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Seven things to consider when launching your freemium product

March 25, 2013

Seven things to consider when launching your freemium product

It usually starts with someone's bright idea:

"We need to disrupt this market…fast. How about we
just give away our product.  It will go
viral and kill ."

In theory it sounds great.  It’s such a simple way to kick your mortal
enemy in their revenue stream by giving away your product for free.

In my world, there are many examples like Solarwinds and
Splunk, where the free products were key awareness builders and growth drivers.
It seems pretty straightforward… however, launching and growing a free product
is hard work and the "overnight sensations" are often high-profile
exceptions rather than the rule.  Over
the past 10 years I've marketed a number of different free offerings and here
some things that I have learned:

1.   Commit to
building a product that is "stupid easy" to install and use.  Companies like Dropbox and Evernote have set
the standard for usability and your users' expectations are based on these
products.

Even if you are in a complicated space and your product
does much more, you need to find a way to reduce the time to value to minutes
(or less).  We live in an instant
gratification world.  If it looks hard
then your users will give up and move on.

2.  It has to be
compelling enough but it doesn't need to do everything.  The best freemium products find that balance
of providing enough functionality to keep you hooked,  but leave you wanting more once you start
using it (i.e. he crack cocaine analogy).

3.  Think about
what in your product will make it viral. The cloud backup guys figured out that
simple incentives work wonders to get people to spread their products (it is
amazing what people will do for an extra 500MB).  Another example I have seen is providing
additional reports to share the value from your product with others.

4.  Marketing can't
do it alone.  If your freemium offering
is going to be successful then you need to treat it like a core product.  You need to add it to your roadmap and invest
significant resources.  Like your paid
product, it will require regular updates and tweaks to get it right.

5.  Virality is not
magic.  You need to prime the viral
marketing pump by announcing it with PR, creating buzz and engaging with key
influences.  I know, you are going to say
"Google didn't need PR" or "look at how Twitter took off without
marketing."  If you are confident
that you are that awesome, skip the marketing and outreach.

My suggestion is to go big with marketing and so you can
quickly figure out what you have.

6.  Think about
your upgrade path. I know that revenue is a distraction for some online
businesses but cash still matters.  Even
if you don't have everything figured out, it makes sense to have some idea of
your revenue model.  I imagine this will
be an early question from your skeptical board when you pitch the whole
freemium idea.

7.  It isn't always
pretty.  Conversion rates can vary from
5% to less than 0.05%.  Many people will
register with temporary email addresses or Gmail accounts with vague information.  Also, large parts of the developing world
rely on free stuff to make things work.

Building and nurturing a big user base can help overcome
these challenges but understand that the percentage of qualified prospects from
a freemium product is likely to be less than from a traditional marketing
program.

In the end, having a product that works well and solves a
real problem is critical for the success of any product regardless of whether
it is free or paid. Some delighted users will upgrade to your paid product
while others will stick with the free version and tell their friends about
it.  Either way you win.  Just keep in mind that there is nothing
magical about it.    Hard work and a
thoughtful product are requirements to make it happen.

Click here to share on Hacker News

Frank Days is the VP of Marketing at Correlsense.  You can read additional content on Frank's blog called TangySlice.com. You can also follow Frank on Twitter (@TangySlice) by clicking here.

A Hologram for the King

March 25, 2013

A Hologram for the King

“Some
days he climbed over the foothills of indifference to see the landscape of his
life and future for what it was: mappable, traversable, achievable.” -Dave
Eggers, A Hologram for the King

There
is an expression that you may have heard lately - “Software is eating the
world”. The meaning of this is that we as a society are building platforms and
machines to do the work that people used to be paid to do and eliminating
entire markets and traditional systems as we do that. Machines don’t call in
sick, don’t need health insurance, and don’t leave sensitive documents in
taxicabs. The obvious trajectory and conclusion is that technology is removing
much of the need for actual human labor. If one were to look into history for a
starting point to our graph, look to the 1800's. English clothing makers of the
time were being put out of work due to the development of machinery created
during the Industrial Revolution which allowed their manual labor work to be
done faster and cheaper. These “Luddite” textile workers destroyed that
machinery and many wool and cotton mills were burned to the ground before the
British Government sent the King’s army to stop the uprising.

