Startable – Healy Jones’ & Prasad Thammineni’s Blog

This is more for me than for my readers; I just love the quantity of data packed into Meeker’s state of the internet presentations. 29% of adults in the US now have tablet. 17% of global cell phone market is cell phones. These stats are great.

My friend has just launched a new venture that sounds really fun called LocalCoaster. LocalCoaster is a startup social venture that produces beverage coasters to help stimulate local commerce and at the same time support local charities. We are working on a new advertising model that engages the community and gives back. Basically, LocalCoaster provides coasters to local bars and restaurants that have cool local messages on them; messages that support local charities or local retailers. As the company says, “Coasters are an unexploited medium for delivering messages in a unique, engaging, social way. LocalCoaster brings an advertising message to beverage consumers within the community while donating a significant portion of proceeds to a local charity.” They are launching today in Portsmouth, NH, and are also on Twitter here.

I’m enjoying reading more and more of the technology press who are starting to recognize that the enterprise is the next major area of software/internet/mobile innovation. The latest read on this topic was on TechCrunch.  I am curious to see how cloud based, outside the firewall, type solutions will eventually stack up against more “controlled” opensource solutions. Only time will tell!

However, one thing I do see happening that isn’t being talked about enough is that small businesses are starting to lead technology adoption – in particular mobile adoption. I think we’ll see more and more of small business mobile solutions creep into the enterprise as end users within enterprises start bringing technology in with their BYO devices. Since it’s easy for a individual within a big company to sign up for a small mobile or SaaS app, they will likely choose products that have effective marketing directed towards entrepreneurs/small business owners. I’ve blogged before about how small businesses are embracing mobile technologies, and from one of those previous posts:

“2/3 small businesses have seem increased efficiency from mobile technologies and 60% believe that mobile technologies are completing functions that other technologies can not accomplish.  This is pretty exciting, as it proves that mobile will create new, exciting markets that have never before been contemplated! Wahoo mobile developers!

Mobile Creates Efficiency”

I believe that the marketing techniques that worked on small businesses will start to work for large enterprises – getting end users to try out new products that they download from an app store, getting them to engage with the product, and potentially start paying without real corporate oversight. Next step would likely be to bring in an enterprise sales force to call into the CTO/CIO and bring the control back to the home organization.

A friend of mine, William Sulinski, has recently started a cool new project called From Holden. The concept is pretty basic – Will like to wear quality clothes (he’s way more fashionable than me!) but he, like me, is on a startup person’s budget. So he’s decided to start a verticalized men’s clothing company focusing on high quality shirts. It’s a cool concept, and I like the style of the shirts that he’s working on.

From Holden V Neck T Shirt

From Holden V-Neck T-Shirt

Will is on the cusp of a new trend in internet retailing, which combines manufacturing/sourcing with internet distribution in the goal of driving down the cost to the end consumer. I like the concept and will be asking for a few shirts for my birthday…

He talks more about what he’s trying to accomplish in a video on his Kickstarter campaign.

Please check out the From Holden Kickstarter campaign and, if you like the shirts, help Will out!

I’m quoted in a PC World piece about how apps will change the nature of desktop software. I had a long conversation with the author, Jared Newman, about how OfficeDrop’s apps, both our smartphone scanner apps and our mac desktop scanner app, ScanDrop, are dramatically changing how we distribute our SaaS product.

The article’s thesis is spot on:

Not surprisingly, many developers are enthusiastic about the easy distribution and streamlined billing that app stores provide, yet these stores also introduce challenges–some that are unique to desktops, and others that have plagued smartphones since the dawn of the iPhone App Store.

I spoke with Jared for a while about how we were wrong about how customers wanted to use our service. They actually want to download and install apps, not use the web. We were off by 100%.

The soon to be famous Healy Jones quote is:

Healy Jones, vice president of marketing for OfficeDrop, noticed this shift away from the Web immediately after his company released mobile and desktop apps for its document-scanning service.

