Free as in Virus

I am writing this post as I’m flying over Tulsa on my way to San Francisco. This is my 10th hour of flight and I just realized something that many might think is stupid. During my transoceanic flight from Madrid to Atlanta I had free movies on board. The same goes for free earphones, free peanuts, free drinks or free cookies during the flight. While waiting for my connection at Atlanta I tried to use the airport’s wifi but, as I expected, you had to pay $7.50 for a 24h connection. On my current flight you have to pay to watch any movie ($6), you have to pay $2 to get some earphones and you have to pay if you want to eat some miserable cookies (you guessed, I didn’t pay for anything). Suddenly something has stricken me pretty hard and I know I’ve discussed this issue with some people (Say hi to Mark Evans!).
I’m so used to free services that I expect everything to be free. And mind me, that’s just wrong, very wrong. I just realized how wrong I am. $7.50 for a 24h Internet connection is very cheap for International Standards (specially if you have Euros as I do).

The problem here isn’t that some products are free of charge, the problem arises when you expect “everything” to be free. There are always exceptions to this, like the case of wifi at hotels. I still don’t get why after spending $150 per night in a hotel I don’t have free wifi. I truly believe wifi is accounted in the high price I pay for the room, but surprise, every single time I ask for wifi I have to pay some really expensive pluses.

Anyhow, many other things really deserve to be paid for. I do have a problem, I’ve never paid for a software product (ok, ok, Microsoft licenses maybe). As a programmer, anytime I needed something I tried to find a free alternative and/or code the extra functionality I needed. Although this is a cool way to save money, it does takes you much more time an effort. Not only that, most probably you won’t code a better software in just a couple of hours.

And so back to my point, I realized that I have to start learning to pay for services I use and like. My question is this: Is this the general evolution of market perception? Am I the only one realizing that an exclusive freemium world mentality is unsustainable? Will more people start realizing this and start shifting to pay per use models?

Now, more interestingly, what are the conditions a pay-per-use model needs to have to be used by a fairly large segment of a market? In my opinion, it needs to deliver two things:

1. Create more value than their competitor’s free services (no surprise here)
2. Get the users to understand why they should pay you for your service.

We need to really start stressing the importance of paid services as we do a horrible job at it. First of all, the value – price relation MUST be fair. Too expensive and users wont pay it, even if they like your product. Too few value and users won’t understand why they should pay you either. These concepts seem rather trivial but I have the feeling we should go back to basics with this issue.

Now that I think about it, I truly wonder if this business model is even valid anymore. Either we go back to basics with a new breed of paid models or we find a way to indirectly cash in thousands of users. Either way, I predict that true free services will die (except those that are under the umbrella of a company that can accept the looses). If that ever happens, I wonder if people will go back to paid services. You know, history is cyclic, maybe it’s time to get back to the “old” revenue model but with a nice 3.0 twist.

Now some questions for all the readers, under what circumstances would you pay for an online service? Would you consider a monthly fee, anual fee or a per usage fee? Any ideas and comments are greatly appreciated!

Next stop: San Francisco, CA

Many people already know about it but next Monday I’m flying to San Francisco for 10 days. I’ll be there from April 7th (plane arrives at 7:17pm) to April 17th (8am). I have several meetings during those days, even a guest lecture at UC Berkeley but my idea is to try and meet entrepreneurs, business angels, bloggers, etc that are either living there or just happened to be there 🙂

So if you are from SF or are coming to the city during those dates don’t hesitate to send me an email or a Tweet. My email is abarrera at inkzee dot com and for the twitter lovers: http://twitter.com/abarrera (by the way today I reached the 100 followers mark. Come one people, lets push it to the 150 mark!).

I’ll eventually upload some pictures of the trip and keep the blog updated. Sorry for the blackout of the last weeks, I’ve been really busy with my startup (yeah you guessed, inkzee.com) and writing down something that resembles a business plan. Oh, I’ll also be giving some demos of my startup at SF, so you should come to see it.

We’ve scheduled some meetings with the people from Hacker News in SF. Check out the details here:

http://news.ycombinator.com/item?id=144632

Dates and places: http://news.ycombinator.com/item?id=14495

Why forcing an entrepreneur into a big company is a mistake

Lately I’ve been hearing many negative comments about creating startups and being an entrepreneur. Most of them can be reduced to: “You should work for a big, well know company and after several years you can go and start you own“. In my experience this idea is pretty widespread. I’ve heard it from my father, from my friends, from friends of friends, etc. The problem with it is that, ALL the persons that express this idea have a common characteristic: they are conservative.

