Capitalism in a nut shell. For a few hundred dollars, you can get a computer with software installed that together cost billions of dollars to develop over the years. For free, you can find almost any information on earth with a search engine that also cost many millions of dollars to develop.
The only thing that stands out here is that by using the products of companies just getting started, you get to influence the development process to suit your needs.
The three hundred dollars I spent on my laptop is combined with the money of millions of others to give Intel a hefty profit.
The $2000/year these folks spend on their engineers is combined with what?
So the question is how sustainable is a model like this? For example, do they really expect support two years from now? Perhaps they won't need it or can do that in-house. Still...
"They get a paying customer and improve their offering. But I still feel a little bad. Because I know that most of them will never makeup for the time and heart they invested"
I think he has a good point. Paul Graham and YC make it seem like creating a successful startup is easier than it may be. In reality, only a few succeed and the majority just fail miserably. But since we only hear success stories, it makes it seem more often than it is.
Of course, this only really works if these small, willing to do anything for a customer, struggling companies stay in business. As these entrepreneurs fail to realize the return on their time/monetary investments, their enthusiasm may wane and the features will slow or stop, and the project may eventually just stagnate or get shut down. I guess it's good while it lasts, but make sure you have backup plans.
Good stuff. He shouldn't feel too bad though, because he is giving them feedback on what at least one customer wants, which could easily be what many customers want, and help them succeed in the long run.
The only thing that stands out here is that by using the products of companies just getting started, you get to influence the development process to suit your needs.