[00:00:00] Vova Feldman: I think our main focus right now is besides pushing all the changes that are happening because we need to communicate them to the world is awareness. Our goal is to position ourselves as a trusted SaaS platform for small and micro SaaS in our industry. And after the eight-year footprint in WordPress, we need to change that so the world will know that we're playing in the field of Paddle and the other competitors are out there.

[00:00:32] Andrew Michael: This is Churn.FM, the podcast for subscription economy pros. Each week we hear how the world's fastest growing companies are tackling churn and using retention to fuel their growth.

[00:00:51] VO: How do you build a habit forming product? We crossed over that magic threshold to negative churn. You need to invest in customer success. It always comes down to retention and engagement. Completely bootstrapped, profitable and growing.

[00:01:05] Andrew Michael: Strategies, tactics and ideas brought together to help your business thrive in the subscription economy. I'm your host, Andrew Michael, and here's today's episode.

[00:01:15] Andrew Michael: Hey, Vova, welcome to the show.

[00:01:17] Vova Feldman: Thanks so much for having me. I'm excited.

[00:01:20] Andrew Michael: It's great to have you. For the listeners, Vova is the CEO and founder of Freemius, a merchant of record for selling software. Prior to Freemius, Vova was the founder of RatingWidget.com and co-founder and CTO of Senexx. It was acquired by Gartner. Vova is also a TechStars ambassador. So my first question for you today is what motivated you to build Freemius?

[00:01:41] Vova Feldman: Kind of came from my own need. You mentioned RatingWidgets. So basically it was this side micro SaaS that I had for many years. And after my company was acquired, the one you mentioned, I was kind of looking at what I want to do next. And I looked at the data, the micro SaaS, realized there's a lot of users using it for free, even though we're paying for servers and all of that. So I decided, let's see if we can turn that into a business. Joining with another two guys and we spent about a year taking it from a side gig into a fully commercial solution, adding all the layers, the payment integration, marketing automation, the user management, everything that you need to actually sell globally.

[00:02:23] Vova Feldman: And it worked, we started to make money, we drew salaries and all of that. But what was the biggest aha moment is that we noticed the core product didn't change at all. It remained the same thing that I built as a developer in two weekends of my spare time. So we realized there's this huge disproportion between the time it takes to… coders to build something versus turn that into a business. So that was kind of the aha moment for Freemius basically.

[00:02:53] Andrew Michael: Nice. Can you talk us through a little bit about the user experience coming to you? So prior to starting, you mentioned you call the users makers. What would be like a typical user? When would they come to you? Like what would be the product experience for them?

[00:03:06] Vova Feldman: Yeah. So I would say today in the age of AI, it will be like the target audience is usually small software companies, indie makers. So I have product and idea, right? And now I want to sell it to the world and I need to choose how do I do that? One way is I can integrate with payment processor if I can and it's accessible in my country and then build a bunch of layers on top of it in order to handle all the other things. And what I mean by all the other things is some of those that I already mentioned. But there's like the payment processing themselves, but it can be software licensing, it could be the affiliate platform, it could be the subscription, like automated stuff, like cart abandonment recovery, exit intent.

[00:03:54] Vova Feldman: It's like endless amount of mechanisms into e-commerce and maybe you don't think that you need it in the beginning. But if you do discover Freemius and we hope that you do, then you get this full business in a box that you can start using from day one that not only tackles the functional components, also solves the whole global sales taxes challenge, which is a huge pain in the ass these days, compliance stuff like GDPR and how do you treat with data and a lot of layers so you can just start selling.

[00:04:29] Vova Feldman: In terms of how the product user experience, you sign up, you configure the product. Depends on the type of product, you may need to do some integration. We have some SDKs. We invested a lot of resources in thorough documentation, SDKs, developer experience because our audience in the end are developers. So there is a big emphasis on that. And you can integrate and start selling very, very quickly. Again, depends on a product type, but we build the service in a way that is truly self-serve and you can start making real transactions immediately.

[00:05:08] Vova Feldman: We don't hold you behind some tedious KYC processes and all these things. We find ways how with technology and systems, we can work around this stuff. And only when we identify suspicious activity, the system is bringing those accounts and then we try to dive deeper. So a typical today customer is someone who is building some AI first SaaS or a Chrome extension or a WordPress plugin. And they want to sell without the operational hassle. So they go to Freemius.

