Freemium at Scale with Typeform CEO Joaquim Lecha and Point Nine Managing Partner Christoph Janz

All right. Good afternoon, everybody. Thank you so much to the SAASTR team for organizing this conference. And thank you to Kim for joining me on, on this session.

Not at all, my pleasure.

Good. So really quick, I'm Christoph Jans, one of the partners at point nine capital. We're in early stage VC mostly focused on on SaaS all over Europe and, and beyond. And Kim is the CEO of Typeform. I'm assuming that most people in the room know Typeform, but maybe not all of them. So I'll let you give a brief introduction.

Yes. So thank you, Christoph. Typeform basically wants to help you, help you create better and more engaging interactions with your communities, audiences, customers. We truly believe that companies nowadays need to stand out. They require information to do a better job. And customers, they are not always happy and not always incentivized to provide that information. So we help the professionals in your companies. We give them the superpowers of the developer and the designer so you can create this online interactions that are amazingly beautiful without any need for code and without any, let's say, true design education.

Yeah, yeah. Thank you. So let's talk freemium. As we just heard, like, some of the most successful SaaS companies in the world have been built based on a freemium model. And I think we'll talk a bit about some of the challenges and opportunities related to that in a little bit. But maybe let's start by looking at the Typeform funnel. So maybe you can walk us a little bit through that. Like how many people sign up for a Typeform or for Typeform and create typeforms on a monthly basis and how many of them use the free plan? And so basically how much does the free plan contribute to the success of Typeform? Yeah.

So good, let's start. So at the top of the funnel, let's say reaching our web Pages, we have 1.7 million people on a monthly basis. New unique visitors, 12, 13% of them. So around 190,000 will sign up and then all of them sign up for free. I mean that's the by default option, 27%. So almost like 55,000 of these people will create and visualize and share a Typeform. And also out of the 190,000 that sign up, around 3% will actually move on to a paid plan. The interesting maybe behavior also is that the creation of the form, the visualization of the form for 92% of them happens during the first week. But for the payment only 60% happens during the first week. 70% will happen during the first two weeks, 80% during the first four weeks, but the remaining 20% can take up to, let's say week 48. So there is a long day.

And is that the main reason why Typeform has basically an eternally free plan to give users the opportunity to play around with Typeform maybe for many months or maybe even a year, and then you still have the chance to eventually convert them into a paying customer.

There are three main advantages. The first one is brand exposure. The second one is customer feedback at scale. And the third one is the creation, the building up of user ecosystem. We currently have around 4 million registered users that we can over time, let's say re engage, talk to them and let's say reactivate and also upsell in regards to brand awareness. So right now like in May, 200 almost 20,000 free users created a forum and that is basically 1.3, 1.4 forms created by paid users. And these forms generated around 3 million in May, 3 million unique visualizations and they were completed. So there's lots of exposure also still nowadays, and we are like five years in the market still nowadays, depending on the month, 75 to 80% of the people who sign up, they come from sources that prove that they knew our brand. So they come like direct. So they go to the URL and they say www.Typeform.com or they search in Google or any other place they search for Typeform Quiz or Typeform Form. So they knew about the brand before signing up. And the people who knew about us, they convert at twice the rate. So the conversion over time was around 3% and this, these customers convert at 6%. So I would say that the fact that they know you, that they know us, it's very positive. It has fueled our growth organically until now. We are currently at 25 million ARR. So in a way I think it has plenty of advantages, to be honest. Finally, in terms of customer feedback, I mean there was the basic motivation for David and Robert, the two co founders, to create Typeform, was that they thought there was a better way of creating more human interactions, more conversational. They were looking at these existing forms as the online version of lifeless paper forms. So they are kind of very proud of the product and from the start they wanted people to try it. Nowadays, 70% of the customer tickets come from free users and we treat these as golden nuggets. So they suggest new things, they, they encourage us and they also complain about things. So it is important to have, let's say a lot of people trying your product and telling you how you can improve it.

That's interesting because I think many people would consider the customer support tickets which they get from non paying customers a burden. Like on the negative side of the pros and cons of doing freemium. It's interesting that you bring this up up as a positive because it seems to be giving Typeform so much useful feedback.

Absolutely. I mean, is it better that they don't give you any feedback and if they take their time to give you feedback, don't they deserve an answer? So in a way, I guess everybody has to make a calculation. For us, mostly it's CS cost. We can also have a bit of server IT related costs as well to serve the free users. But currently on a monthly basis it's around $130,000 which is like 7, 8% of our total monthly cost. So it's okay for us it's not that much. And the positive is again, this, lots of feedback in addition to that, all these forms, I mean at the beginning this changes actually over time. The importance of these things relatively change over time. So at the beginning we didn't know, they didn't know I was not there, I am relatively new in the company. But at the beginning they didn't know what people would do with this product. So by letting people use it, you can observe what they do, what things to be useful for them. So again, having free users there has a cost, it has a cost. But on the other hand, you can learn so much more about how people use your product, why they use it, what problems they encounter. And also you can start collecting best practices. Is this type of form for feedback collection better than that one because the completion rate is higher? And why is that? And then you can over time start telling everybody and giving advice to everybody like hey, maybe you should do it like this, it's better if it's shorter. And all of that customer feedback through tickets, but also customer feedback through behavioral analysis of data, analysis of their behaviors is so valuable, we think.