The idea that working in a big company you have better odds of creating a successful startup is bullshit. There are no statistics for that. Even more, people like Paul Graham from Y Combinator recently wrote an essay precisely about this same issue:

We’ve now funded so many different types of founders that we have enough data to see patterns, and there seems to be no benefit from working for a big company. The people who’ve worked for a few years do seem better than the ones straight out of college, but only because they’re that much older.

The three most common benefits I keep hearing about working in a big company are the following:

• At a big company you’ll have the chance to get high profile contacts that might aid you when you go and create your own startup.

Contacts are of great help, everyone knows that by now, nevertheless, the idea that you’ll have better and more contacts working in a big company has no ground. First of all, to contact truly influential persons is, in general, way beyond a normal worker. You’ll need several years to reach a status within a company to get access to the management team or high profile executives. I’m pretty sure Apple employees can’t phone Steve Jobs or mail him at any time with total freedom. Even if this isn’t true (there are always exceptions), the psychological perception for many top executives is that they are better and you are worse, that they belong to the executive class and you don’t. This means that even if you can reach them, you won’t be seen as an equal and the true advantage of recommendations et al. will be diminished. Of course, there are always special cases, but we probably wouldn’t be talking about a BIG company then.

Secondly, contacts within a same company are pretty much endogamic. This means that, if you work as a beta tester, most of your friends and coworkers will be related to the beta testing environment. Reaching interesting and influential persons in other fields is much more difficult.

Finally, the rate at which you contact new people is determined by external factors like the number of people in your department or how frequently you engage with other departments or clients. If we throw some numbers we get a glimpse of the big difference. I usually go to a couple of entrepreneur meetings per month. In average I meet 2 persons of interest for my startup at each meeting. That makes 4 good contacts each month. In the software industry (my field), projects usually take between 2 to 6 months on average (even more if it’s a huge project in a big company). During that period and if you are lucky you’ll meet an average of 3 persons (which might not even be good contacts) at the client. That means that for a 6 month project you’ll only meet 3 new persons and probably only 1 or even none will be of interest to you. Check that against 15-20 interesting persons in a 6 month period by yourself (and no, you can’t go to many entrepreneur meetings if you work at a big company). Although this estimates will also go down if you keep meeting with the same persons, it’s clear which rate is better. Please, as usual, takes these numbers with caution, they are very gross estimates and there are always exceptions.

• Working in a big company you’ll get the change to work or see really big projects that employ huge resources. This vision will help you when working on your startup.

Nobody disagrees that you acquire very interesting experiences while working for a big company. Specially if you work with large teams. The problem is that when building a startup you won’t be managing huge teams or resources, you won’t (normally) need real-time critical systems either. You won’t even deal with a lot of clients at first. So, even though it’s a plus if you have the experience, it’s not critical, as a startup is NOT a big company.

• Working in a big company will give you a good resume and it will be easier for you to find investors.

Good resumes are always good things. Specially if you approach investors, your team’s resumes must be great. The problem is that many persons don’t differentiate between the team and the founders. An investor isn’t looking for a top notch programmer founder, they are looking for people with experience setting up companies, growing companies, selling companies. They are looking for people with a track record of not wasting money in useless things. They are looking for a true leader that is able to get the best out of his team. If you are also a top notch programmer then be it so. Working at a big company won’t get you more money from investors. VCs that invest on people only because they are ex-googlers or ex-yahoos are wrong and they’ll pay for it. That it’s harder to find investment if it’s your first time and you haven’t been working at a known company, true. Impossible to do it, false. Actually, most of the investments I see are to founders with not experience in big companies, just take a look at Apple, Microsoft, Google, etc.

So, in conclusion, from my point of view, there isn’t any competitive advantage in working on a big company. Actually for me it’s the opposite. Two years of inferno, with a tight leash around your creativity and without the freedom you’ve got in a startup. Worst of all is that the environment affects you in a negative way and it takes a while to get used to breath again. Finally, the years after graduation are the best to play the high risk game of creating a startup as people haven’t got so many financial debts (a house, a family, etc.). Wasting those precious years in a restrictive environment instead of changing the world is wrong.

Choose what YOU want and follow your gut. If you don’t feel comfortable at a company, take the time to think about what you really want. And most of all, don’t listen to those that try to project their own insecurity on to you, as that will only block your true feelings.

As usual, everyone is invited to drop a comment. I would love to read what other entrepreneurs or big company guys think about this. It would be interesting to have a VC or an angel to comment on this issue as well.

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