Railway rebuilt its free tier around better infrastructure economics

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 3:05

   And at one point you were even losing 500K a month. Walk me through those years. I mean, so like, you know, when you're starting a business and you're an engineer who has never run a business before, right? Like you're really focused on the product. And still to this day, I'm like core, core, core focused on the products. I've just gotten better at like letting go of those sections and delegating them and then being like, okay, cool. Right. But I wasn't in the early days. Right. I was like, okay, cool. We got to make a really, really great product that people are going to go and love and all this other stuff. And then so like, I think it was like kind of right around when we did our series A or whatever, but we were burning like a ton of money or shortly thereafter or whatever.

2. 3:40

   And yeah, like we had a ton of like original developer love because people were just like, oh, this is awesome. It's like so trivially easy to just like spin up like database backend, like whatever at this point in time. And like, again, I was an engineer and like had no idea about like pricing and packaging. How are you going to go in and do this? You know, we talked a little bit like about this last night at your house, right? Like it's the highest leverage thing that you can ultimately do, right? And so, you know, I looked at the balance sheet at one point. I was like, oh, shit, like this is not good, you know, right?

3. 4:09

   And so we had to kind of like make some changes, right? We ultimately like removed our free tier, kind of like pulled things back until we were saying like, okay, listen, these are like, we're servicing this many users and we only service this many users like really, really well, right? And like, I'm a big fan of like Jim Collins, the hedgehog principal, et cetera, like do only things that you can be the best in the world at.

4. 4:27

   So if you're doing all this service area, we had to like pull it back. And so just made the call that we're like, it wasn't going to work otherwise, right? What was the change? You cut off free users completely, right? So now everybody is a paid user. Well, we cut off free users originally, and then we spent like two, three years building out our bare metal offering so that we could go back and offer that like free stuff for those users.

5. 4:47

   And so it was like, you know, it's like free tier on, free tier off, right? And we waited like two or three years basically until we could guarantee that we were like, okay, we can service this portion of users, right? With like this pricing and packaging, right? And then, you know, we have no plans to go on and remove that indefinitely because it runs now and like a very, very solid like foundational business model that is growing very, very rapidly, right?

6. 5:10

   Where we can go in and monetize more and more and more as folks kind of like grow on the platform, you know? So in those years, it seemed like not just pricing and packaging, but maybe product-wise, there was a lot of iteration. How close did it get? Like, were there moments where you were very close to just running out of money or you were always managing that part well? I think we were like, I mean, it depends on like what you define as close, right?

7. 5:34

   Like, you know, I personally don't like when the runway is below 18 months or whatever. And so we're getting into the single-digit months of stuff being like, hey, we got to fix this. And somebody internally was pointing this out. They're like, we're not going to tell you what you need to do about this, but you just won't have a business in six or seven months if you don't do something about this.

8. 5:54

   And so it's like, yeah, sure. And we already knew it was on the horizon. We were already going to go and do stuff about it.