Lure in with FREE, and make functional with standard features that already beat the competition. And charge for additional services innovative, fun, and attractive services.
It is an insane amount of work to create a product better then the paid versions, then add in extras that go above and beyond for a fee. Once you start bringing on people, you have to start working to keep them happy, while also trying to build those extra features. In a perfect world a person would have funding to do that but for most startups funding is not available. I have yet to see a funded startup pull something like that off either.
Looking at DropBox, paid users get more megabytes, from my understanding the original commenter was suggesting free features, then additional paid features that compliment the free ones or extend upon them, in a freemium fashion.
