September 12, 2017
Heavybit Welcomes New Member: Greta
We’re excited to welcome our latest Heavybit member company, Greta - a company dedicated to helping users increase site performance via an...
Today's goal for the session, why is commercial
success important? It seems kind of
obvious, but I meet with founders every day who are building
a community, building a great tool, a great product. "People
love our product, people are tweeting about it, people are talking
about it. We don't need to make money right now."
And I'm like, "You should always be
thinking about money from the beginning." So how
do you make money without ruining your community?
Community is a sacred thing, I think you all know that, and it's something that you work really hard to build and foster. It's kind of scary when you have to take that jump from community-free product to, "hey, please pay us some money for something we've built." But there are some actual tactics for monetizing your product for a large community. When you're thinking about what your monetization strategy could be, and a lot of it has to do with working with your larger companies who are using your product with larger teams and we'll dive into that shortly.
So who am I? Why
am I talking about this? By
training, by degree, I'm a biomedical engineer
with a CS minor from Georgia Tech. Biomedical
engineering is a little bit slow. I'm
more on the startup pace, I think. So,
moved to San Francisco. My first
startup job was at Twilio as the first
twenty people, got to work in devrel there,
sales, marketing, ops, you name it,
at Twilio, I got to do everything. I
got to work with the most incredible team and learned from
some of the best.
And from there, went to a startup called
Parse. Parse is a mobile app
platform and I was in the first 10 there. I
was the first non-technical hire, if you want to call me that.
acquired by Facebook and then subsequently shut down a few years
later, but incredible communities surrounding
both Twilio and Parse. And both of
those were able to monetize. GitLab,
great community. We were thinking
about monetization from the beginning. I
was in the first 10 there, was CMO. And
then later stage I worked at GitHub on the
exec team the 18 months prior to acquisition.
So huge community, huge monetization. There was some pull between the two and we really had to be very thoughtful and intentional about how we thought about those sometimes counter forces. I became a venture partner at OpenView. I was doing investments. I worked on deals Axoniuos with which is a security company here in New York City where I'm based. And I did an investment and I'm also a board member at a company called Buildkite, which is a CI tool based out of Australia. So everything I've done is developer tools.
Everything I've done I think is really about, how do we build a great community around our product, but also, let's please make some money on this because there are some signals that we should start monetizing.
Currently I'm angel investing in a lot of developer tools, data tools, design tools, anything that kind of helps the technical community get work done. I'm advising a ton of startups. I walk around New York City a lot, which is probably my favorite thing to do right now because the city is really coming back. So, excited about that.
So the title of my talk here is, "our community
loves our free product, now
what?" Every founder I talk to,
like I said, is so excited about,
"we've built so many great features,
people love it, people are using it.
It's on Hacker News. Twitter's
blowing up about this thing we launched." I'm
like, that's awesome. Okay, great. "We've
got something, right? There's
something there." They raise a little bit of money, they're bootstrapping.
They're continuing to build that great product that solves
a key problem for developers.
So a lot of times I'll get a pitch or work with a company and it's always, "we're going to solve this entire thing. We have a platform, we have a layer. We have a thing." And I ask, what is that actual key problem that you're solving? I need to know the specific key problem you're solving. And that's a hard question for a lot of people to answer. So if someone can't answer that question for me and in 10 words or less, I tell them to go figure out what the problem is that they're solving. And let's work from there.
Around that, let's build a community of people
that have that problem and need to
solve that, and are going to be searching for it or trying to find
solutions for that problem, and can
give you product feedback, be a
champion, has love for your building,
will work with you to help understand what you should build next.
Really work hard to build that community. And
then you want to empower that community to share the product with
Word of mouth is the best marketing tactic in an early developer tool.
And almost always, when I'm talking to
someone who's built a great
community around their product, I'm like, so how did you get
this marketing strategy off the ground? It's,
"people were just telling their friends to use this or people were
telling their colleagues."
Then there's some question marks, step five, which we'll go through and then there's hopefully profit, right? We want to make money at the end of the day, if you're taking venture money, you're probably going to be expected to make money at some point.
So what do we do to move from community to
commercialization? What are the actual steps,
right? So the first thing I think
people kind of overlook is both your company
and your product must be ready to monetize. So
what does that mean? We all work with, or have hired or worked
for people that are very much community-focused and feel strongly
that community is core to what you're building. Maybe
they're your first engineer, they're your first product person, your
first devrel person. They're not
worried about monetization, but they care deeply about
features and products.
On the flip side of that coin, there are
people who really like to make money, right? They
care about the community but they care
about features, but they care about features that we can ship to
actually make money. You need both
of those kinds of people on your team. You
need to have a good balance within your team
of both minds. And so that's
something that if you have everyone thinking about, " all
I care about is the free product" and no one thinking about
monetization, you're never going to
be able to monetize.