Software
is the cotton mill of our day, and everything is becoming software. Skype is
making the phone obsolete, the iPad has removed much of the need for physical
newspapers, and streaming video has obviously destroyed traditional video
rental services. When was the last time you were in a Blockbuster? Today these
cycles happen faster and faster and much of our hardware assets are obsolete
only 12 months after we purchase it. Imagine seeing someone on the subway with
a first generation iPhone and thinking to yourself “Look at that old thing.”
Think about what we had before the first iPhone- That first iPhone was a
revolutionary device at the time! It's so funny to see it now and scoff at it. Technology
advances so rapidly that we almost take it for granted from a consumer
standpoint, but one must be careful not to be caught looking the other way when
technology comes for your job.

So
what can be done about it?

Research.
Take a moment and think about how many unemployed lawyers there are in the
country. Are law schools telling the incoming classes “Hey there... We don’t
actually have jobs for the lawyers that are out there now, so you might want to
think twice about spending hundreds of thousands of dollars on this particular
education”? Of course not. Schools exist to make money first, and to educate
second. Education is a business and the people that run them need to fill the
seats. It is on you and you alone to identify trends in the job market and make
calculated decisions based on that data. 

After
doing some job market research, I’ve decided to join the “Kings Army”. Having
always had an interest in computers and connectivity, I’ve released software
for mobile devices and managed software projects for my own small software
development firm PNTHR.com for a few years now.
The downside to this is that I was never able to program the more complex
things myself and I never liked being a “middleman” in any operation,
especially my own. A new ‘technical vocational course” (my words, not theirs)
has opened up in Boston called “Launch
Academy
” and I am happy to have been accepted into the very first class.
Based on a similar program called “Dev Bootcamp” in San Francisco, Launch
Academy is an intensive 10 week development course that teaches the full
technology stack- Front End (HTML, CSS, Javascript) Ruby, and Ruby on Rails.
After intensive 14 hour days of studying, programming, and group coursework, we
will have built our own projects and will be introduced to potential employers
on our last day. I’ll leave you to do your own research, but being a Rails
Developer in a town like Boston will be a very good position to be in and I
look forward to building some great software for whomever I work for and being
able to build side projects for PNTHR clients. Software engineering, and
especially Rails, is a great field to be in and I recommend giving CodeAcademy.com a try and if it appeals to
you, considering joining Launch Academy or similar courses. 

Jesse Waites is an animal lover, writer, technology
activist, Founder and CEO of PNTHR.com, and is on the MIT Enterprise Forum
Innovation Series Planning Committee.  You can usually find him walking
his dog Finn in and around Boston or reading physical novels made out of actual
paper in locally owned coffeeshops.  He can be reached @JesseWaites on Twitter.

It Doesn’t Matter Unless We Win

March 21, 2013

It Doesn’t Matter Unless We Win

I had lunch recently with one of our portfolio CEOs, and he said
something that really caught my attention.  I had just commented on how
well they were executing and the quality of the team he put in place. 
He thanked me and said that he was really proud of the team, the
culture, and how hard everyone was working.  Then he said “but it really
doesn’t matter, unless we win.”

I think that comment sums up the key tension between founders and
their investors and is somewhat unusual to hear from a founder.  When I
was a founder, I remember feeling extremely deflated when my investors
would point out that we were behind our plan.  We were working so hard
and making progress.  I always felt that the investors didn’t appreciate
our blood, sweat, and tears; despite the speed not being as planned,
the progress didn’t come without amazing effort.  I was right that the
investors didn’t really appreciate it, but didn’t consider that maybe
they shouldn’t.  The hard work is table stakes.

Winning in entrepreneurship is really hard.  The second a founder
takes venture capital funding, they are signing up to deliver improbable
outcomes and the definition of winning becomes way more ambitious.  The
investors are betting on an outlier business and the founders shouldn’t
take the money unless they believe they can and want to build that type
of business.  By definition, there are very few outliers and the odds
are against the company.

