Freemium Edition of Startup Funding Espresso

# Freemium: A Key Business Model in the Startup World

Welcome to the Startup Funding Espresso, your daily shot of startup funding and investing with Hall T. Martin. In today’s episode, we will be discussing Freemium – an essential business model in the startup world.

Freemium is a popular pricing strategy that offers a product or service for free, with the goal of attracting more users. Once the user is engaged with the product, the company then has the opportunity to upsell the user with paid services[^1^].

This business strategy is highly scalable, as it allows startups to capture new users without the need for a direct sales force. It proves particularly effective for software products, where the incremental cost of adding users is virtually zero[^2^].

The key to a successful freemium model lies in the ability to upsell users into a paid product. For this reason, the premium features offered must be compelling and provide value to the user. Companies can achieve this by limiting the usage, reducing available features, or decreasing the level of support provided[^3^].

Monetizing a group of users can be approached in various ways. Premium services can provide additional functionality at a cost, while the content, data, and identity of the users themselves can also be monetized[^4^]. Moreover, companies within the same user base may be willing to pay for access to these users through advertising or direct marketing efforts[^5^].

To truly succeed, a freemium product must be “sticky” – this means capturing key information from the user, making it more difficult for them to switch to a competitor. This includes creating a unique value proposition and establishing a strong connection with the user[^6^].

Thank you for joining us on the Startup Funding Espresso, where we bring startups and investors together for funding opportunities. Let’s go start something today!

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**Keywords/tags**: vid_tags, startup funding, investing, Freemium, pricing strategy, product, users, scalability, software products, premium features, monetization, user base, upselling, value proposition

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**Sources**:

[^1^]: [What Is a Freemium Pricing Model? How to Properly Utilize Freemium Strategy](https://www.cleverism.com/pure-price-strategy-freemium-pricing-model/)

[^2^]: [Freemium model: The best friend of a startup](https://startupander.com/freemium-model-best-friend-startup/)

[^3^]: [What Is the Freemium Business Model and How Does It Work?](https://www.businessnewsdaily.com/16411-freemium-business-model.html)

[^4^]: [Monetizing Freemium: Maximizing the Value of Freemium Customers](https://medium.com/swlh/monetizing-freemium-maximizing-the-value-of-freemium-customers-45a36b4e77db)

[^5^]: [How to Monetize Your Freemium Product – Freemium Economy](https://www.multisoft.com/blog/how-to-monetize-your-freemium-product/)

[^6^]: [How to Make Your Freemium Model Successful](https://www.disruptiveadvertising.com/conversion-rate-optimization/make-your-freemium-model-successful/)

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*Disclaimer: The opinions expressed by Hall T. Martin and podcast guests are solely their own and do not reflect the standpoint of Investor Connect. This podcast is for informational purposes only and should not be considered as investment advice.*

Freemium

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

Freemium is a key business model in the startup world.

It’s a pricing strategy that provides a product or service for free in order to attract more users.

After the user is engaged with the product, the company can upsell the user for paid services.

The freemium strategy is highly scalable as it can capture new users without the use of a direct sales force.

The strategy works well with software products because the incremental cost of adding another user is near zero.

The key to a freemium model is the ability to upsell the user into a paid product.

Therefore, the premium features must be compelling.

One can create a freemium product by taking the company’s main product and limiting its usage, reducing the features available, or limiting the support the user receives.

There are many ways to monetize a group of users.

Consider the following:

Premium services provide additional functionality but at a price.

The content, data, and identity of the users can be monetized.

Companies that sell to the same user base would pay to access those users through advertising or direct marketing.

It’s important to have premium features to upsell to.

Finally, the product must be ‘sticky’ by capturing key information from the user so it’s harder to switch to a competitor product.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.Let’s go startup something today.

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For more episodes from Investor Connect, please visit the site at: http://investorconnect.org

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