Kasper Hulthin and his Podio co-founders knew the approximately $120,000 they'd raised in angel funding wouldn't last long. So in August 2009, while still testing their collaborative work platform, they enlisted dozens of businesses to subscribe to the product, described as "Facebook for the workplace." In addition to keeping the lights on in their cramped basement office, securing paid subscribers at the early stage gave these Danish entrepreneurs invaluable product feedback.
The move paid off. In August 2010, serial entrepreneur Tommy Ahlers invested $500,000 in Podio and came onboard as CEO. In February 2011, Podio received $4 million in venture capital funding; the following month, it launched its collaborative platform to the public.
Today Podio is used by thousands of organizations in 170 countries. In April, the company was acquired by cloud services provider Citrix for an undisclosed amount.
Although free of charge for up to five users, Podio makes its money from premium subscriptions sold to larger organizations at $8 per month per user.
We talked with Hulthin about prelaunch sales.
Why sell subscriptions while still testing the product?
One of the important decisions we made was to start selling the product from day one. That gave us a little bit of money. And it created a completely different commitment from the people using the product, because they had actually chosen to pay for it. It wasn't just someone finding it on Twitter, and it's the interesting product this week, and they play around with it and then leave.
It also gave us some really valuable input for building the company. We couldn't have lived without the money, but we definitely couldn't have lived without the customer feedback, either.
How many subscribers did you have at that time?
During the end of 2009 and the first part of 2010 we probably had more than 50 organizations paying to use Podio.
How much did you make from that?
About $100,000. We charged a yearly subscription starting at $1,200 per customer and running into the thousands. It was based on the number of users at their organization, hence the different prices.
How did you find the early subscribers?
It was pretty old-school. We would go out and knock on doors or talk to people we knew or find people who were in our target group and call them up--everyone from media agencies to consulting firms to public organizations.
Did you worry that your prototype product might put off customers?
It's a much better product today than it was two and a half years ago, but it was never buggy. The good part about customers paying us is that we had a commitment to them. We could not have the site down for two days and everything not working.
How did you collect feedback from those early subscribers?
They could provide feedback within the product, and then we did weekly workshops.
What advice can you give tech startups about charging customers early?
The most important thing is to have a business model. Way too many businesses have a freemium product without the "-mium" part, so to speak. They say, "It's just free, and we'll figure out how to make money on it later." A way of testing your product is to ask people to pay for it. That will show if someone wants to use it.