The freemium pricing strategy offers a free basic version of your product to attract users, with the option to upgrade to a paid plan for access to premium features. It’s a common model for SaaS and digital products focused on rapid user growth.
Why it matters for startups
Freemium helps you lower the barrier to entry and build a large user base quickly. But acquiring users is just the start—converting them to paying customers is where the real challenge (and revenue) lies. For investors, a strong freemium model signals scalability and potential for recurring revenue.
What’s a good freemium-to-paid conversion rate?
It varies, but 2–5% is typical. What matters more is the lifetime value of your paying users.
How do I decide what to include in the free vs. paid plan?
Keep the free tier useful but limited. Premium features should unlock real value that power users can’t do without.
Can freemium work for all startups?
No. It works best for digital products with low marginal costs, like SaaS or tools with viral potential.
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