The startup I founded last fall, CatchFree, officially launched at TechCrunch Disrupt on Tuesday of this week. Only a TechCrunch event could offer this: within 24 hour we were contacted by Corp Dev at two of the biggest Internet companies in the world. Of course it’s way too early to have any substantive conversations, but it’s a great early opportunity to build a relationship that could be meaningful down the line.
More importantly, TC Disrupt was very helpful in kick starting our UGC. Users submitted and reviewed hundreds of free apps and services on the first day. We had identified a critical mass of authentic, non-anonymous reviews as one of the biggest hurdles in the business. TechCrunch helped us clear this hurdle in a single day. It didn’t hurt that Dropbox, SpringPad, SurveyMonkey, LogMeIn, WordPress.com, Xobni, KissInsights, Lookout, Webs, Mavenlink, and many others also recruited their passionate users to support them on CatchFree via Twitter.
The Key Challenge with Freemium
The vision for CatchFree is based on the frustration I faced trying to help grow 15 freemium startups. Customer acquisition is probably the number one challenge for a freemium company. You’d think it would be easy giving away free products. It’s not. To understand why, just try standing on a corner in any big city handing out free apples; you’ll find that people are pretty skeptical. That same skepticism applies when trying to give away free software, services and apps. Too many people have been burned in the past.
Compounding the issue is that freemium businesses can typically only afford to spend about 5-10% of their “premium only” counterparts acquiring a new user. This makes it very hard for a freemium company to buy growth in traditional channels, where inventory generally goes to the highest bidder. If the product is good enough, eventually organic growth kicks in, but many freemium companies give up or run out of money before they are able to achieve sufficient growth. Even when organic growth is reasonably strong, the inability to accelerate it can be frustrating for even the most successful companies.
Hub of the Freemium Ecosystem
CatchFree is solving this challenge by helping freemium businesses leverage their most important asset to grow – large passionate user bases. The CatchFree Network links together the best freemium apps and services, enabling each service to draw off the growth experienced by other leading freemium services. We will be offering referral credits for each person referred from a freemium business to the network and providing surplus referrals back to a freemium company at a profitable CPA. Collectively the best freemium businesses have nearly a billion users between them, so they will all benefit when traffic can circulate easily among them.
To be effective, CatchFree must adopt the culture and standards of the best freemium companies. So we have put it entirely within our community’s control to determine who can and can’t be accepted to the network. Unethical behavior by freemium businesses will quickly get them banned by the network. While this may seem anti-commercial, it turns out that a highly ethical approach is a key requirement for a freemium company to succeed anyway. Companies like Dropbox and Evernote are genuinely loved by their users and it’s their evangelism that propels them forward. I know some of you are thinking of some unethical companies that are succeeding with freemium, but I would argue that they were likely ethical in the early days and more recently lost their way because of greed. In those cases, freemium has become a tangential part of their model and is no longer their core.
The Wild Feedback Loop
There will be lots of learning and surprises along the way, but we are very excited to be out in the “wild”. As Paul Graham suggests: “tame” users can only take you so far. By working hard and acting on user feedback, we’re confident we’ll be able to give freemium the platform it needs to thrive and change the game in some of the most profitable categories of technology. As CatchFree gains traction it is going to be very hard to compete against a great freemium app or service.
This article in TechCrunch actually captured our vision pretty well: CatchFree Wants to Become the Hub of the “Freemium” Ecosystem.
We also announced our $5.5m Series A funding by Polaris Ventures, True Ventures, Index Ventures, First Round Capital and 500Startups.
I’ll try to share lessons learned for taking a network effect startup to market over the coming months. It is significantly more difficult to get traction in a network effect business, but post traction they are much easier to grow. This is part of the reason we raised so much up front.
Here’s our launch demo and a bit more on the vision: