Roundtable Recap: August 4 – How Do You Bootstrap Freemium Ventures?
During this week’s roundtable, we had Inoh Choe from San Jose, California, pitch DemoTunes, a freemium concept. One of the discussions that ensued was about how to bootstrap a freemium venture. I think this is a question on many minds, and we discussed it today as a core topic.
DemoTunes
DemoTunes is proposed to be a LinkedIn of the music industry where a million plus musicians would be uploading music, getting feedback from their community, as well as, and more importantly, from talent scouts and connoisseurs who can help them further their careers.
In principle, this sounds great. I love the idea. Once there is critical mass, lots of business can, indeed, happen. However, how do you get to critical mass, and how do you finance the period during which this business runs on red ink? How much time do you budget for red ink financing? If there is friends and family money available to you, how far can that take you? How long can you go without a salary? How do you find cofounders who are willing to work for 18 months without getting paid?
These are some of the practical questions. The answers are highly subjective and situation-specific, but as a rule of thumb, I’d say, budgeting at least 18 months of red ink financing is necessary, including going without pay. One middle ground is to keep a job and develop a freemium site on the side, so that you still have your paycheck to pay the bills. Another is to do consulting or offer some other kind of paid service to bring in some money.
Whichever direction you go, please do not assume that some VC is going to finance you during this phase. Even angels like to see some progress so that the length of red ink financing that is simply validation stage work doesn’t happen on their watch.
GoodyTag
Also, Irit Dabby from Tel-Aviv, Israel, discussed GoodyTag, a neat concept about tagging photos of products differently than you would tag or ‘like’ a regular link or photo on social media. Rather, you tag a woman wearing a Speedo swimsuit with a Speedo GoodyTag and then encourage your social network to further propagate that as part of an incentivized advertising campaign.
I like the concept, and there is already a prototype and a pilot case with an advertiser. Irit, however, needs to think through some of the details of the business model, pricing model, and positioning. For instance, she showed Coca Cola as one of the target brands advertising on the GoodyTag network. She wants to charge $1 per tag that is generated, but Coca Cola is probably not the kind of brand that would pay $1 per tag because their unit price is so low. Speedo may, especially if every tag includes an incentive – a discount coupon – to buy a swimsuit for $300 or some similar large denomination.
My point is, the concept is good. It requires some serious fine-tuning, which will offer guidance on where the best customers are going to be.
You can select the business you like best of those discussed today through a poll on the 1M/1M Facebook page.
The recording of today’s roundtable can be found here. Recordings of previous roundtables are all available here.
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This segment is a part in the series : Roundtable Recap
. March 25 – A Mixed Bag Of Advice . April 1 – Bootstrapping Tips . April 8 – A Focus On E-Commerce . April 15 – Small Is OK; The Goal Is Profitability . April 22 – The Original Runners . April 29 – Finding The Right Direction . May 6 – Defining Value Proposition . May 20 – Validation, Validation, Validation . May 27 – Is The Venture Worth Your Time? . June 3 – Defining Market Segments . June 10 – Efficient Targeting . June 17 – Online Education Startups . June 24 – Three Startups That Can Hit One Million Dollars . July 1 - Get Your Pricing Model Validated . July 8 - The EJ Methodology . July 15 - A Market Of Late Adopters . July 22 - Bootstrap Using Services . July 29 - Startups In Malaysia . August 5 - Paying Customers =>Validation =>Valuation . August 19 - Niche E-Commerce Is Great For Bootstrapping . August 26 - 85%-90% Of Search Traffic Comes From Organic Search . September 2 - Find High Velocity Channels . September 9 - Open Opportunities