[00:05:43] Andrew Michael: Very nice. Yeah. I think all those complexities sort of you laid out, think those are things that sort of keep popping up along the way. Previously, we had Andrew Davies from Paddle on the show and he sort of mentioned like some of those things are champagne problems and the sense that you only really get to experience some of them when things are going well. But I think if you like an indie maker, a small like team, these operational sort of things on the side tends to weigh you down eventually, and you can't actually do the thing that you enjoy doing or enjoy building.

[00:06:11] Vova Feldman: So maybe you mentioned Paddle, like a big difference between us and them is that we are focused on the smaller maker, on the indie hacker while they focus more on the bigger one million plus and naturally the attention they give to the smaller ones. It's not the same.

[00:06:28] Andrew Michael: Obviously. Yeah. And I think also the feature set becomes slightly different and things you care about more. I see some of the features that you have like the cart abandonment and the affiliate platform and these sort of things. I think they become interesting. Like as a small team, you want to be able to do these things, but you just don't really have the time because you have a million features as well that you want to get. Very cool.

[00:06:48] Andrew Michael: So tell us a little bit about how it's going. Where's the team at now? Where's everybody [inaudible]?

[00:06:55] Vova Feldman: So things are going well. We've been in business for over a decade for many years. Thank you. For many years, we've been focused on the WordPress ecosystem. That's kind of where we started because we saw the biggest like unmonetized inventory and we felt we can make a big impact there. The plan was always kind of expand to additional ecosystems. We were not sure where exactly. It just happened two years ago. There was some hiring things that happened and the timing was great and we decided to expand with the focus on SaaS and desktop apps. It's really exciting. It's a new ecosystem. It's changes that we have to go through after being eight years, one ecosystem marketing entirely to that, even though the platform itself, technology-wise, in the end, it's the same mechanisms.

[00:07:47] Vova Feldman: But still, you have this mega footprint online. And now you need to reteach all the algorithms that it's not only that. And not only the algorithm, also the people, the ecosystem start going to different conferences, network with other people, join different podcasts like yours that I was not doing previously. So it's really exciting. It's a new thing. Constantly moving in terms of – you want to ask something. Sorry.

[00:08:15] Andrew Michael: Yeah, no. So I was just going say like repositioning size is quite a large exercise and keen to double click onto this actually a little bit is that makes a lot of sense, I think, what you're saying. Starting out as WordPress plugins, like focusing on that audience because very niche, but still a large enough niche to build a good business. But then realizing at some point, you said more recently, more like a couple of years ago, what did that look like initially? Like what are those initial conversations? Like you may be made a few hires, like all of a sudden, Hey, like we need to change. We need to do this. Like what are the initial conversations go like?

[00:08:46] Vova Feldman: So it wasn't about, we need to change. We want to grow and have a bigger impact, you know? So it's not, we're not forgetting like most of our audience is WordPress right now. It's still the case. was like for many years, it was when will be the right time and what would be that next ecosystem. I think what pushed us to go to SaaS in addition to seeing, you know, the explosion of SaaS, but also AI. Now everyone is becoming a SaaS builder. So like we felt that direction. There are also some things that happened in the WordPress ecosystem that they were not necessarily the catalyst for that, but it was another like reason. Plus, it just happened that I wanted to refresh the design because over the years, we were just running, running and switching designers and everything was inconsistent, messy. And it just happened that I hired a head of brand. I didn't know that I need people to do brand. I didn't understand what brand means, honestly, in terms of a role.

[00:09:47] When I talk to her and she explained what it means, I realized I'm doing a shitload of brand work, just unknowingly that this is happening and that could actually really help me. So she joined and we started this whole branding process, who we are. So it was like perfect timing to kind of extend. If we redefine ourselves, like that's the time when we do the branding and like positioning. So that was kind of the kickoff of like several stars that aligned at the same time and having the right leadership team to push it and getting the team aligned behind that mission. So that kind of kicked off the process and it's really exciting. It's a new thing and it touches everyone in the team.

