Recently I was talking to an entrepreneur who’s working on a new open source product for a small but fast growing market. After talking about it with him for 10 minutes, and learning more about the opportunity, I told him that I thought he was much too early. Free doesn’t help if the market isn’t ready.
For our company Pardot, we could give away our software for free and we wouldn’t materially increase the number of active, successful clients. The challenge with our market, and the market this entrepreneur is going after, is that there’s a) a significant lack of market awareness and b) a significant lack of product understanding. The two are related in that the more people use a new technology the more awareness there is of it and a positive adoption cycle continues until it’s mainstream.
Because so few people have used our type of technology, we spend thousands of dollars per customer making sure they’re successful and manually helping them out. 5-7 years from now enough people will have used our type of technology such that a lower cost entrant in our market will be successful by offering a simpler interface with only the most important features and they’ll be able to sign up companies that already have experience, and thus don’t need a comprehensive on-boarding experience.
Free or open source works for an educated market. When the market isn’t ready, these types of distribution models don’t work as well as traditional models.
What else? What are your thoughts on free or open source products in a market that isn’t ready?
David Cummings on Startups 
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