Does a freemium model destroy early SaaS retention?

We initially launched with a generous free-forever plan hoping users would naturally upgrade as they grew. Instead, thousands signed up, flooded our servers, and barely 1% ever looked at the paid features.

​When we eliminated the free plan and switched to a $1 paid trial, signups dropped by 80%, but active daily usage among those who joined went through the roof.

​Is offering a free tier a trap for bootstrapped products, or is it still the best way to get distribution?