And how do you feel about the cannibalization of the paid plans, which is maybe one of the biggest concerns of anybody considering a freemium model, like how many paying customers will I lose by offering a free plan? Or if you already have a Freeman plan, you may be wondering how much more could I make if I didn't give away so much value for free? Do you have a sense for how much we're losing by doing that? And maybe also how did you try to find the right limitations of the free plan to give people enough so they can kick the tires, but at the same time also have plenty of features to upsell.

There's a lot of science that we still haven't applied to this. I think this is becoming more and more important in. In, let's say, in the next stage. So I would say that in the first stage, like 0arR to maybe 5 million, you want to get the product out. You want to know a lot about the users and the feedback of these customers. And then when you are maybe beyond 5 or beyond 10, you start to enjoying the benefits of the brand and the brand exposure and the fact that people know you and even like you. At our current stage, we are more and more thinking about our 4 million registered users, how we re engage them and how we, let's say from a more scientific way, we can upsell them in a way that is always a good deal, in a way where they can, you know, through the functionality of the product, we can prove them that they obtain this value and that they can upgrade and pay this price and have a nice gap in between. So we are not, let's say, perfect at that. What we are doing also is talking to a lot of companies. So we are happy to share information and so on because it makes us realize. So you know, other companies, how many of their registered. Total registered users in Dropbox or in Spotify or are currently customers. And when you realize that we have 53,000 customers out of 4 million registered users, and other companies have maybe 3%, 6% or even above 10% conversion rates, that gives us some food for thought. So it's something we have to really do.

I don't know, maybe we can come up with a few criteria which might help people who might be in the audience and thinking about whether or not they should go for freemium, maybe we can find some criteria that help with that decision. Obviously, it's always individual, but I think what I'm hearing from you, and what obviously also makes sense is that a strong argument in favor of freemium is if there is a virality in the product like Dropbox, Typeform and mailchimp. So then obviously you have this advantage of giving it into the hands of lots of users and they will lead to referrals and so on. Then another one that you pointed out is that your cogs are pretty low. So meaning the cost of supporting all these three users is not killing you. I think you. I kind of heard another one is that you are attracting the right users. So there is an upgrade path. Like even if somebody doesn't convert within the first 30 days, 60 days, he or she or the company might still convert in like years later. So you're not attracting the wrong people because otherwise it basically wouldn't, I wouldn't.

Say we have identified and clustered 13 different use cases and let's say also group them in five customer segments or customer needs. And I wouldn't say that every customer who comes to us or every user, free user who comes to us organically or through viral channels and so is our ideal customer. It's true that our tool is very versatile. So we have people who have actually built businesses or who have covered many different areas of information gathering in their company, looking outwards, looking inwards and so on because the product is very versatile. So it attracts a lot of users. That doesn't mean that all of them are the ideal customer. But it was important to us to understand to have this kind of Swiss army knife. And then it's the decision of the company to decide, okay, let's focus more on these like we are happy to have them all and not blocking any use, let's say. But in any case, if we want to, let's say favor or help or give further value and therefore develop more functionality in a specific area, then it's our choice. But not all of them are the ideal customer. But all of them are welcome, of.

Course, and not all of them have to be. Basically when you have a free offering, you're opening the floodgates. You will get lots of, lots of users. Not all of them are the right ones, which is okay as long as you can serve them at low cost and as long as you know which ones how to identify the like the better ones that I have a higher propensity to pay in your sales process or customer support or customer success process, which I think is still relatively early on for typer because everything is still like so much product and self service driven.

Yes, I mean we've done a lot of things, but there's everything to do still. And I would say that having them having all these users is not worse than not having them. And if some of them are, let's say not the current definition of ideal customer today, it's because we haven't told them, we haven't taught them. There's 13 use cases. So people use us on average for two of these use cases. So one of the ideas that we are implementing is more personalized onboardings. So you're looking for a quiz. So we are going to help you build that quiz and give you templates and so on. But why shouldn't you be interested in other so we are adding personalized onboarding to cross discovery so that we can suggest you like other e commerces do as well, you like this book, why don't you buy this book or other people who bought this book bought this book as well. So you can maybe eventually, and this is for next year when we have the experience and I can share more data about it, but maybe you can turn a non ideal customer into an ideal customer.

Yeah. Yeah, right. Maybe. Let's quickly talk about the K factor or viral coefficient, which is kind of like the holy grail of companies with a viral loop, usually once with a freemium model. Basically, if you haven't heard about the concept, it tells you how many new users do you get from every existing users, and if that number is above one, you'll basically soon have every person on the planet in your user base. So it's a bit theoretical, but there are a few companies like, I don't know, Skype, WhatsApp, probably not that many Facebook, maybe in the early days that had a viral factor above one. I think even if it's significantly below one, it means it can be a huge contributor to your growth. Can you maybe explain a bit how you look at that and how you try to measure it? Also knowing that a lot of the referrals actually happen, not directly by somebody clicking on a link, but by.