The investors spend their time thinking about whether the company is
winning and what it takes to win.  Typically, the founder cares even
more about winning than the investors, but founders also care about many
other intangibles including passion, a great team, a great culture,
hard work, engaged customers and lots of faith.  Investors care about
all those things as enablers of winning, but not as ends themselves.
  Seldom do investors put money in companies prioritizing passion over
economic expectations.  If the company fails to meet expectations, the
inputs ultimately provide little solace to anyone involved.

When things aren’t going as planned, the founder naturally takes
pride in everything the team built and all the intangibles that have
been created to pursue the outcome.  As tough feedback comes from
investors, it is natural for founders to be defensive and emphasize how
much has gone into the business.  I certainly felt that way during our
more challenging moments.

From the investor viewpoint, none of it matters if the company
doesn’t win.  Understanding this difference in perspective is the key to
overcoming the natural tensions between investors and founders.  Some
founders, like the one I was having lunch with, seem to innately
understand this better than I did when I was in the same seat.

Eric

Paley is a Managing Partner at Founder Collective.  You can
find this blog post, as well as additional content on his blog called Anything's Possible.  You can also follow Eric (@epaley) on Twitter by clicking here.

The Top 6 Things You Should Know About LLCs

March 21, 2013

The Top 6 Things You Should Know About LLCs

Last week, we launched a new Limited Liability Company (LLC) incorporation offering on the Founder’s Workbench Document Driver.
To help founders evaluate potential use of the LLC structure, we’ve
outlined below the top things they need to know about LLCs. We’ll take a
deeper diver into these issues in additional posts in the coming weeks.

Here’s a quick list of what you should know about LLCs:

1.  LLCs are similar to corporations in that they shield the owners of
the LLC from the liabilities and obligations of the LLC in generally the
same manner, and generally to the same extent, that corporations do.

2.  LLCs offer a lot more flexibility and creativity than corporations
around matters such as governance and sharing of proceeds, so more
“unique” business arrangements can be implemented among founders and
founders and investors utilizing an LLC.

3.  Because LLCs offer more flexibility and creativity, they tend to be
more expensive to establish and operate from a legal, tax and accounting
perspective. To help manage the incremental costs, our LLC offering in
the Document Driver has a fairly standard set of terms that are
generally in line with those that would apply to a corporation being
formed using the Document Driver.

4.  There are a number of tax benefits associated with using an LLC over a
corporation. These include “single level” taxation, the ability of
founders to get a step-up in basis for undistributed retained earnings
in the business, and the ability to deliver certain tax benefits to a
buyer in connection with a sale event.

5.  LLCs can grant “profits interests” which are a form of equity
incentive (like stock options) that have certain tax advantages to the
grantees.  However, the use of profits interests can create additional
complexities and costs.

6.  Many venture capital and private equity funds have certain
restrictions on them that limit their ability to invest in LLCs. That
said, it is typically fairly “easy” to convert an LLC into a corporation
if necessary, but there are often challenges (usually tax related) in
moving from a corporation to an LLC once a business is up and running
and starting to create value.

Stay tuned for more “need to know” posts on LLCs!

Bob Bishop is a Partner with Goodwin Procter.  You can find this post, as well as additional content on Goodwin Procter's Founder Workbench website located here.  You can also follow Founders Workbench on Twitter (@FoundersWkBench) by clicking here.

Apptopia - The Mobile App Marketplace & How They Raised $500K From Mark Cuban

March 20, 2013

Apptopia - The Mobile App Marketplace & How They Raised $500K From Mark Cuban

Discuss on Hacker News

Late in 2011, Eli Sapir and Jonathan Kay realized that there was no
viable (or profitable) endgame for app creators, so they decided to start Apptopia, a marketplace for the buying and selling of mobile apps.

Back in 2009, a period that Kay referred to as the “Wild West App Gold
Rush,” Sapir created GPush, a highly successful and heavily downloaded Gmail
alert app. At some point, Sapir decided he was done with the app; but even
after making a huge profit, he wasn’t sure of an exit strategy for the
business. The company was making money, but Sapir had no idea what it would be
worth or how to even sell it.

