Ask YC: Help regarding catch 22 situation for choosing startup's revenue model?

What I will say though is that paying customers give you a better understanding of the actual value you are providing to them with your product. Shelling out for something isn't something most people take lightly.

On the other hand, advertising is much more subjective, and it will rely not only on what you're doing for your users, but what you're doing for the advertisers in terms of profits. It's a much more delicate balance to maintain.

Just food for thought.

a free plan that restricts functionality and serves ads, and plans that cost money but opens up more of the application and removes (most?) ads.

also worth noting is that google adwords and PPC in general is NOT the be-all-end-all of online ads. you can come up with other options that suit your needs, like a higher quality PPM, referral programs, or special individual sponsorship deals.

Obviously the easy answer is "as soon as possible", but most startups have a burn time. Our founders have pretty much decided that we can burn until we get popular, and until then we're going to focus on building a great product and pay our expenses out-of-pocket.

The "third option" can be awesome, but finding it depends on what your company does. I can't speak to Mint's revenues, but I do know that I switched banks because Mint found me a better deal. If you can provide value (or money) to your customers, that is pretty much ideal.

Alternatively, the third option could suck. We've bounced around a "third model" internally for some time, and we're not sure if it will actually be valuable or not. We'll probably code it up as we get closer to running out of funding and see if it works. If it doesn't--we'll go a more traditional route.