[00:10:33] Andrew Michael: Yeah, for sure. I think doing a repositioning exercise, like you say, it has its difficulties, especially when you've been going in business for so long, everybody knows you for a certain way in certain space –

[00:10:43] Vova Feldman: You call that an exercise if it's like a small thing that you finished. We've been in that for two years and it's still going, you know?

[00:10:49] Andrew Michael: I've done it a couple of times. The other interesting thing you said as well is that you ended up hiring a head of brand, but you didn't really know what brand was. I'm keen to what it entailed. Obviously I think you know what brand is, but I'm keen to understand a little bit about like, how did that hiring process look for you then? So I don't think it's the easiest thing to go in higher for a role that you perhaps don't have the most expertise in or understanding. So like, how did you go about setting that higher up and figuring out who is going to be the right person for this role?

[00:11:17] Vova Feldman: Sure. So first of all, shout out to Hadas because we're talking about you. So let's already mentioned, put name behind the role. It was completely opportunistic, honestly. So, like I said, I was thinking about refreshing our design because we never went through… you know, the logo was the same logo since before we had the company. I just asked the first designer, like, let's do something cool, futuristic. The developers like, okay, cool. Looks good. Let's move on. And this is how everything moved, you know?

[00:11:47] Vova Feldman: So I've been in touch, in contact with someone who is in the design brand space. And I didn't know how I'm going to evaluate and hire them to do this brand design work. So I knew someone from previous connections who is also from Israel and I met several times in events and we had good chemistry. So I reached out to her to ask her like, what am I supposed to ask her to understand if she is qualifying, right? So she advised me like several times and then there was a conversation that she was like, how's going on with that? And then it was about something else, but her asking that question kind of raises, wait, are you looking for something? And she said, I don't know, maybe, you know? I've been working in the same company for many years. And I told her, okay, you know, we need to check. Like, I don't know what is brand, but let's meet.

[00:12:41] Vova Feldman: And we literally met after two hours because it's 15 minutes scooter ride, their offices. So we sat down on the coffee and I'm like, okay, this is what we do with more details. Tell me what is brand. And like I said, she told me what is brand and like, okay, I'm doing this. I'm doing it. Like she will take a lot from my plate. I didn't know it's called under the brand umbrella. And I asked her, you know, how much do you want? And we high-fived and then I let her two weeks to digest what happened. So that was the hiring experience.

[00:13:16] Andrew Michael: Very nice. Very nice. Yeah. O think it's obviously like as you mentioned in the beginning, you reached out to somebody with more experience trying to understand what to look for. And I think that's like always the best way to go about these things. I think in early stage startups, eventually you don't really understand most of the roles that are needed at some point and having others with more experience is really, really good to be able to lean in and step into. You mentioned something as well.

[00:13:37] Vova Feldman: I just want to say something about that. Like reflecting on that experience, I realized, for other founders listening, that this is a great way to hire senior people. Like asking for feedback on how to hire someone or get their input because you can tap into their thinking, see how they talk about and naturally also present why you are thinking to hire someone for that role. So you give them a glimpse of, can I see myself in that company? If there's good chemistry, so it opens up something. It was reflection. It was unintentional.

[00:14:13] Andrew Michael: You also raised the thing for me as well, like a memory in the sense like I, at some point, was thinking about hiring somebody. I was like, okay, They’d be perfect for this role. But I didn't really ask because I thought they were very happy where they were. And then like, I think like a month later I bumped into them and like, Oh, what you're doing? He’s like, Oh no, I just started at this new company. I was like, I was going to ask you, should you like, if you'd be interested, it's like, you should have just asked. And so I think that's also like the thing that can, in your case, yeah. Like just asking as well, sometimes like you never know. And like from now on, it's like my default. Like if I think someone's amazing, I don't care where they're at. I'm going to ask them if they're interested and see like, you got nothing really to lose at the end of the day as well.

[00:14:48] Vova Feldman: Yep. Yep.