OfficeDrop, which provides searchable cloud storage, says that it sees seven times more user engagement through its apps than it does through the Web browser, Jones notes. Since releasing its first apps in 2011, OfficeDrop’s user base has grown from 7000 users to 140,000 users.

“We had a thesis that people did not want to install software; that the cloud meant that people could use a browser to interact with software and would never have to install anything. We were completely wrong,” Jones says. “People love installing software.”

Obviously I’m really bullish on apps. That’s also why I’m very bullish on tablets (and part of the reason OfficeDrop recently released an Android tablet version of our app.) Apps are how people want to interact with software. I’m happy people like HTML 5, but if it isn’t installed it’s not gonna grow as well as an app.

Recently Prasad Thammineni, Healy Jones (me), & one of our investors, David Mars, recent participated on a panel at Wharton reunion talking about how we worked together to grow OfficeDrop. Tyler Wry, Wharton professor, lead the discussion and recently posted an article on the panel for Wharton Magazine.

Tyler’s post, entitled “Teaching Lean Entrepreneurs,” dives into how a business school education can be an asset when running a lean startup. Tyler defines the lean startup, then goes into how OfficeDrop combined some of the theories we learned about at Wharton with the practices of running a lean startup.

Often times business school/MBAs are made fun of by startuppers; this is a somewhat fair stereotype – A lot of times MBAs think that they will join a startup and the the “strategy” person or run a bunch of analysis in Excel. Of course, we all know that startups need doers! But the MBA can be helpful as it provides frameworks that can be used to quickly make sense of a rapidly changing competitive environment that startups face. Also, things like pricing, positioning, etc are all classes taught at business school, and a good school will at least help you be prepared to know what you don’t know so you can launch.

Tyler had an interesting conclusion to his piece, and one that I agree with. He said, “For me, this drove home the point that entrepreneurship isn’t really that different than any other area of business—training matters. Anyone can start a company, and many scientists and entrepreneurs who don’t know the first thing about business become successful entrepreneurs. On average, though, the startups that are most likely to succeed have some serious business chops behind them.”

Lincoln Murphy, the well known SaaS Marketing guy, got pretty upset at a recent TechCrunch piece on the freemium pricing strategy that posted this weekend. Lincoln says (I’m on his email newsletter list; it’s pretty good): “In a nutshell the Complete Guide to Freemium on TechCrunch is a post by someone who got lucky enough to get their post accepted so he can get a backlink to his site from TechCrunch and where he takes the results of studies and some words from high-profile VCs and weaves it together into a post for the TMZ of the tech industry.”

Ouch. That’s a little harsh. The article isn’t bad at all. The conclusion is 100% great, actually.

What is Freemium?

However, I don’t think it’s the Ultimate Guide to what is a actually a pretty complicated pricing strategy. I happen to disagree with the author’s ideas that a time based free trial = freemium. I can’t tell if my disagreement is a big deal or not – his company, FutureSimple, has a free trial offer, so it’s hard to know how much of the piece is using that as the basis for the post vs. a couple of professors he references. I disagree with the idea that a free trial is freemium so much because OfficeDrop recently made the switch from a free trial to having a free forever plan and we called it “going freemium.”

My definition of freemium is that a user will have the opportunity to use the service/software/whatever forever without having to pay for it. It may be a limited plan or limited features, it may be ad supported; whatever. It just means you can use it for as long as you’d like without paying. FreshBooks has a freemium model, but you run out of “free” pretty quickly. You can jump through hoops to keep it free, but most likely you’ll upgrade. A free trial that expires after a set number of days doesn’t meet my definition of freemium.

OfficeDrop’s free plan is driven by our mobile distribution strategy. I write a little bit about why we think apps are taking over here. But you should listen to my conversation with Lincoln – I call it “Healy Jones on Freemium.” Our free plan is a free forever plan, with some upgrade triggers baked in – search limits, storage limits, OCR limits. But it’s a pretty good product for free; we are the only company offering free high quality OCR for scanned images coupled with storage. People seem to like the plan… and they also seem to like to upgrade to paid plans. We like that part for sure!

