Global Business Freemium

By Matt Holleran

Should a small team of developers serve businesses around the world?  Business Freemium companies are often global from inception.  This is an important part of the story for how the Business Freemium Model is disrupting SaaS and Enterprise Software.   We have been studying Global Business Freemium for a couple of years.  We would like to share some of what we have learned to help entrepreneurs and executives to create a Going Global Strategy.

Emergence Capital is pleased to be investors in Business Freemium leaders that include Yammer, Box, YouSendIt, and echosign (Adobe).  We’ve been actively framing and executing on Emergence Capital’s Business Freemium strategy since 2009.  See this presentation for an overview of how the model is disrupting SaaS and Enterprise Software: http://www.youtube.com/watch?v=9MfhXq_KCGg.

One of the recurring themes from our conversations with Business Freemium entrepreneurs and executives was whether and how to service and market to the high percentage of their free users that were actively using their application outside of the United States.  These companies often reported strong absolute and relative usage in emerging countries, which traditionally have not been served by SaaS or Enterprise Software because it was not profitable to do so.   This made us think of Clayton Christensen’s The Innovator’s Dilemma.  He wrote that new leaders with new models generally start by serving markets that were hard for incumbents to service profitably.  Less than ten employee companies are hard for SaaS sales organizations to profitably sell to and Business Freemium took root in that segment.  Global is another important dimension to the disruption.

The founders and CEOs of the pioneers in the Business Freemium market made courageous decisions to accelerate the growth of their global free and paid users years ahead of when leaders in prior software models had done so and often when the companies were small in terms of revenue and or people.  SurveyMonkey’s CEO, Dave Goldberg, and VP International, Minna King, have built an exceptional global business and company in part by investing in a global strategy years ago. http://blog.surveymonkey.com/2011/02/13_languages/.   Yammer has a large percentage of their users outside of the US and translated the service into many languages starting in 2010:  http://blog.yammer.com/blog/2010/11/yammer-in-translation.html.  Last week I spoke with an entrepreneur with millions of users, the majority of which are outside the US.  He translated his application into multiple languages when the company had little revenue.  LinkedIn, one of the first public Business Freemium companies, reports that 60% of their members are outside of the US as of December 2011 and that 33% of their revenue for the quarter ended September 2011 was outside the US.  Their international revenue grew 183% year to year in that quarter, much faster than the rest of the company.

We listened to these leaders and many entrepreneurs and developed a framework for creating and executing a Global Strategy for companies with a Business Freemium Model.  We hosted a forum on Going Global for the Emergence portfolio and friends of the firm in 2011.  Dave Goldberg, CEO of SurveyMonkey, keynoted the event.   There was a lot of discourse, agreement and dissent.  The presentations and conversations made it clear that the Business Freemium Going Global Strategy and execution is different than how SaaS and Enterprise Software companies grew around the world.

Our recommendations to Business Freemium entrepreneurs are the following.  Choose to be the global leader in your market, or not.  Design global into your product from inception even if you expose the capabilities later.  Implement languages early.  Think carefully about how you will accept and manage global payments, especially in auto-convert businesses.  Identify the executive you will send to lead new global markets well before they need to go and do it.   Accelerate the auto-convert business in other geographies with an inside sales and or field sales model.    Choose venture investors with experience in Global Business Freemium who can help you craft your strategy and execution plan in more detail.

Global Business Freemium is exciting for customers, entrepreneurs, executives, employees, and investors.  Business users around the world can access exceptional products that are easy to use years before they might have otherwise.  The model opens up new markets in company size and geographies and accelerates global revenue while consuming less capital and time.  Companies and investors should consider developing global capabilities and leveraging global resources much earlier in the company lifecycle.  Let us know how we can help.