Build numbers or build revenue?

I have developed a software programme which guides managers in real time while they are conducting coaching sessions. It has a lot of IP built in to help managers coach across a wide range of issues combined with the connection software. We have some initial traction with some big companies but it is very small and only in the pilot stage. I had a great conversation with Kevin McCathy. One option he suggested was to develop a freemium version to build up a customer base. Would like to do this but really need some income right now so concentrating on building income from companies. There is only me in the company, funded from savings and friends. Would appreciate advice on should I try and get some funding and get the freeium version going or should I stick to what I am doing? Or try a new approach altogether.


While the development of a "freemium version" might help you build a customer base, it could consume a significant amount of your time and money without the assurance that your free users would every become paying customers.

Since you're a one person operation, and running on limited capital, I'd suggest a different approach. If indeed you've gotten good traction with big companies, I'd approach one ore more of these companies and ask them to invest in the continuing development of your product up-front, in exchange for a significant discount on the per-user licensing costs. This will both serve as validation that your application is as valuable to your target customer base as you believe it to be, and would also provide you the additional income necessary to move forward.

You might also put serious consideration into trying to find a salesperson who would work with you for either straight commission (if you expect your deals to be large enough to make this attractive), or for equity. In either case, this would enable you to significantly increase the number of paying customers you can target with your unique solution.

I'd be more than happy to discuss these and other strategies in detail with you if you'd like to schedule a call with me. Good luck!

Answered 10 years ago

My assumption from your question is that a company would buy this for their managers to use. If that is the case, building a freemium version would not guarantee that the company would actually turn around and purchase the product (or premium version) in the future. If you have pilots with companies that are well established names, that should be enough to start trying to get new customers and generate revenue. The surest way to know if your product is good enough is to ask people to pay for it. The fact that you could use some money at this point, only reinforces the decision.

Answered 10 years ago

It sounds like you really want or need to be making money from this venture quickly and that you are either at capacity or nearing capacity for you to continue self-funding this. If I'm reading the situation correctly, an investment in building out a freemium version is not feasible at this point. The cost to do so and the relatively low conversions from free to paid, make this option seem unrealistic at this point, although it certainly has long-term value.

I was able to raise a small angel round from great angel investors at a time when I had a few large companies in varying stages of piloting my software that was all about collecting feedback from employees. So it's possible that you could put yourself in a situation where you could raise a small angel round as well. I would suggest that's the best path forward unless you think one of your customers is near the point where they could make a significant purchase in the next 30 days (which still would mean you're probably 90 days out from being paid).

Happy to talk to you in a call to explore your options more thoroughly.

Answered 10 years ago

If you need the money, you need to start selling. However, realize that just because you start selling doesn't mean that you'll get money quickly. I agree that, even with a quick sale, you'll probably need to wait 2-3 months before you start getting paid. But if you're trying to grow sales as quickly as possible for a product like this, you need to start talking to the users and buyers of this software, which sounds like enterprise learning and development, HR consulting firms, corporate educational companies.

Freemium makes sense for a funded company or for a platform approach where the add-ons and premium software product will make you money, but that's a strategy where you only expect a few percent of users to actually pay. If nobody is going to fund a year of your time for you to take the freemium approach or if you need money in the next 6 months, you've got to prove the value by putting out a price point based on the differential value of your product and finding an actual customer. I think your challenge is very tactical: Can you find 100 local companies that could use your product? Can you find the buyer in each company or do you have any 2nd degree connections to these people? If not, can you either make the call or hire a sales person at a 15%-20% commission rate to sell for you?

Funding is nice when you can do it (and I've been in 3 VC-backed startups), but you can't count on funding. Also, funders like seeing that you can actually sell your products as well, so these aren't mutually exclusive paths.

Answered 10 years ago

Sales cures all...I think Mark Cuban said that.

First question - do you have a way to even collect their money? That's where I would start. How do I know to ask that with so little information? This is an expert's forum :-)

Sounds like you need to get outside the box. You may have built the next amazing tool, but perhaps you are not a sales person. Sounds like you need online sales advisers.

You must have sales, or you do not have a business. Unless you are Daddy Warbucks, then maybe it's time to prove that you have a product that people will actually buy before you waste another minute of your life (that sounds like Kevin O'Leary). What's with all the Shark Tank advice!

There are some great case studies out there for exactly what you are going through. Maybe check out Air BnB's story... Maybe figure out how to reach customers - package it up in a new way. Do a joint venture deal with someone who already has the audience. Build some landing pages and take it to the next level.

Answered 10 years ago

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