Freemium is a pricing model where you offer a free version of your product indefinitely, then charge for upgrades. The free plan isn't charity. It's distribution. Users find you, try you, trust you, and then pay you without a sales call or contract negotiation in between.
Why it works
People don't buy things they haven't tried. Freemium removes that friction entirely. You get users in before the purchase decision, which gives you time to show them value. If the product's good, conversion follows.
It also creates network effects when the free tier is collaborative. Every user who invites a teammate on a free plan is doing your growth work for you.
The traps
Free plans are expensive to operate. You're serving users who might never pay. The math only works if your conversion rate and average contract value are high enough to cover the cost of your free base. A lot of companies get this wrong and end up subsidizing churn.
The other trap is a free plan so limited it can't demonstrate value. If users hit a wall before they understand why the product matters, they leave. The free tier has to be genuinely useful, just not infinitely useful.
FeatureOS has a free plan built around this logic: enough to feel the value, enough to want more.