

The audacity of charging from day one. - g0atbutt
http://thestartupfoundry.com/2011/03/31/the-audacity-of-charging-from-day-one/

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sp_
I used to work at zynamics (<http://www.crunchbase.com/company/zynamics>) for
a long time and while I was not part of the initial team, I still have a good
idea of what went on in the early stages.

The company charged hundreds and thousands of dollars for software licenses
from day 1 even though the first versions of the products were pretty bad. In
fact, we even had customers who bought these early versions not because they
wanted us to succeed. I remember at least one customer who bought licenses for
many tens of thousands of Euro telling us 'we won't use your software yet
because it is not good enough but we believe that you will deliver great
software one day and by buying early version we will keep you alive'.

So yeah, charging right from the start worked out tremendously for us. Without
it we would not have survived.

~~~
conorgil145
The rest of your comment makes this point obvious, but I think that you meant
to say "In fact, we even had customers who bought these early versions
_because_ they wanted us to succeed."

Its great that the customer believed in you and your product so much that they
basically funded you by buying initial versions that were "bad". What was the
product? Were there few or no competitors in the market? I assume the company
which purchased your initial versions would have just gone with your
competitor otherwise.

~~~
sp_
Good typo catch, yeah. :)

The product was BinNavi (<http://www.zynamics.com/binnavi.html>) which sold
for (I believe) roughly 3000 Euro per license despite being really terrible
for the first two years of its existence.

The only competition was IDA Pro (<http://www.hex-rays.com/idapro/>), the
standard tool for binary code security researchers, but BinNavi aspired to be
much more than IDA Pro and our customer was aware of our vision and bought
many licenses to support us.

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originalgeek
> Why is there apprehension about making money in startup land?

Because then there would be real reference points for calculating valuation,
which is counterproductive in an industry that relies on bubble economics.

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chops
I started charging from day one. I've never had a free version. I've been
profitable from day one.

That said, business has slowed for me mostly because now I have more
competitors, their software is better than my competitors at the time, and
most of my competitors offer free versions, which I still do not (though I am
contemplating).

(this is all in relation to my guild hosting site, link in my profile)

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bpeters
Good point for startups who have value to offer day one, but some startups do
not add value until a certain level of activity is reached or a certain state
of stability is reached, take Twitter for example.

However, I believe they have reached a point that it should start to charge.
Those who see it as a value have spoken up about wanting and willing to pay.

~~~
g0atbutt
Good point. However, in this case, the startup needed money and already had a
fantastic product that saved small business owners a lot of time. They had
customers that wanted to pay for premium access, yet they were content to just
keep scrapping by because they were afraid what their community would think if
they charged for their product and I found that line of thinking utterly
ridiculous.

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NinetyNine
Personally, my reservations with charging are two fold:

1) That I come from the open source community, where charging is successful
and the value of your code is often personal rather than looking at the user's
value. Also, much of my knowledge of coding has come from reading others'
code, does this mean whatever I create is an extension of their creations,
which they offered free of charge?

2) That I wasn't sure I was good enough to charge. If users started paying
money and my database went down when they needed it most, how would I respond?
I'm not a legal expert or even a trained business person.

~~~
michaeldhopkins
The solution to your second reservation is to have users agree to a software
license/terms of use. Usually, there is no guarantee of uptime. If you want to
guarantee uptime, then you can do that. In that case you'd define the terms of
your guarantee to be something like, say, $10/day of downtime up to the amount
of the monthly bill.

The solution to your first question is to realize that all professional
developers have learned from other developers. It's a pay it forward system.
Someday, someone will look at your code or receive free advice from you that
helps that person make a living off of software. That said, if you think you
are deeply indebted to a particular person, you could thank that person with a
monetary gift or even purchase rights/license to use the code.

~~~
dhimes
_The solution to your first question is to realize that all professional
developers have learned from other developer_

All professional _anything_ have learned from others: teachers, doctors,
lawyers, authors.... It's how society gets better. Business is the engine that
powers it (even if indirectly), and money is the fuel that allows it.

There's absolutely no harm in charging for something of value you create
because of what you have learned. Besides, you can always give back to the
open source community- maybe even moreso if you are in a position to provide a
little funding for some projects (because you charged for your product).

------
pauldisneyiv
Dr. Ian Malcolm: I'll tell you the problem with the business model that you're
using here - it doesn't require any discipline to give it away for free. You
read what others had done and you took the next step. You didn't earn the
knowledge for yourselves, so you don't take any responsibility...charging for
it. You stood on the shoulders of geniuses to accomplish something as fast as
you could and before you even knew what you had you patented it and packaged
it and slapped it on TechCrunch, and now [pounds table with fists] Dr. Ian
Malcolm: you're giving it away, [pounds table again] Dr. Ian Malcolm: you want
to give it away!

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dcosson
It seems like the title of this post doesn't quite agree with the example
given. The company started charging for their version 1, but they already had
a not-insignificant user base of 1000 people that seemed to like the product.
It's possible that their growth might have been a lot slower if they had
literally charged from day one; of course, it's also possible that this would
not have been the case.

Either way, I think that people's hesitance to charge for their products is
probably more often motivated by the fear of slow/non-existent growth rather
than the fear of coming across as a sell-out.

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Tycho
I think something like Historio.us might be the way to go. They give you 300
bookmark slots free when you sign up, which is a fair amount even if you
import old bookmarks. As I inch closer to the limit, I can see myself just
biting the bullet and buying the monthly subscription. It's just a few £s to
avoid a lot of hassle and continue using a useful service. However, I doubt I
would have paid from day 1 when there are free alternatives (which may even
have been just as good, I'm not sure. I may never know.).

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thomson
I'm reminded of dhh's talk at Startup School 2008 where he talks about the
'revolutionary idea' of charging for your products for a profit:

<http://www.justin.tv/hackertv/b/259414909>

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matthewslotkin
The problem with charging from day 1 is that the entry cost on the Internet is
so low. That means that even if I make a great product and start charging for
it, someone else can easily make a copy-cat product and make it free. The
logic behind charging in version 2 or 3 is simply that by that time there will
be a loyal customer base that would not be as easily swayed by a free copy-cat
product. This has nothing to do with being a "sell-out" in the startup
community, it's just about being an aware entrepreneur.

~~~
idlewords
Charging money reassures users that you might be around longer than those free
copycats, and can be a counterintuitive selling point of your service.

