Thoughts on entrepreneurship, startups, and tech.


The Fable Of Free

Before the internet, everything outside a cup of sugar or washing liquid from your next-door neighbour was for sale. Then suddenly, things of apparent usefulness started to appear for free and soon trying to get someone to pay for something became difficult. For startups, this forgotten truth forced the majority to raise money on hypothetical future cash flows and produced a series of ‘bubbles’ and cohorts of belly-upped companies.

What happened?

For some the “if it’s free, you’re the product” became a mantra for developing their business but this worked for only a handful of soon to become global behemoths. Small (but respectable) startups subsequently had a sizeable challenge; offer their services for a ‘premium’ and face being compared (and ignored) to the industry leader (incumbent) or for ‘free’ and try to raise enough capital to wait out the eventual growth. This led to what is now commonplace, the ‘freemium’ rule by which a startup hopes that by using a product or service, a user will eventually start paying once they ‘perceive’ the value. Like many fables, this so-called reality is far from a science and only a minority of startups evolve into companies where this is both feasible and sustainable. And so, many founders lured by the acclaim, status & wealth of the aforementioned lucky few, focus from the outset of their venture on giving away what they create as they go ‘into business’.

My point is, what would happen if that was flipped on its head?

If a startup built something that truly solved a common problem or need, and did it well from day one, most people would pay for it immediately. But to achieve that you need to concentrate every ounce of energy to conceive a product or service like you’re going to charge for it as soon as it becomes available and this is where many teams fail and fall to the ‘fable of free’. It’s far easier to give something away than it is to ask someone for money to use it. And let’s stop talking about the ‘chicken or the egg’ thing, that too is another fable, applicable in only a handful of circumstances. For entrepreneurship to work you need a durable economic model to succeed, anything else is pure speculation and although that is not reprehensible, it is not a sound theory to build a business on.

Trying to use the ‘free’ to get to the top is like doping, it can probably enhance your performance but only if you’ve got world class skills, experience and results — but it’s not a shortcut to the podium. Next time you run into a craftsman, farmer or chiropractor ask them to describe their professional mindset, you might be surprised by their story.