Also, your product has to scale. This is one that you would be surprised. If your product doesn't work, no one's going to want to pay you for it. If they do pay for it, it's going to be kind of a nightmare. So make sure your product scales, create a culture where you can ship a ton of things, but let's make sure they work or there's some great beta testing process that happens there.
So what are the signs that we should be
thinking about, pricing, packaging,
monetization? It always happens
that customers will say to you, "I would want to pay you money.
Please let me pay you money." I
can't even remember how many times I've been at an event
or something. And I'd have someone come up to me that worked at a big
company and they'd say, "You're not
charging enough for the product." And that's always a very loud
and clear signal that either you're not charging enough or you're not
charging for the thing you should
be charging for.
Generally a team of like five to 10 people. If
you're series seed round, pre-seed,
just before A, maybe you should be thinking
about developing a lot of the
community then. But as you start to
scale your company up, start, like I said, hiring people
that can be thinking more about monetization and
building the other half of the business beyond just the community
side of it.
The other loud, and potentially the loudest, signal is, investors that invest in your company will begin to ask about revenue metrics. Seed investors, pre-seed investors are all about, to build developer love, build your community. When you get to series A and B, and I'm sure a lot of you know this, and you're in a board meeting, they're going to ask a lot about developer love and community and active users and things like that, but also revenue metrics. And if you don't have good answers for that early on, you will start to have some really messy board meetings, I can promise.
So some modernization routes, these are
just four that I know that work. You
can use multiple ones in this list. There's
things outside of this that would also work for monetization. But
these are the four that I have the most experience with. So
I'll talk about these. Enterprise scale. Collaboration
features. Managed services. And
support. So let's start with the
easiest one first.
Support and Services: It's easy in the sense that you can launch this and then have some engineers answering questions. It's not easy to scale, but it's something, it's a quick way to make money. So if you're really trying to just make some money, maybe in your first or second year of monetization, come up with an enterprise support plan, its enterprise feature, come up with a way to train people on how to use your product. Do not rely on this as your only monetization strategy, because it's really expensive to scale a support team globally, and a services team globally, without some other way to monetize.
One caveat here is I think everyone deserves
good support, for users, paid
users, doesn't matter. The better
support you provide for your community and your product,
the better your product is because you can get so much more feedback
from all types of users into your product
roadmap. So give everyone good support,
but also understand that enterprises are used to paying for support
and services. This is a pretty easy thing to get off the ground.
It's as easy as a landing page and email
address or a slack channel.
Collaboration features. I love these.
So collaboration features, a basic product is
still going to be free in this
case. But whenever someone's moving up to working with a team,
they're going to need to unlock a bigger
functionality. Is it commenting? Is
it team roles? Is it permissions? What
are these things that you need to have if you're working within a team?
will pay for those because in most cases, not all cases, in most
cases, if they're on a team working, using a
product, they're working in a
bigger company and they have the money to pay you.
Great example here, HashiCorp. Terraform
has this wonderful free tier. And
then the Team and Governance tier. I
won't talk about the business tier yet because I'm talking about that in
a little bit, but the Team and
Governance tier for HashiCorp's Terraform Cloud
is all about collaboration, how to manage
users, and enforcing provisioning policies if you're working with a
team. A great way to understand
and learn more about pricing and monetization is going to look
at pricing pages of companies you admire
in the space. HashiCorp obviously
is a great one. As you can see
here, they've started to think about a team
approach, a collaboration approach to pricing.
one's fun. This one you can make a lot of really good money.
Managed services is something that I think is becoming a bigger and
bigger deal every day. DevOps is something that
not every company has or can't
afford a giant DevOps team. And
so if you want to actually sell expert
I think someone who's doing this really
well is Armory. If you look at this
Managed tier on the right, you're getting
everything that you'd get on the team enterprise plan, but you're also
getting Armory's spinnaker experts
around the clock. And that's just
something that if you don't have a dev ops muscle
in your corporation, this is a great way to get it.
This monetization strategy is
wonderful whenever you know that
your product is very big for the enterprise and
you can monetize that idea of a
Enterprise scale. This is the one you should be thinking about from the beginning, it's something that is the hardest to get right. But when you get it right, you make a ton of money. The only people paying you for this, it's not your community paying you for this. It's a giant corporation or a big company, which is great. SSL role permissions, enterprise support. A lot of things we just talked about actually fall under this. But enterprise features are so great and a good way to make money off of companies that are employing the developers that love your product.
So you're monetizing the developers when they go to work, you're not monetizing the community.
When they do go to work at these big companies
or medium sized companies, you're
able to charge their employer so that they can use the best tool.
And the thing that they love the most. And
I really like this approach.
