Startups- Launch Early but Launch Small?

Kraus also gave the following story about the beta in a public forum: JotSpot signed up over 3,000 people for the beta and let it run for more than nine months.

Every Beta user had free access to the application and the developers were happy because they were getting a lot of testing. When it came time to convert to paid they had an extremely low yield (either less than 2% or less than 0.5% I can't remember) and they had to re-tool completely to figure out how to find paying customers. They ultimately revamped their signup process so that you had to give a credit card to start your 15 day free trial: this cut way down on their trails but boosted their conversion rate significantly and allowed them to focus on what kind of trial users converted at the high frequency.

Steve Blank makes a related point in "Four Steps to the Epiphany" when he cautions startup teams to distinguish between beta for product development and customer development. You need to test your product, but you also need to test your product conceptXwill people pay for it, how many people and how much will they pay. He observes that many startups fail because they can't find a market, few fail because they can't get their product to function.

Beta for test and beta for market exploration have two different goals. The number of early product testers you need may be two or three orders of magnitude less than the number you need to refine your product concept to the point you find market acceptance.