The problem Sapir faced was multifaceted. “Apps are little businesses,”
Kay pointed out. “There are assets, they have expenses, revenues, and people
who are working on them.” Without having any idea on how to get value out of
GPush, Sapir felt tied to the app, a common problem for app developers. Even
highly successful app founders have never had a clear route to cash out and
benefit from the asset that they have created. As Kay said, “People just ride
apps down to zero.”

So Sapir, Apptopia’s CEO, joined with Kay, the company’s COO and former
Buzz Ambassador at Grasshopper, to establish a platform
to help app developers.  With Apptopia, they created a new financial marketplace
for a class of products whose only path to making money, up to that point, was
through the Apple or Android app stores.

Apptopia originally received funding from New York real estate VC firm Expansion VC, who was taking a chance on the technology market for the first time
with their investment in Apptopia.  However, the company’s largest and most
eye-opening investment came in the summer of 2012 when Dallas Mavericks owner Mark Cuban became an investor in
Apptopia.

While at Grasshopper, Kay had successfully helped the Cuban-backed
finance app Chargify with its marketing.
Kay and Sapir sent an inquiry to Cuban about his possible interest in their
latest company and received a simple, unforgettable response: “I love it, tell
me more.”

The two Apptopia founders were shocked when, previously spending over a
year raising $350,000, after two weeks of emails with Cuban, they raised
$500,000 from the Maverick’s owner. Based on the number of companies pitching
him, Cuban uses email as a way to make everything more manageable and allows
him to set certain standards.

Kay added that Cuban’s style was very direct with no fluff and he knows
which questions to ask to get to the core of your business and idea, which in
return, allows him to make a quick decision on the investment.  Kay felt that Cuban made the investment
because of how “binary” the opportunity was… either it gets big and Apptopia
becomes THE mobile app marketplace or the market just doesn’t exist, but
ultimately he’s backing the team who has the best chance of making it succeed.

Having Cuban on board with Apptopia has been great in Kay’s opinion. For
one, he has been impressed by the investor’s involvement in the company,
checking in every month and wanting to learn of any new developments with the
website. Second, Kay loves how Cuban is not like a typical VC. “He is more like
an entrepreneur,” in Kay’s mind; he often contacts the Apptopia team, one of
the first mobile companies in his portfolio, to ask their opinion on the
relevancy on other tech companies he may be looking to fund.

The website’s success in the first few months of 2013 is starting to
make the investment in Apptopia a shrewd one for Cuban. For one, the company
saw its revenue double in January and February, and the numbers are projecting
even more profit in March. Second, in the next couple of weeks, Apptopia is going
to launch a major redesign, which, for Kay, will make Apptopia a central
financial market comparable to Morningstar.

Dennis Keohane is a teacher, journalist and contributor to VentureFizz.  You can follow Dennis on Twitter (@DBKeohane) by clicking here.

 

An Analysis: 2012 Downtown Boston Leasing Trends

March 19, 2013

An Analysis: 2012 Downtown Boston Leasing Trends

If you are a tenant in
the market for office space in Boston this year, you may want to consider the
findings of Cassidy Turley’s research team.  Our analysis of Boston’s 2012 deals pinpoints trends and changes in a
city that is beginning to rival Cambridge’s Kendall Square as a hub for start-ups
and tech firms.

The city has
historically been home to the region’s most traditional (Finance/Insurance/Real
Estate and Business Services) organizations so it’s no surprise that nearly
half of the deals executed in Boston last year were with tenants in the FIRE
industries.  What may be surprising is
the rapidly growing popularity of downtown Boston among start-ups and
technology entrepreneurs as an alternative to Kendall Square – 44% of the deals
signed in the Seaport District were with technology-based firms.  Diminishing availability in the Seaport
District has pushed rental rates in the young neighborhood to levels comparable
to established markets such as Back Bay.

What hasn’t changed
(yet) is low rise (floors 1-12) space in the Financial District as a value play
– where rents were, on average, 18% lower than those in mid-rise space (floors
13-22).  While certain landlords
consistently achieved above-market rents, others have loosened credit standards
and are becoming more start-up friendly. Keep in mind that demand from growing
technology firms is increasing, and rent premiums are expected to climb in the
next two quarters.

We hope you
will find the following analysis helpful as you navigate the city.  

To see a larger version of the infographic, please click here or on the image below.