In Cloud Computing And Rural BPO . September 16 – 5 Cloud Computing Opportunities for Entrepreneurs . September 23 - Do Not Spray And Pray . September 30 - Investors Don't Fund Broad Ideas . October 7 - Try To Get At Least $2M Pre-Money In Seed Round Valuation . October 14 - Professional Investors Do Not Invest In $20 Million Markets . October 21 - Bootstrapping Comes In Many Flavors . October 28 – Convert Potential Competitors To Partners . November 4 - Premium Lounge Sneak Preview . November 11 - African Tech Entrepreneurs Emerging . November 18 - Not Coming To The Rescue Of Victory . December 2 - Niche Marketplace Businesses Can Be Interesting . December 9 - Where Should You Raise Money? . December 16 - Top 10 Tech Trends To Watch . January 6 - Top 10 Vertical and Social Web Trends For The Decade . January 13 - Top 10 Online Advertising Trends For The Decade . January 20 - Personalization Remains An Open Problem . January 27 - Non-Dilutive Financing Through Revenue Sharing . February 3 - Indian Entrepreneurs Are Maturing . February 10 - When Keywords Are Competitive . February 17 - Indian Company Plugs Gap In Google’s Enterprise Solution . February 24 - VCs, Angels, Incubators, Accelerators – What Are You Doing With Your Rejects? . March 3 - Spotlight On The Northwest . March 10 - Spotlight On India . March 17 - Spotlight On Latin And Central America . March 24 - 75th Session Spotlights The Midwest . March 31 - Microsoft’s $100,000 India Startup Challenge Grant . April 6 - 1M/1M Announces Important Partnership With MAD Incubator, Malaysia . April 9 - 1M/1M Announces Partnership With TiE Chennai . April 16 - 1M/1M Partners With Indian Angel Network Incubator . April 17 - High-Octane Energy In Pune . April 21- Incubators Are Reaching Out To 1M/1M . April 28 - Guerrilla P.R. & SEO Most Profitable Customer Acquisition Strategies . May 5 - Ownership Matters . May 12 - Two Really Cool Companies . May 19, Making Money From Blogs . May 26 - Twitter, LinkedIn - Why Not Affiliates? . June 2 - 1M/1M And Incubators - What We Have Learned . June 9 - Silicon Valley . June 16 - Exciting Companies Lined Up For Microsoft Startup Grant Finals . June 23 - New Assessment Tool For Entrepreneurs . June 30 - Continued International Participation . July 21 - Crowd Sourced Funding Exchanges - An Emerging Trend . July 28 - Investors And Incubators Need To Look At Pre-Incubation . August 4 - How Do You Bootstrap Freemium Ventures? . August 11 - Menlo Park And The Silicon Valley Renaissance . August 25 - How To Use Twitter For Lead Generation . September 1 - Fall Call To Action . September 8 - A View Into Israeli Start-ups . September 15 - Do Your Homework First . September 22 - How Do You Catalyze A Region’s Entrepreneurship? . September 29 - From Poland To Argentina . October 6 - Dedicated To Steve Jobs, Reinforcing Mission To Restructure Capitalism . October 13 - FREE Is Not A Business Model . October 20 - Non-profits And For-profits . October 27 - Check Out Stanzr . November 3 - VCs Are Not Always Right . November 17 - Business Schools And Early Stage Entrepreneurship . December 1 - 1M/1M Premium Company Freshdesk Wins Funding From Accel Partners . December 8 - Three Open Opportunities For 2012 . December 15 - Web 3.0 And Social Dancing; Romania Emerging . December 22 - Free Apps, Ad-Supported Business Models => Dangerous! . January 5 - ERP Galore . January 12-13 - Spotlight On IIT Kharagpur, India . January 19 - Are Media Sites Fundable? . January 26th - Spotlight On Jacksonville, Florida . February 2 - YCombinator vs. 1M/1M . February 9 - Are You Fundable? . February 16 - What’s Happening In Turkey? . February 23 - Microsoft Israel To Offer 1M/1M Scholarships . March 1 - Strategy Gaps Need To Be Plugged . March 12 - Winners Of Microsoft Israel Scholarships . March 15 - Spotlight On 3 Day Startup Tel-Aviv . April 3 - Rendezvous In Bangalore . April 12 - More From Indian Entrepreneurs . April 19 - Tyranny Of The TAM . April 26 - A Rare Women-Only Session . May 3 - Some Wonderful Opportunities With Corporate Partners . May 10 - BlueSnap-Elance Contest Applications Deadline This Weekend . May 22 - Winners Of TechHub-A&N Media Battle Of The Startups Contest In London Win 1M/1M Scholarships