Lincoln is putting on a webinar on kicking butt with your company’s free trials model. I think he’s got some good stuff, so I’d suggest you register!

Yup, it’s me, Healy Jones, talking about the OfficeDrop cloud filing system switch to freemium with Lincoln Murphy of 16Ventures. Lincoln is that well known SaaS pricing guy, and we go over the switch OfficeDrop made from a pure web only service with a 60 day free trial to an app focused business with a freemium pricing model.

The switch in our pricing strategy has been pretty huge for OfficeDrop. It’s driving a lot of new user growth – both free and paid. It’s been only a month and a half since the switch and the change is clearly measurable with our analytics packages. So far, for our SaaS company, freemium seems to be working.

Check out the interview with on why OfficeDrop went Freemium here! Or simply watch the video embedded below.

Healy Jones with Lincoln Murphy on Freemium

Interesting research from Flurry again (they were the ones who put out the info that mobile app usage is topping regular web browsing). This time they have data showing that free or “freemium” app titles are generating more revenue than pure paid apps. From a MediaPost summary of the research:

Flurry shows that over the last six months, revenue from free-to-play game apps has overtaken that from paid apps. Among the top 100 grossing games in the App Store as of June, more than two-thirds (65%) of the revenue generated came from freemium games and 35% from paid games.

That’s nearly opposite the situation from six months ago, when paid game apps accounted for 61% of revenue and free titles, 39%. What’s changed since January? Peter Farago, vice president of marketing at Flurry, pointed out that Apple began counting in-app purchases toward app gross revenues at the end of 2010, reflecting the impact of that sales stream in its ranking of top-grossing titles.

Free apps generating more revenue than pure paid apps

So, this research is focused on games, but OfficeDrop is betting the same will be true for our b2b SaaS app. We switched to a freemium model earlier this week, mainly driven by the feedback we were getting in the app stores. App store people just expect to try stuff for free and don’t like free trials. We can’t get them to read the app description that talks about the free trial period; they just look at stars, download and then leave a nasty review without trying the service. Hopefully this freemium experiment will pay off for us. Initial web signups are promising, but it’s too early to tell!

Really? Does this make any sense? Intuit announced that QuickBooks 2011 will not have a free document management plan due to a change of accounting policies. The email they recently sent to QuickBooks users said:

Free Document Management will be discontinued in QuickBooks 2011

What’s Changing?

Document Management is free in QuickBooks 2010, and it will stay that way. But after May 15, it will no longer be free in QuickBooks 2011.

Why?

A change in our accounting policies requires us to stop offering free services in any version of QuickBooks after 2011. We’re not happy about it because we know Document Management could be an integral part of how you do business.

Waaaa? It’s an accounting software company, you’d think they could figure out a way to not let the accountants drive important business decisions. Does this mean that Intuit will never offer a paid version of Mint because they’ll have to end the free version? Does this mean that no packaged software companies can do a freemium upsell model for attached services? If the latter is true, will a company like Microsoft – that makes a lot of money off of one time installed software – be totally unable to acquire freemium SaaS companies? Will Intuit never be able to acquire a freemium company like Box.net? This seems nutty.

I just don’t get this move by Intuit, unless the real reason that the free plan is being eliminated is because they just aren’t making money off of the free to paid upgrades and this is a way to kill off the free plan with an excuse that is so obtuse customers are unlikely to question it.

What do you think? Are the accountants just running the show at Intuit and forcing business decisions to be made off of accounting rules, or is it likely that the free plan just wasn’t working for Intuit as a business/marketing model?

Here is most of the email that I was able to screen capture:

QuickBooks discontinues free document management

Note, I have no info other than this email about Intuit’s document management policy change. And these opinions and questions are 100% mine, having nothing to do with my employer.