[00:14:50] Andrew Michael: Very cool. Rebranding figured out this needed now to focus reposition yourselves as well to expand the market opportunity that you're at. We were chatting as well a little bit before the show. I think like, obviously when it comes to churn and retention, you have a very big vested interest in helping your customers retain customers because ultimately you get paid when they get paid. I'm keen to understand first of all, like this realization, I think obviously, did it come to you from the very start when building Freemius? Or is this something that you realized over time as the business started to grow and what did that look like internally?

[00:15:23] Vova Feldman: I think it took a year and a half, two years to actually acknowledge that.

[00:15:30] Andrew Michael: It's about the typical timeline for most startups, but I guess you get to see it across many all at once. So it is very interesting.

[00:15:36] Vova Feldman: So the way we realized that, like we've been doing it from day one, like we were, you know, working initially with very early stage, like makers and getting on the calls and trying to help, pricing this, pricing that. But we were in this ecosystem in WordPress when our main competitors were self-hosted solutions and not SaaS. So pricing-wise, we're competing with solutions that have fixed annual subscription. And it was very challenging to come to someone and say, hey, look, instead of $1,000 per year, pay us X percentage of your revenue. It was hard sell. So it took me time to process to understand how do I actually sell that? What are the true benefits of Freemius, unlike those self-solutions?

[00:16:21] Vova Feldman: And the acknowledgement came that, hey, for them, they don't care about whether your business is successful or not. They care about their subscription. So even if you didn't sell a single access account license of your software, they got their subscription money, right? So they have no interest to add any layer to the operation that will help you to optimize, strategize, or it's just not part of their business. So the kind of the conversation, because it always came out as one of those kind of things, concerns through the support or whatever kind of framed it over time. Like I acknowledge what are our main advantages.

[00:17:01] Vova Feldman: And also we evolved as a company and started to double down on these activities and building a strong community and creating networking opportunities, understanding what is the value of those opportunities, attracting business buyers, helping makers sell their businesses, helping other makers in the ecosystem to buy other businesses. It's created this ecosystem that helps makers beyond just the current like the billing, but through their journey from the moment they launch, they grow and eventually exit their business. Because in our space, you don't IPO. You're shut down or you sell your business. So hopefully you sell it. And usually like small in the [inaudible]… they don't have experience, they don't have access. So we can provide a bigger umbrella of support through their journey.

[00:17:50] Andrew Michael: Very cool. Yeah. And I think it makes a lot of sense. think from a business side of things is that, okay, your success depends on their success. So like it's mutually beneficial to make sure versus, you said, like on the one end, just paying a yearly subscription and then you're going to get the money, whether or not you perform from a sales side of things.

[00:18:08] Andrew Michael: We talked a little bit about this I think. It’s looking at the merchant of record pricing and packaging. I think you have a hot take on this. I think from my perspective on the outside as well, like I think this probably is like… these types of products I, and you alluded to [inaudible] each other previously as well. I think they come into the issues with graduation churn where you do very well with your customers up until certain points, and then they just become too successful for your platform. Like assuming this is something that you noticed as well and keen to hear how you're combating that and hearing a little bit about your strategy when it comes to graduation.

[00:18:45] Vova Feldman: Fantastic question. So I think it is relevant to graduation, but it's also relevant to early stage, to early stage companies that do have high aspirations. And let's say, you know, a company just raised $10 million and I'm building some massive SaaS. If I choose one of those like any payment solution right now in the market, putting Freemius aside for a second, like, okay, I know how do I start, but I have no trajectory how much I will pay the company when I get to the first million, 10 million, whatever. And that's a concern. You know, that's a concern.

[00:19:28] Vova Feldman: And I think that many of those companies are becoming experts in negotiations to avoid reducing those rates. So back to your question. What I wanted to say is that having something transparent from the get-go can also give you a peace of mind when you start out, not necessarily when you get to a graduation, to a place you're too big. But the point is that in those revenue share businesses, in the payments industry, it feels like, okay, you start with alignment of interests. The more you make, the more we make. We want to help each other, but it can't scale forever. A fixed revenue share, a static revenue share can't scale because the more you make, you're also starting to pay a lot of money. And then the equation between build versus buy and switching to another solution, it's becoming real valid question.