I'm going to talk about Orbit. You've got the starter plan, which is free, but then you've got the growth plan, which really is like an enterprise plan where you're getting priority support, SLA, SSO. You're getting increased API rate limits, which is really important for big companies up to a hundred thousand members in the community. That's really large scale. And when you're at that scale, in most cases, it's okay to pay some money. And so I love this monetization route and I think Orbit's done a good job with it.
So, when you're thinking about, how do we
price? What do we price? What do we
build? Don't be afraid just to
actually ask your community. People
are so excited to give you opinions. Your
community is there to help you survive as a
startup, as a company. And so come
up with a list of questions. They
can be open-ended or in a survey form. I
like survey forms for bigger audiences.
If you're doing a list of questions, get different types of community members, but 10 to 20 people and just ask, what would you pay for it? How much would you pay for it? What pricing models do you like? What do you think your company would pay for it? Just ask these questions and you'd be so surprised how much insight you'll get into how you should be thinking about monetization for your product.
And I want to be clear, when I talk about
community, I'm not just talking about
the indie developer or indie hacker.
Those people mostly go to work somewhere. We
all have been the person working on something at home hacking away,
but then when you go to work at, wherever your job is
and not always, but a lot of cases, that's when you become
this enterprise developer concept but it's all the same community.
It's a lot of times it's a crossover. It's
all the same person.
So a lot of people talk about them being very
separate, but in a lot of cases,
sure, whenever they go to work, the needs are different.
You do need different features, which again, people will pay you
for. But it's all one community. And
I think that's really important to know.
Today's independent developer, someone who's been working on some product at home or a student or whatever you are doing at that time can be tomorrow's internal champion at a large company.
So it's so important to really foster a strong
community and care about your
community and make sure you're listening to them because
those are your internal champions at large companies.
Every day, always, when you're closing large
deals, when you're getting into
actually making a lot of money at a startup, the
product got in the door because someone there loved your product,
talked to people, the team started using it and
then IT or the CTO or the head of
engineering or something looked and
said, "What are you all using? What
is this thing?" And you got it from that internal champion.
Another thing, most community members want
your company to succeed. There's
always this fear that the community's going to get
so mad at us because we're trying to make money. And
that's not the case for most people. People
understand that modernization is a key part of startup survival
and it's totally normal. You just
have to be pretty careful about how you do it. Sometimes
people monetize their own features.
And so what this looks like, and the one that hurts the most, I think is you'll see a product roadmap where you're going to work six months for something you're building something. And you're sure is the thing that everybody wants. It's going to be so exciting. It's going to change the way your company monetizes and it launches it and no one cares. And that's the worst. So that's probably my... We've all done it, but that's when you're monetizing the wrong features.
The flip side of that coin is when you're
taking free features, because you
built something really cool and you give it to everybody.
And then there's no way to make that into the paid
product without taking it away. And
so from the beginning of your startup, try to be very
intentional about what you're putting into what I call the core
product or the free product, community edition, whatever
Really be thinking, okay, should this be a paid product at some point? And if so, is there a level two version of it that we can charge for, but try to give as many features as you can in that free version and save the paid product for things that should actually be paid for.
So beyond research pricing, packaging, which
are all huge undertakings, build a
team that understands we're a business, that
kind of comes from the top. It's
very hard to work in a company that the execs
or founding team aren't saying very clearly, "We're a community-driven
product, but we need to monetize." It's both. It's
not either/or. And so that should
be coming through in all columns, when you're interviewing people,
when you're doing 1:1s, don't be afraid to
introduce this concept of
monetization early on in this business's journey.
Don't let sales and marketing be looked down
on. I have worked in organizations
where, there's engineering and
product and then there's sales and marketing. It's
so separate. It needs to all work
together. It needs to all be one
cohesive unit. One can't exist
without the other. And everyone is
important in an organization. And
so, really work hard to make it clear that go to market
and R&D are equally as important in the business.
And again, community is extremely important and monetization is extremely important. And back to my earlier point on thinking about team and how you're building it. Hire engineers and product leaders that understand monetization, but also hire people that, or keep the people around that built the original community to love the product that got you to where you are and your community to where it is.
Those blend of people will be so important
to make sure there's a perfect balance
of free features, community features, community love,
and monetization enterprise, et cetera. So
it's a balance, but you can definitely do it. So
what are our steps to monetization? Again,
raising a little money, you're bootstrapping. You're
building a great product that solves a key problem for developers.
You're creating a community of people that
absolutely love your product. You're
empowering that community to share your product with others.
And then that next monetization step is you have to research and build pay features that larger companies need. I think that's kind of succinctly what we should be doing here. Profit. And then repeat, try again and repeat. You're going to fail a few times. It's okay. But you'll figure it out at some point. And if you don't go back to the drawing board there, go talk to your community and see what else you can do. I love talking about this topic so it's been a real pleasure to be here today, talking about both community and monetization because it's so near and dear to my heart.