1. REVENUE MODEL: What is the best way to charge your customers? Dave Schappell - @daveschappell

2. Who am I? Founder – TeachStreet Angel-funded / VC-backed Founded in ‘07 – Profitable in ‘11 ex-Amazon, JibJab Former CPA NEVER built a profitable business on my own (yet)

3. Transform the Lifelong Learning Marketplace 49M College Grads / 77M Baby Boomers / 31M Retirees >$30B/year spent by 54M in U.S. taking personal interest classes $5B/year TAM (Marketing, Transaction Fees, Affiliate Sales)

5. Don’t want to go bankrupt

6. Think customers will pay

7. Aren’t sure how they’ll pay

8. Not sure how to find out/testdone that almost done that thought that too (& was wrong) wasn’t positive either

10. Subscriptions

11. Virtual GoodsAds Lead-Gen Affiliates/CPA

12. 5 Steps to Business Planning Plan next 2-3 Years of your Biz What HAS to come first? - Features, Assets, Office, Employees * Make a Good/Great Product! * What’s your MVP (Minimum Viable Product)? Remove unnecessary items Create a timeline Add 3-6 months to everything

14. Product / Market Fit

15. 80% on Optimization

16. Revenue When?

17. Don’t Put Ads on your Site!

18. Don’t Worry about Viral

19. 5 Tips to TransitionfromFree to PAID

20. 5 Tips to go Free to PAID Give plenty of notice & (real) chance for feedback Price it ‘fairly’ (probably still at a deep discount) Offer customers a way to get product for free Provide Grandfather’d Pricing Make transition gradual people should only pay if you’re delivering value

21. 5 Tips to go Free to PAID Give plenty of notice & (real) chance for feedback As expected, many angry (that’s life…) Some were HAPPY about fees: to reduce clutter/listings from non-serious teachers we’d be around over long-term we’d have money to pay for advertising (more students) Learned we weren’t sharing metrics with them Fixed this, with better reporting Feature request  enable EARNING ‘free’ listings (#3)

23. 5 Tips to go Free to PAID 2. Price it ‘fairly’ (probably still at a deep discount) $3 = Starbucks Latte! Lasts 30 days, or 10 leads ($0.30 per lead) $3 still expensive vs. Free (Craigslist, WOM) More than just an Ad: SEO benefits Marketing tools (Craigslist Ads, Flyers) Payments

24. 5 Tips to go Free to PAID 3. Offer customers a way to get product for free Virtual Currency – Write Articles / Answer Questions Launched with 5=Free Listing Reduced f/5 to 3 & Doubled Content Creation (Iterating!) Win-Win Great Content is Good for SEO (Traffic) Content helps to merchandise the Teacher (Leads) Lost $3 is minor in the short- to medium-term

25. 5 Tips to go Free to PAID 4. Provide Grandfather’d Pricing Offered 6 month ‘Pro’ pricing for $10 (vs. $30) GOOD - SEOMoz locks Annual Fees of $299 vs. $799 BAD – Airlines changing rules for Miles (20k vs. 40k)

27. 5 Tips to go Free to PAID 5. Make transition gradual people should only pay if you’re delivering value CRITICAL DECISION FOR US! Only force listing payment if Lead Delivered in last 30 days Maintained our Class Listing Inventory (SEO benefits) Triggered a Payment Decision only with Value (Conversion)

28. So, How’s TeachStreet? Launched ‘All Paid’ in late April 2010 Pro/Sub Revenue up 56% Listing Fee Rev is now 75% of Pro/Sub Rev And, it’s 2x’d since May 2010 Operational Revenue up >100% Leads to Teachers up 88%

29. Timeline to Semi-Success Jun ‘07 - founded company; raised Angel $ Apr ’08 - ~25k classes & teachers in Seattle – teachers could add unlimited classes; students could contact teachers. Limited functionality. Let us demonstrate value & learn (100% free) Apr ’09 - +7 cities; expanded tools (phone tracking, teacher metrics) (100% free) Jul ‘09 - Student-to-Teacher payments. 15 months to launch?!? Believed needed to demonstrate value-add. Students paid small booking fee (to cover costs); Teachers paid commission (still free to add listings) Sep ‘09 - Pro teacher $29.99/month; extra promo, marketing tools, free payments. (still 100% free to add listings; revenues are building from services)  Apr ‘10 - optimize/weblab – addt’l lead-tracking – believed we’d never earn biz if didn’t deliver value (more, new students) to teachers (still free to add listings) Apr 7, 2010 - “pre-announce” introduction of fees for all new class listings April 27, 2010 - “turned on” listing fees (100% new listings paid; All rev-enabled) May 12, 2010 - last day of $10/month “Pro”-motion (100% new listings paid) At present - Traffic’s growing, Revenue's ramped sharply, and we’re 100% sure that we’re going to have to keep pivoting. Because that’s what startups do.

30. Rules We Break Both Direct & Indirect Subscriptions & Listing Fees Lead-Gen, Affiliates & Ads We have Ads Not for long? We don’t Weblab/test enough Too few resources / too many ideas  Still are attracted to shiny objects

31. Resources Andrew Chen – www.andrewchenblog.com Dave McClure – 500hats.typepad.com Alyssa Royse – Seattle 2.0 Post(s) My TechCrunch Post on ‘Free to Paid’ http://techcrunch.com/2010/06/13/free-to-paid-tips/ Hops & Chops Startup Happy Hour (Thursdays) www.hopsandchops.com