[00:20:17] Vova Feldman: We wanted to eliminate that situation and tighten the alignment even further also when it comes to scale and growth. And we're really proud to be the first in the market to introduce transparent growth pricing. Basically, the more you make, the less you pay and it's transparent. So you know exactly how much and it goes down to 0.5%. Once crossing 100K per month and it completely eliminates that entire need to going through this like exhausting negotiations. Something that… you know, we use Stripe and PayPal behind the scenes. So we've been doing that every two years. I hate that. You know, I really hate doing that. It's distracting me from the focus of my business. It takes a lot of months. It's annoying. You need to really rely on personal connections there.

[00:21:07] Vova Feldman: Like you don't know the insides, what they allow to do or what not, they don't really expose and you don't know how you end up in the end. It's really kind of an open question. It's friction because instead of having that as a long-term partnership, you get to a friction point when the interests are suddenly not the same. Like you as a maker want to reduce, they want to keep it the same, right? We're really happy that we introduced that. And now at any point at any volume, you can know exactly how much you will pay. And it also makes sense that you're not penalized anymore for your growth and scale, but actually it remains as a win-win kind of long-term relationship.

[00:21:49] Andrew Michael: I think definitely as well from the perspective of the end user, I think one of the things around like these merchant record tools is that they tend to be extremely sticky products. I think they're because they become the backbone of the business and they become the rails. So I think this is probably one of the reasons why I think they get away with these pricing practices for a large degree because the switching costs are always often thought and even at some point when the scales do flip, there is still this like, okay, at that point in time, the company's going really well. Do we really want to make the switch now? What will we be giving up this on? So there's always these trade-offs going off.

[00:22:25] Vova Feldman: And they know it.

[00:22:26] Andrew Michael: Yeah. And they know it and they know it, but it doesn't create a good experience from brand side of things for users and what's think eventually like it'll take a long time, but these things do bite them in the tail. But like I said, like this is rails, like your whole business runs off of it at some point. So pulling them out… I think these types of businesses are incredibly powerful when it comes to churn and retention. Because ultimately it's like the main reason for churn in these businesses, because the company goes out of business. And then in that case, there's not much you can do about that.

[00:22:54] Andrew Michael: But I think definitely your approach to pricing, as you say, will help one with conversions in the early days because people have full transparency and say, yes, I know what I'm getting into. I know what I'm signing up for. And then two, and it does come time to actually scale and grow that I can see that things are transparent. Like I'm not being robbed just because I'm able to grow the business.

[00:23:13] Vova Feldman: And not only that, we can now offer a very competitive pricing at scale, you know, because others… we can put the number next to the exact ARR or MRR they're getting while others cannot. You need to go and to have sales calls and this and that negotiations just to get a number to start with. So with us… go to the website, check it and you know exactly.

[00:23:35] Andrew Michael: How long have you rolled this out now?

[00:23:36] Vova Feldman: Since October 1st. so it's pretty fresh.

[00:23:41] Andrew Michael: Yeah. Have you had any initial response? Like any conversations or whether it be from new customers or…

[00:23:47] Vova Feldman: It's great. Honestly, like we're getting a lot of attention for that. Yeah. It's pretty exciting to be honest.

[00:23:54] Andrew Michael: Yeah. Yeah. So it's still very, very early. That's probably why we have to catch up in a year's time from now and see what's been that impact when it comes to churn and retention on the back of this. But very cool. And so it sounds quite a lot of changes that happening all at once now, like going off to new markets, figuring out new pricing and packaging for the business. Like what's next for you and the Freemius team?

[00:24:14] Vova Feldman: Yeah. I think our main focus right now is besides pushing all the changes that are happening because we need to communicate them to the world is awareness. Our goal is to position ourselves as a trusted SaaS platform for small and micro SaaS in our industry. And after the eight year footprint in WordPress, we need to change that so the world will know that we're playing in the field of Paddle and the other competitors are out there. And that takes time. It takes a lot of, you know, footwork.

[00:24:48] Andrew Michael: A lot of training data for training data for LLMs.

[00:24:52] Vova Feldman: Exactly. Exactly.

[00:24:53] Andrew Michael: That's where most of the top of the funnel is going to start to come from now as well.

