Gaurav Dhillon of SnapLogic discusses startup business models and why his company abandoned the “freemium” approach.
Read the full transcript below. (Transcript by Realtime Transcription.)
Dhillon: It’s a pleasure to be here at my first Techonomy.
You know, the myth I’m going to debunk is that of “freemium” in the enterprise. As many of you probably know, freemium is a business model, an economic model, which is very popular on the consumer Internet, where you have a free product or service that you give out, and then if people like what you have, they go out and buy your premium product, you know. Spotify, you know; Skype, all the cool kids are doing it.
So when we started to go to market with our products a few years ago, I thought, you know what? We want to be that cool, lean startup. So freemium is the model, and off we went.
This is a 180. You already know where I’m going with this. In many things not only was the idea of freemium wrong for our model; it was exactly wrong. Our business, which is connecting the enterprise to cloud and SaaS applications, didn’t work that way at all.
When you connect to the heart of the enterprise, payrolls, truck rolls, financial transactions, people want to evaluate the premium product. And the fact that you have a free product doesn’t have a big weight on that decision at all. They really want to go look at the real technology because it’s a career issue for them. It’s at the very heart of their enterprise, and they can’t afford to make a bad choice.
So my 180, our 180 as a company, was going away from that lean startup to a different kind of not-so-lean, “sumo” startup in the enterprise, which is very common these days.
I’m sure many of you have heard of salesforce.com, and you know they do a wonderful job. But there are other companies who followed a little bit of the sumo startup model, companies like Workday and Service Now and have had very successful IPOs last year. In fact, if you add up their market capitalization, it exceeds Twitter as of this morning. And Twitter’s lockups haven’t come off yet.
So the 180 that we had, the 180 that I had, was that different models work in different businesses. The fact that we tried freemium really helped us to be a better company. We learned how to take the friction out of an evaluation, a 30-day evaluation of our products. We learned to really, really think hard about the cost of goods. The bill that I was getting from Amazon Web Services for the cloud computing, we really had to think hard about it, and it made us a better company as a result.
So, you know, different models for different businesses. We have a free evaluation, but we have a premium product. That is the evaluation that takes place. And I hope in sharing this 180 with you, we all get better at the great game of creating something new, of creating a transformation, making something from nothing. Thank you.