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It's Time to Stop Chasing VC Funds Already

Take it from someone who knows: Alex Moore, one of the co-founders behind the popular Boomerang email app, explains why you're better off not taking investors' money.

Running an email productivity startup isn't easy, but the husband and wife team behind Baydin have managed to make it work. Alex Moore's and Aye Moah's flagship product is the Outlook and Gmail plug-in Boomerang, which lets you schedule messages to respond to and send later. It's been downloaded 3 million times, and the related website The Email Game, which helps users get to Inbox Zero, was named one of Time magazine's best sites in 2012.

Beyond their clever products, what's interesting about Baydin is that the startup has never taken venture funding. In winter of 2010, it took an angel round of $400,000, but after that Moore and Moah focused on monetizing their products, and Boomerang in particular. "We converted to a freemium model that summer," he said in an interview with Inc., because "we wanted to give people the ability to pay."

By not going the venture capital route, Moore had the flexibility to make decisions that were good for his business, such as trying the freemium model. "When you raise the VC money, the expectation is that you will get very, very large, or you will die, which is not exactly right for every business," he says. "A lot of VCs just don't [want to invest in] email," he says, because others have failed. "They just aren't interested in investing in the space."

Worse still, "most venture capitalists didn't understand the problem we solved," Moore says. "We met with one and were explaining how Boomerang lets you alert yourself if you don't get a response to an email and he said, 'Why would you need that?' He just didn't have the problems that we solve." 

Here's why not chasing venture capital worked out for Baydin. 

Going the Freemium Route

Boomerang "had users and traction early on," says Moore, so "we used that angel round to keep ourselves really lean until we figured out how to monetize." At one point, they devised a "glorified donation button" that popped up and said, "Hey, if you love us, pay for a subscription." The button was effective, encouraging one percent of its users to pay. So Moore realized if he could do that, he could get more people to subscribe. 

Soon Boomerang's model was structured so that users could schedule up to 10 messages a month free of charge. When they sent the 11th message, Baydin prompted users to pay, and if they didn't, "we continued to let them use the service but with nag screens," Moore explains. "By the 18th message, we'd send you a limerick asking you to pay. We'd often get limericks back all the time with people saying, 'Sorry, we're broke.'"

That "little bit of goofiness and lightheartedness" paid off, helping Baydin turn profitable in 18 months. People ponied up, because "they know that we're a tiny startup," says Moore, and that the Boomerang plug-in provides value. As a startup, "we try to be people that our customers can root for." 

Since Baydin charges either $5, $15, or $49 a month for Boomerang, depending on the plan users sign up for, it isn't like this is a "one-time big ticket purchase" either, says Moore. That made it more enticing.

The Downside of Profitability 

Getting to profitability, however, doesn't solve all of your problems. For starters, Moore admits that when you monetize users, you can lose a "decent chunk of heavy ones who are engaged with the product," and if you're trying to get that user number higher, going the paid route will impact your growth rate. And setting up the necessary customer support resources is tedious. "You're not focused on making your product value higher; you're focused on turning some of that value into money," he says. 

That said, when you have someone paying for your product, it will change your relationship with them, often for the better. "They're delightful when you have customer support issues," jokes Moore. "Some of the free users are definitely not as nice." 

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Last updated: Jun 30, 2014

JILL KRASNY | Staff Writer

Jill Krasny is a staff writer for Inc. magazine, where she covers the intersection of entertainment and startups. Prior to Inc., she was a writer for MTV and Esquire and an editor at TheStreet. She is a graduate of the University of Southern California with a degree in communication. She lives in New York City.




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