[00:24:58] Vova Feldman: And product-wise, we're focusing a lot on the developer experience, ensuring that everything is nailed. We want to get our SaaS offering in the same level of what we had with WordPress, which is by far – of course, I'm biased, by far the most complete and integrated into the solution. It makes it extremely easy to use and very comprehensive. Like you get a lot for the value, you know? So we want to be in the same level with SaaS and desktop apps. And therefore we're building SDKs for different frameworks and JavaScript and this and that, and, you know, listening to the audience and moving along based on our growth in that vertical.

[00:25:45] Andrew Michael: Very nice. I see we're running up on time now. I just want to make sure I ask you a question. I'll give every guest a chance to show. What's one thing that you know today about churn and retention that you wish you knew when you got started with your career?

[00:25:57] Vova Feldman: That's what comes to my mind. So I'll just share it. I think by definition, because I'm coming from a technical computer science background, I'm very anti-salesy and all this stuff. But today when I transitioned to founder and business person and all of that, like if previously… everything that smelled a little salesy, it was like, hmm, I shouldn't do this, you know? So, I think by data, we know that card recovery works. We know that there are mechanisms that may be perceived to some people as annoying, but in the end, they're working. So, I think my perception on different business e-commerce mechanics has shifted. So I don't know if it exactly answers your question.

[00:26:50] Andrew Michael: No, no, it definitely answered the question. I think for sure, you can see some of the things from the outside and you think, oh, like, this is really annoying. Why do companies do this? But then as you said, like, when you actually look at the data and churn recovery and all these sorts of things, they tend to be effective and things you can implement pretty fast as well.

[00:27:06] Vova Feldman: And did it through the entire kind of solution. All these exit intent coupons and retention coupons and serve like all of this, they're working. Reducing, increasing, whatever is needed. It does the job.

[00:27:21] Andrew Michael: Yeah. It may feel salesy, but it's salesy for a reason because it sells and it works. Obviously, you’re operating in the merchant record space now as well for many, many years. Like the last question then for me is like, what's one question that you wish more people would ask you when it comes to choosing a merchant record, but they don't.

[00:27:39] Vova Feldman: Yeah. I think not enough people understand the real underlying cost of payment processing. And this is something that we're trying to communicate more to the world these days, but people go to Stripe or PayPal and they see the 2.9% and they say, oh, cool, that's a price. Even though everything is listed down below, but you just don't acknowledge and understand. But if you are actually selling subscriptions globally as a software company, many times they're actually paying two, three times more because of all those other things. So I think, in the way that you phrased the question, I wish more people asked me something like how much… like from a pricing perspective, right? How much do payment processors really cost?

[00:28:26] Andrew Michael: Nice. I almost felt like that was going to be the answer and ask the question, but yeah, it makes a lot of sense.

[00:28:30] Vova Feldman: Yeah. You felt that that would be the answer? Okay.

[00:28:34] Andrew Michael: Nice. Vova, it's been an absolute pleasure hosting in the show today. Is there any final thoughts you want to leave the listeners with before we wrap up?

[00:28:42] Vova Feldman: If you're an indie maker, a small software company… you got to be a salesy a little bit, right? So check out Freemius if you want to partner with transparent growth pricing that can grow with you. Check out freemius.com.

[00:28:57] Andrew Michael: Very cool. Yeah. For the listeners, we'll make sure to leave everything we discussed today in the show notes so you can pick that up there. Vova, thanks so much again for joining and I wish you best of luck now going forward.

[00:29:06] Vova Feldman: Thank you so much. It was my pleasure.

[00:29:08] Andrew Michael: Cheers.

[00:29:16] Andrew Michael: And that's a wrap for the show today with me Andrew Michael. I really hope you enjoyed it and you were able to pull out something valuable for your business. To keep up to date with Churn.FM and be notified about new episodes, blog posts and more, subscribe to our mailing list by visiting churn.fm. Also don't forget to subscribe to our show on iTunes, Google Play or wherever you listen to your podcasts. If you have any feedback, good or bad, I would love to hear from you. And you can provide your blunt, direct feedback by sending it to andrew@churn.fm. Lastly, but most importantly, if you enjoyed this episode, please share it and leave a review as it really helps get the word out and grow the community. Thanks again for listening. See you again next week.

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