Ashley Lane is the Director of Research at Cassidy Turley in Boston.  You can follow Cassidy Turley on Twitter (@CassidyTurleyMA) by clicking here.

StartLabs Spurs Entrepreneurship at MIT

March 19, 2013

StartLabs Spurs Entrepreneurship at MIT

Thanks
to the Mark Zuckerbergs and Sean Fannings of the world (Fanning founded Napster
while at Northeastern), entrepreneurship thrives on campuses across Boston and
Cambridge, and StartLabs at MIT exemplifies this
entrepreneurial spirit. Founded in the summer of 2011 by MIT engineering
students, StartLabs merged with the MIT Startup Club and continues to nurture
entrepreneurship within MIT and the broader community.

The
group was designed to give scientists and engineers the tools to start a
company, according to Turner Bohlen, who was Director of StartLabs for the past
year and now serves on the student advisory comment. The Physics major says the
organization caters to students “who don’t know enough about the
entrepreneurship ecosystem to be able to place themselves in the ecosystem.
When would venture capitalists be interested in funding them? They don’t
necessarily know what their next steps are, so we help out a lot there.”

Adds Bruno
Faviero, an MIT sophomore studying Computer Science who recently stepped in as Director
of StartLabs, “we have a diverse array of entrepreneurship resources [at MIT],
so I’d love to think of StartLabs as a … unifying force to take advantage of
all our resources.”

StartLabs
has space for about 25 people in MIT’s International Design Centre. On
Wednesdays from five to midnight, StartLabs hosts SLACK Time (a contraction of
“stay late and hack”) so that aspiring entrepreneurs can use equipment such as
laser cutters and woodworking tools or seek advice from visiting lawyers or
venture capital advisors. Faviero says his goal is to teach people something
new each week, whether it’s a workshop on pitching or another aspect of running
a startup.

So far,
StartLabs has helped launch several startups including a medical adherence app
called Nightingale,
a cab-sharing app called SplitMyTaxi (which recently launched at
Boston University), and a biological battery sciences company working on a
battery for use in Third World Countries that will create energy by pouring in
sugar.

In
February, StartLabs ran a Startup Career Fair with about 63 companies and 400
students. Delian Asparouhov, an MIT sophomore who helped organize the fair,
says attendees responded well to the less formal atmosphere of the event. “A
lot of career fairs at MIT are very formal with long booths and everyone is in
suits,” he says. “By having only tall cocktail tables and providing state fair
food, the environment was much more relaxed and fun. A lot of students and
employers came up to me after the fair and thanked me for having such a
different environment that made it much easier to meet and talk with people.”

StartLabs
also hosts an annual Startup Bootcamp, which Faviero hopes to refine going
forward. “I’d love to see that as more of an actual boot camp: a short amount
of time with a high-intensity, quick course on how to become an entrepreneur,”
he says. “I want people to see that any idea can be a great idea. If you put
some thought into it, great things can happen. I want them to learn things but
also do things. That’s the best way to get a great experience.”

Susan Johnston is a journalist and contributor to VentureFizz.  You can follow Susan on Twitter (@UrbanMuseWriter) by clicking here.

VF Tidbits: Tim Curran Joins Sample6 Technologies as CEO

March 18, 2013

VF Tidbits: Tim Curran Joins Sample6 Technologies as CEO

VentureFizz Tidbits... news you can use:

Sample6
Technologies
, the developer of the world’s fist synthetic biology-based,
“enrichment-free” bacterial monitoring platform, has appointed Tim Curran as
Chief Executive Officer. Curran has an over 20 year record of success leading
technology companies, including as CEO of Vela Systems, which he led to an
acquisition by Autodesk in 2012. Previously, he was CEO of Eleven Technologies
which was acquired by Trimble Navigation in 2006.  READ MORE

Highlights From Startup Institute's GiveHack [Slideshow]

March 18, 2013

Highlights From Startup Institute's GiveHack [Slideshow]

Hopping into the seventh
floor elevator at Communispace with an armful of candy boxes, Matt Slaman
wanted to revamp his sales pitch.

“We should offer free
candy,” he exclaimed.  “Who doesn’t love free candy?”

Most of Slaman’s team was
still upstairs, but from among the 45 students and alumni assembled at Startup
Institute Boston’s (SIB) GiveHack event last Saturday, a handful were out campaigning
in the streets.  In six separate teams, and paired with mentors from
previous classes at SIB, these young entrepreneurs were participating in the
Institute’s first ever GiveHack, a three-hour intensive exercise in developing
and launching a fundraising campaign.

“They’ve been thrown into a
realistic startup scenario,” explained Kailey Raymond, SIB’s Program Manager
and an alumna of the Institute’s Summer 2012 class.  “They have no initial
funding and must rely on their own creativity and entrepreneurship to
accomplish a common goal.”

The teams are working to
raise $500 in donations for One Laptop Per Child by the end of this week (March
23rd).  Each team is required to host its online campaign on the
Boston-based social fundraising platform Fundraise.com.

“Startup Institute is
entirely about community,” Raymond said in explaining their choice of online
platform. “Fundraising in partnership with local companies through events like
GiveHack is one of many ways we work to reinvest in the vibrant Boston tech
community that has allowed SIB to thrive.”

Aside from these basic
guidelines, there are no limits on how the GiveHack teams choose to engage
potential donors.  Only one other rule was scrawled casually on the
whiteboards in the Communispace classroom: “Don’t break the law.”

As we raced downstairs with
additional candy boxes, Slaman explained that he was grateful for the chance to
apply skills he is learning at SIB in a focused and real-world setting.

“As a networker I know I
have to employ a diverse range of strategies to support myself and the causes I
believe in” he explained. “Putting a face to a cause is always productive, and
today it might bring new people into the fold of Boston donors supporting
OLPC.”

Brooke Morrissey, who was
already outside with her team’s billboards, said her team had taken that
concept even further.

“Our team has tried to
maintain a personal element in our networking and fundraising across the board.
Our online strategy reflects that.  We’re posting team photos, building
our digital footprint through social media, and reaching out to a variety of
contacts in the Startup Institute network.”

Their approach seemed
effective, as Slaman, Morrissey and their peers had reportedly raised $130 for
their teams by five o’clock that day. As their numbers indicate, however, each
team still has a ways to go.  If you’re interested in making a donation,
you can do so here.

Ben Mirin is a
professional videographer, journalist and contributor to VentureFizz.  You can follow Ben on Twitter (@benmirin) by clicking here.

ZeroTurnaround Acquires Java Development Tool Company, Javeleon

March 18, 2013

ZeroTurnaround Acquires Java Development Tool Company, Javeleon

ZeroTurnaround, the international software development
productivity company funded by Bain
Capital Ventures
, announced that it has acquired
Javeleon, a Java development tool company. Originally headquartered in Estonia,
ZeroTurnaround, moved its global sales center to Boston a couple of years ago according to the BBJ.

The acquisition of Javeleon, a company
whose product eliminates the need for the restarting of applications while
developing Java projects, adds to ZeroTurnaround’s own dynamic coding software
productivity resources, including JRebel and the recently unveiled LiveRebel 2.6.

The deal also gives ZeroTurnaround
exclusive rights to the intellectual property related to Javeleon’s products.
Javeleon’s technologies are a commercialization of innovations from the Maersk
McKinney Moeller Institute at the University of Southern Denmark that were
developed to decrease the downtime which slows down coding in Java as well as
other coding environments. The company’s co-founders, Dr. Allan Gregersen and
Michael Rasmussen will join ZeroTurnaround’s team in Estonia, helping the
company to maintain it status as an industry leader in multi-environment coding
productivity solutions.

In the press release to announce the
acquisition, both companies expressed their excitement at the possibilities
brought by the new partnership. Javeleon’s Dr.
Gregersen said, “We have admired the ZeroTurnaround success story for years,
and we believe our involvement will positively impact ZeroTurnaround’s future
growth.” Added ZeroTurnaround’s co-founder and CEO Jevgeni Kabanov, “We welcome
this opportunity to work with Allan and Michael, and we think our customers
will be equally happy with the results.”

Dennis Keohane is a teacher, journalist and contributor to VentureFizz.  You can follow Dennis on Twitter (@DBKeohane) by clicking here.

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