"...so we've never had a free plan"
How not siding with freemium led to a more accessible (and sustainable) pricing structure, why there's no one-size-fits-all MVP, and reexamining a knee-jerk hiring recommendation.
Welcome to the thirty-ninth edition of The Baton. A fortnightly newsletter that brings you three, hand-curated pieces of advice drawn from the thoughtful founder-to-founder exchanges and interviews taking place on Relay and the interwebz. So, stay tuned!
In this edition, you’ll find instructive and inspiring pickings from the brains of Flodesk’s Martha Bitar, Scratchpad’s Pouyan Salehi, and Tray.io’s Rich Waldron.
Recently on Relay:
AMAs: Podia’s founder and CEO, Spencer Fry, on getting B2C SaaS right, Podia’s async culture, raising money after 3 bootstrapped exits, zigging when the competition zags, and more!
#1: Deciding against freemium in a space that can’t get enough of it — Flodesk’s co-founder and CEO, Martha Bitar, on challenging status-quo pricing standard and arriving at a structure that serves their customers remarkably better. (Sources: SaaStr, Relay)
Very early on we realized that we wanted to make sure that we are not having a free plan. Because with email marketing that becomes really detrimental for a lot of your legit users. You get a lot of spammers…
We also knew that it just wasn’t our business model. So we’ve never had a free plan. And not having a free plan, actually allows us to have a more accessible pricing for the long term.
And then another thing that we think about with email marketing is that the pricing in the industry is a little outdated based on what people are actually using.
Imagine if you’re starting a website and the website provider tells you, ‘hey I’m going to charge you more if you start hitting more visitors.’ Like yes, there are costs that do grow in the backend, but they don’t grow at the rate where you can’t keep an accessible price.
And if you think about the target market that we’re serving, we can’t just make it accessible in terms of ease of use and the design piece, but it has to be accessible when it comes to pricing too.
So we did a lot of experimentation and analysis and then we came back to what we knew was something that we could sustain long term. That was also going to work for our customers. And by choosing to not do a free plan, we were able to afford it.
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We played with so many scenarios, and this was the most sustainable one. If you think about it, we’re not priced that low, you could get the equivalent service at other providers for free.
Not having a free plan is what afforded us this bolder pricing. Backend costs are very predictable now, so the reason email marketing platforms charge in tiers is because they can.
This is less tied to their growing costs and more to optimizing the max revenue per user based on their needs. It’s very smart, but for us lowering the anxiety of paying more the more you’re successful was a bigger priority.
And yes, we’ve had large customers offering to pay a lot to use Flodesk, but it’s never been a debate since we’ve always been clear on this. We know our market, and taking on high-value customers would be a distraction roadmap and support wise.
#2: MVPs are worthless if they don’t fetch you differentiated signals — Scratchpad’s co-founder and CEO, Pouyan Salehi, concisely captions the perfect — most helpful — sort of response one must seek from an MVP. (Source: Surf and Sales)
It needs to be enough such that you get a differentiated signal. What I mean by that is I’ve seen some startups put something out there as an MVP and then they’re like, ‘didn’t work, we didn’t get the signal back or it didn’t get adopted.’ Well, if you look at this vs anything else out there you didn’t even cross the bar.
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When we started PersistIQ, which was a sales…what’s now known has sales engagement. Back then Salesloft was scraping LinkedIn. Outreach we didn’t even know of. It was that early. Most investors were telling us this isn’t even going to be a thing. Marketo is going to do this. So will Salesforce. Fast forward you have several multi-billion dollar companies. Which is pretty incredible.
I think back then the signal for us was revenue. Can we get people to even pay for this thing (outside marketing automation, outside the CRM they’ve purchased)? It wasn’t necessarily adoption or usage. Because it was something so new.
With Scratchpad it’s completely different, because we went into the space knowing that there’s is budget there. The hardest piece is, can we get people to use the product. That’s why for this one, instead of revenue, we went for usage.
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I would caution you against any advice that’s blanket. And really focus on what you’re building and why it’s different. If you look at a few examples. Let’s maybe look at Superhuman as an email client and then let’s say some enterprise applications.
If you’re going straight for an enterprise play, it might require you two years of building just to get the MVP, you may have to have all of the checkboxes and everything else it needs. Go through security. Go through all these things. Just to be able to prove that you have something different.
Now you may get some signal early on without actually building the product. Is there a need here? Will they spend money on it? But to actually get to the MVP with a product that’s delivering some value, it may require that much runway.
Now if you shift and look at something that’s not enterprise…But if I were to do something like [Superhuman], let’s say come up with the next iteration of it, it would again require, lots of building and design upfront.
Because they’ve set such a high bar. That if you need to differentiate, you need to at least meet some of that bar and then be somewhat different. Vs. if you have something like, you can’t even send an email yet and differentiate in a different way, that’s not enough to get the signal.
I think it really starts with spending upfront time really thinking about what it is you’re trying to do vs. just throwing spaghetti on the wall.
#3: Why ‘hire fast, fire fast’ is just easy advice to dish out — Tray.io’s co-founder and CEO, Rich Waldron, on reassessing an oft-endorsed hiring practice. (Source: Startup Grind)
If you hire somebody that really obviously not a good fit, is detrimental to culture, and you have a fairly mature process. Say marketing or sales or whatever else.
The absolutely, you need to make the change quickly. And you need to protect the health of the team and ensure that you have the right kind of progressive talent in place.
I think where we get this sort of knee-jerk culture is where you’re still defining a lot of those things. And somebody is coming in and is under pressure very quickly to make a change in the next quarter or the quarter after that.
When you actually need to allow a bit of time for them to embed in. And as long as you have a very open line of communication as to what your expectation is, what the goals are, and that you’re working together on it.
I think a little more patience is certainly required.
I think it’s easy advice to dish out and there are some very obvious situations where it should be applied to.
But there’s a nuance in thinking…a company is scaling fast, they may not have developed the perfect go-to-market or inbound lead strategy. Or they may not have developed the perfect sales process yet.
They feel putting somebody under the gun straight away for a strategic reason. Then it’s probably not the smartest move. If it’s a cultural issue, then absolutely, that’s when things can go south very quickly.
Note: This February 24th, we’re really looking forward to host Rich for a Relay AMA. From origins in a place with a non-existent tech scene, to “(literally) bootstrapping the business by selling Wellington boots on eBay,” Rich and team have built Tray.io into a decade-in-the-making scale-up that now serves companies such as Cisco, Eventbrite, Segment, and others. You can ask him all about: the criticality of patience, the different phases of hiring, cracking the mid-market segment, and more! If you’re keen on joining, please request an invite, here.
Until next time,