This week I'll focus on the sick way the web2.0 startup world works thanks to Venture Capital (VC) money pouring in. I agree with 37signals and believe startups should be focusing on making money and not on burning other people's money. When you don't earn your own dough, the decisions you make can be really strange:
Here you go, Ning and their VC-backed business backfired:
After 6 years in business and burning $120M of other people's money (VC) they discovered that eyeballs don't pay the bills and a free model isn't sustainable. They decided to charge each account now. Not a really nice move, now is it?
As much as I respect Joel, I'm not sure he's going the right direction with their Stack Exchange web site - killing paying users and creating totally free networks? Well, just look how it worked out for Ning! Again, VC money and irrational decisions. Judge for yourself.
Anyway, I've seen this many times - first web2.0 companies give accounts for free, later they say, sorry, it's not sustainable, we need to charge you right now. It's cheating users. It's not good for customer trust and bad for overall user trust in the industry.
when we give free accounts, you know their limitations and you know they are free forever. If you upgrade, you know what you're paying for and we're trying to exceed your expectations. We actually care about our business model and about our users. We don't care about eyeballs all that much.
When a service offers free accounts and doesn't earn a dime, you should watch out, don't you think?