaS Startup to Boost Growth?
Probably not. Not because in theory it’s a bad idea. But because for most folks even at $1m-$2m ARR, it’s already too late. In practice, if not in theory.
Why?
Two reasons:
First, if you don’t start off with a Freemium offering, it’s very very hard to add that DNA later, once you have real revenues, processes and software optimized around larger customers and deal sizes
Freemium:
- Requires a much more elegant onboarding (no human assist) that most enterprise software
- Requires millions of users to make the conversion funnel work. More on why here: Why You Need 50 Million Active Users for Freemium to Actually Work | SaaStr
- Requires that the users get huge value out of the product in minutes, without human interaction to explain that value
- Distracts the sales team
- Distracts the marketing team
- Etc.
If you start there, and do OK there, you can then go upmarket. Your product and your team will have the DNA.
But if you have a product today that has thousands of users (not millions) and requires onboarding, selling, training … the odds you can build a freemium product that will make any money is close to nil.
Second, it can be a huge distraction, done anything less than 100% right.
If your sales team is closing $20k deals, who will deal with $200 freemium single-seat customers? How will you split your marketing budget? Your product team?
If you are going to add PLG and freemium later on … it can work. But you have to truly, really, go 100.000% all-in. And brute force the conflicts with your existing sales and marketing motions. Are you committed to that?
So I’m not literally saying don’t add a Free / Freemium addition. HubSpot, Atlassian, and others added “Free” later.
And I’m not saying don’t add a PLG motion.
What I am saying is deeply understand what it will take to make it a success. You likely are looking for a shortcut. It’s often quite the opposite.
A related post here:
