I like startups that sell a product. It means they’re operating a business that hinges on getting consumers to spend money as opposed to offering a product that enough people will like that it magically delivers a way to generate revenue.
In my opinion, too many startups are afraid to sell their products. They’re afraid there’s too much competition, they’re afraid not enough consumers will be willing to pay for it, and they’re afraid of not getting the traction to attract investors or an acquirer.
Instead, they take the easy way out by offering their product for free and, even worse, they have no clue about how they will drive revenue. Honestly, it’s a cop-out and shows little confidence in the value of their product or the product’s ability to solve a big enough problem that a consumer would be willing for it.
As a result, you get a startup that may have a popular product but the only financial salvation is being acquired. The problem is it’s like buying a lottery ticket so the odds of “winning” are slim. As much as Instamatic got a lot of attention, it’s a fluke or the equivalent of getting hit by lightning.
Some startups try to hide their fear of selling by embracing a “freemium” model, which often means that if someone really, really wants to pay for it, the startup will take their money. In most cases, however, the free version is so robust and feature-rich, there’s no reason to upgrade to the premium version.
Yes, there are exceptions to the rules such as DropBox, Skype and Freshbooks but freemium is a difficult game to play, particularly for anyone looking to build a solid business.
What I like to see are startups that develop a product that addresses a point of pain, engages or entertains but has enough value to justify selling. It’s a simple proposition: the product does something consumers need so it’s worth buying.
I’m not sure why so many startups shy away from selling their products but I think one of the big reasons may be that initial sales can be challenging. It’s tough to convince the first group of consumers to pay because no one likes to be first and there is a digital culture that most products are free, so why would anyone have to pay for a product.
To sell, it requires a startup to have confidence in their product and take a leap of faith that consumers are willing and happy to open their wallets. While it’s easier to avoid the entire situation by just giving away a product, it’s a huge hurdle in the development of a real business that drives revenue and profits.
My advice to startups: don’t be afraid to sell. If what you’re offering is not being bought, it probably doesn’t have enough value, which means you need to figure out a way to build more value into the product as opposed to simply adding more features.