> Honestly, the goal with a free account should be to convert users into paying users or by making the platform more useful for paying users of the service.
That's true for normal companies. Startups operate by a different set of rules.
> If you cancel an account that didn't pay them any money, what exactly did they lose?
A user, and a potential source of future users.
For many startups, userbase growth matters much more than revenue, to the point they'll happily go negative on per-user profitability just to get more people on-board. Particularly those that aggressively pursue further funding ("actually making us profitable is something we'll consider after the next round") or an exit ("it'll be a problem for the sucker that buys us").
Yes, it is a source of a lot of pathology you see with today's software products, like products getting bloated with irrelevant pseudo-features ("oh shit, we can't actually make this sustainable; quick, let's try to extract all value we can from the userbase, and hopefully have something left after paying off the investors"), or getting acquired and shut down ("ha ha, we knew it was never going to be sustainable; we bought it to cheaply acquire talent and/or get you out of the way so you don't compete with our offering").
That's true for normal companies. Startups operate by a different set of rules.
> If you cancel an account that didn't pay them any money, what exactly did they lose?
A user, and a potential source of future users.
For many startups, userbase growth matters much more than revenue, to the point they'll happily go negative on per-user profitability just to get more people on-board. Particularly those that aggressively pursue further funding ("actually making us profitable is something we'll consider after the next round") or an exit ("it'll be a problem for the sucker that buys us").
Yes, it is a source of a lot of pathology you see with today's software products, like products getting bloated with irrelevant pseudo-features ("oh shit, we can't actually make this sustainable; quick, let's try to extract all value we can from the userbase, and hopefully have something left after paying off the investors"), or getting acquired and shut down ("ha ha, we knew it was never going to be sustainable; we bought it to cheaply acquire talent and/or get you out of the way so you don't compete with our offering").
In every case, VCs and founders win, users lose.