We meet a lot of entrepreneurs and startups through Innovation Breakfast and Mass Innovation Nights. (If we don’t know you already, come introduce yourself!) Once we get past the introductions and initial explanation of what a company concept is, the next question is “How are you going to make money?” This is especially true of Web-based startups and other tech-based ventures. These companies have been caught up in the swirl around the freemium business model. I would submit that most go beyond freemium and are squarely in the free camp.
What is freestrapping? Start with the definition of bootstrapping. Bootstrapping your startup means you are not accepting outside help — no friends and family funds, no angel funding, and no venture capital. Bootstrapping generally means you are able to fund your business by internal means. In the strictest sense, a bootstrapped company should be a lean enterprise that supports operations from an early (often small) revenue stream, selling enough product or services to keep the door open. Often workers are ill-paid and excess revenues get put back into growing the organization.
But many startups today have crossed over the line into freestrapping. Pay isn’t “low”, it’s “no”. Operations aren’t lean, they are free. Revenues aren’t small, they don’t exist. That’s right — no revenue and no overhead that can be strictly assigned to the business. Workers work virtually so there’s no office. Or maybe they spend hours at the local coffee shop mooching Internet access. They work for free, sustaining themselves some other way. Maybe they work part-time, have a working spouse, still collect unemployment or have “walk-away” money from their last gig. There are no materials in the strictest sense since they are creating a web-based or mobile application. Even their tools are free. Can you say open source? Or maybe they are using a “free 30 day trial” of a development tool. (Ah, so that’s why the agile development scrums are so short!) They are creating something from nothing. (And, yes, guilty as charged. That’s how we did it. There were a few out-of-pocket expenses but so far nothing that seriously cut into my coffee habit.)
If you are an experienced bootstrapper, this all sounds familiar, right? You are used to making nothing or next to nothing. The difference, and the trouble lies in the lack of revenue or prospects for revenue and the use of free raw materials and tools. The expectation of free has become so pervasive that we are harming our economy’s ability to grow. How can we make a living if we give everything away for free? And why should we expect anyone to pay for what we produce when we don’t pay for the tools we use?
Shades of the dot.com bubble. Are you living in a freemium world? Are you freestrapping? Do you have a business plan that relies on building up a base of non-paying customers? And not just a sample or a trial, are you giving away the whole product?
In other, less free-oriented times, entrepreneurial communities supported each other. One small business buys products from another and a network starts to form. The companies start to form their own economy. In a freemium-oriented world, this doesn’t happen. Are we creating a non-economy?