Andreessen Horowitz

DECEMBER 8, 2023

Introducing usage-based pricing requires a fundamental mindset shift away from securing cash up front and toward providing value so your customers consume more. The point of usage-based pricing is to create a great experience that encourages your customers to consume, but overages slow down that seamless adoption and usage experience.

Pricing 114

Pricing Scale Forecasting Compensation 114

Tom Tunguz

NOVEMBER 24, 2018

In the very earliest stages, the company doesn’t know how to sell or how to price. The most important goal isn’t price maximization, but just closing some business. The ultimate goal of any compensation plan is to ensure account executive success at each stage. Stage 1: Management by Objectives.

Compensation 153

Compensation Sales Recruiting Sales Hiring Scale 153

Sales Hacker

JULY 14, 2023

I was heavily incentivized to move the share price. sometimes (like ~99%) people aren’t willing to do the work to make it stick Dan Shaw , CEO at GhostRetail : The most common recommendation I see from boards re: CRO compensation is to keep them focused on top line. This isn’t hollow/arm chair advice either. Appreciate you.

Compensation 52

Compensation Sales Hiring Technical Review Metrics 52

Andreessen Horowitz

NOVEMBER 1, 2023

One of the most common pricing questions we get from late-stage SaaS companies is: should we switch to a usage-based pricing model (also known as consumption-based pricing)? But just because usage-based pricing has worked for other companies doesn’t necessarily mean it’ll work for yours. How will you compensate your reps?

Pricing 101

Pricing Compensation Subscription Payment Features 101

SaaStr

SEPTEMBER 12, 2023

Tie compensation to these metrics to incentivize performance. A classic on founder compensation, always one of the most searched topics. The company will need a Sales Ops/Enablement professional for every 30-50 salespeople to manage training, onboarding, territories, and compensation plans. But Not Lower Prices, Usually.

Sales Hiring 233

Sales Hiring Technical Advisors Compensation Outsourced Development 233

SaaStr

SEPTEMBER 29, 2022

Mistake #3: Not designing a sales compensation plan for PLG. “We We are using the sales compensation models from the 1970s, and these models drive quota-fulfilling behavior.”. In a sales-led compensation plan, the team is rewarded more for the first revenue from a customer and less for the expansion revenue.

Technical Review 246

Technical Review Technical Advisors Scale Compensation 246

SaaStr

APRIL 4, 2024

I think it did a pretty good job The summaries we do might be better, but this is a great place to start.

Sales Hiring 207

Sales Hiring Scale AI Search Compensation 207

Tom Tunguz

FEBRUARY 1, 2015

Another way is to look at the cash based cost of the stock based compensation. The chart above shows the average stock-based compensation (SBC) per employee by years since founding across the basket of publicly traded SaaS companies. I’ve plotted the growth in share price by round for nine public companies in this post.

Compensation 100

Compensation Benchmarks Startup SaaS 100

Tom Tunguz

APRIL 28, 2014

Since 2008, there has been a secular trend to increase cash compensation and decrease equity to startup management teams. In the past 5 years, VPEs have benefitted from a 10 to 16% increase in their cash compensation, but have seen their equity grants fall by 17-19%. Cash +10% +16%. Equity -19% -17%. Cash +26% +8%. Equity -31% -25%.

Compensation 100

Compensation Part-Time VPE Trends Startup 100

OpenView Labs

FEBRUARY 9, 2021

This is why we’re seeing more and more SaaS companies—Datadog, Twilio, AWS, Snowflake, and Stripe, to name a few—find success with product led growth paired with usage-based pricing. Usage-based pricing will be the key to successful monetization in the future.”. Usage-based pricing is in all layers of the tech stack.

Scale 98

Scale Pricing Scaling AWS 98

OpenView Labs

APRIL 8, 2021

The response since the usage-based pricing playbook has far exceeded my expectations. My TechCrunch byline went semi-viral, Bessemer named usage-based pricing part of the “ new normal ” for SaaS go-to-market strategy, and Alex Wilhelm said it’s “ one theme that’s come up time and again ” in public company earnings calls.

Pricing 97

Pricing Scale Subscription Payment Features 97

Tom Tunguz

JULY 10, 2022

But, as Lee Kirkpatrick, former Twilio CFO, shared during Office Hours , Twilio employed this strategy to achieve top quartile NDR while achieving strong ARR predictability with a usage-based pricing model. A key part of the formula: crafting the right account executive compensation structure to reward this strategy.

Strategy 323

Strategy Sales Compensation Retention 323

OPEXEngine

JANUARY 11, 2022

Consumption-based pricing is best used when you can accurately and easily break down your service offering into small, digestible units. Many companies in the technology industry are moving toward “pay for what you use” consumption-based pricing models. Four pricing models. Uncommitted contracts. Challenges and shifts.

Pricing 52

Pricing Payment Solutions Outsourced Development Compensation 52

Baremetrics

JANUARY 10, 2022

Optional product pricing is a pricing strategy whereby the core component of a product is sold for a basic price, and a menu of complementary services are offered for a separate fee. Optional product pricing often employs the concept of a loss leader. What is optional product pricing? Table of Contents.

Pricing 98

Pricing Airlines Systems Review Outsourced Development 98

Tom Tunguz

JUNE 21, 2022

In addition, Lee shared his view on usage-based pricing and defending a startup’s great asset, talent, from poaching during the next recovery. Usage-Based Pricing. Twilio was one of the pioneers of usage-based pricing. UBP presented an opportunity to reinvent the account executive (AE) compensation model.

Startup 168

Startup Outsourced Development Sales Hiring Compensation 168

Tom Tunguz

FEBRUARY 17, 2022

The greater the revenue, the more likely the acquirer prices a target on a revenue multiple. The essential components of a merger term sheet often include: price: the amount and the structure (cash vs stock; merger or asset purchase). executive compensation: especially equity revesting.

Technical Review 278

Technical Review Construction Compensation Acquisition 278

SaaStr

NOVEMBER 24, 2021

It’s 2021, but surprisingly, a significant number of SaaS companies still use outdated sales compensation plans. Salespeople are often compensated at the highest rate when they win brand new business, but that might not be good for revenue expansion and might contribute to churn. Sell it to your market for half the price.

Sales Hiring 193

Sales Hiring Scale Compensation Sales 193

OpenView Labs

SEPTEMBER 8, 2021

2021 has proven to be the year of usage-based pricing. . 45% of expansion stage SaaS companies now say they have a usage-based or consumption-based pricing model, according to data from OpenView’s forthcoming 2021 Finance and Operations benchmarks report. . Pricing: Keep it simple even if that means leaving some money on the table.

Pricing 64

Pricing Customer Success Scale Compensation 64

Tom Tunguz

MAY 1, 2023

Conversations about contracts & pricing are kicked down the road until the customer sees value & the path to capture it. AEs, experts in closing contracts, often focus on reducing sales cycle & maximizing contract value - which aligns with their incentives & compensation plan.

Scale 174

Scale Engineering Outsourced Development Sales 174

OpenView Labs

MARCH 16, 2021

The usage-based pricing model almost feels like a cheat code —it enables SaaS companies to more efficiently acquire new customers, grow with those customers as they’re successful, and keep those customers on the platform. But the shift from pure subscription to usage-based pricing is nearly as complex as going from on-premise to SaaS.

Pricing 52

Pricing Payments SaaS Payments Payment Solutions 52

SaaStr

OCTOBER 27, 2022

Because it’s seen as their money, as “extra” compensation on top of the deal price. And 90-95 times out of 100, the acquirer makes all the decisions here (and makes many mistakes because of it). Sometimes, you don’t even know what these packages will be until the deal closes, or just before.

Startup 226

Startup Sales Hiring Compensation Finance 226

SaaStr

SEPTEMBER 29, 2022

A few thoughts on retention compensation when you are acquired. But the sticks come out of the purchase price. Dear SaaStr: How Do I Do My Retention Negotiation in an Acquisition? First, understand that the acquirer almost certainly already has a strong sense of what they want to do (right or wrong). The SVP has to pay for the carrots.

Acquisition 257

Acquisition Retention Payments Compensation 257

Tom Tunguz

OCTOBER 14, 2015

The purpose of a price is to tax usage of a product. Complex or unintuitive pricing model. Complex or unintuitive pricing model. A good pricing model appears simple and logical to the customer. Often for applications, it’s people - hence a pricing model by seats. Employ static pricing.

Pricing 100

Pricing Startup SaaS Compensation 100

Andreessen Horowitz

SEPTEMBER 7, 2023

To calculate the size of the market, we use the equation price of service x unit of service (e.g., We expect personalization with AI will increase both the price of service and units of service by unlocking: More users. Higher prices. Higher prices Today, there’s a massive price gap between digital and in-person services.

AI 135

AI Generative AI Marketing Compensation 135

OpenView Labs

MARCH 18, 2020

In this uncertain environment, how should one approach pricing? For pricing, this means no price gouging. Price helps anchor your value, and price discounts made during a crisis tend to stick and can reset value perceptions long term. If you don’t already have one, add a usage component to your pricing model.

Pricing 57

Pricing Payment Solutions Payments Healthcare 57

Kellblog

AUGUST 7, 2019

I’ve been asked about this a few times lately, less because people value my accounting knowledge [1] but rather because people are curious about the CAC impact of such deals and how to compensate sales on them. Equal Value: The Price-Ramped Deal. Price-Ramped). The hard part is figuring out sales compensation and CAC.

Deferred Revenue 74

Deferred Revenue Pricing Payments SaaS Payments 74

Incredo

OCTOBER 17, 2019

is like asking “how expensive should I price my SaaS product?” What are 5 common SaaS sales compensation models? The reason is that commission-only position doesn’t guarantee a fixed financial compensation at the end of each month. Asking “what’s the typical commission for SaaS salesperson?” See below!

SaaS Payments 150

SaaS Payments Compensation Payment Services Sales Recruiting 150

Tom Tunguz

SEPTEMBER 6, 2021

These new shares are often granted to employees as compensation. If I work on behalf of a crypto company, I receive tokens as part of my compensation. But today, the ecosystem is most certainly using the speculative value method: if the floor price of a CryptoPunk is 20 ETH, then a Degenerative Ape must be at least 150 SOL.

Government 234

Government Compensation Blockchain Banking 234

Clouded Judgement

JANUARY 19, 2024

The answer is they may, but just at a different price / valuation. One thing I do want to call out that I don’t see tracked enough is stock compensation. For many companies, this can be viewed as somewhat of a free expense. An option pool that is simply re-upped at each round.

Cloud 177

Cloud Scale Compensation Metrics 177

Incredo

OCTOBER 17, 2019

is like asking “how expensive should I price my SaaS product?” What are 5 common SaaS sales compensation models? The reason is that commission-only position doesn’t guarantee a fixed financial compensation at the end of each month. Asking “what’s the typical commission for SaaS salesperson?” See below! Here’s why.

SaaS Payments 144

SaaS Payments Compensation Payment Services Sales Recruiting 144

BitPay

JANUARY 17, 2024

Bitcoin ETFs are a positive signal for merchants - here’s why Shortly after the SEC’s announcement, Bitcoin prices hit a two-year high. Although some hodl’ers will see this as the opportune time to stash away their coins, many of those who’ve bought at a lower price will be keen on cashing out or spending their gains.

Merchant Services 52

Merchant Services Payment Services Payment Methods Payments 52

ProfitWell

JUNE 27, 2019

For a young company, choosing a pricing method and establishing your overall pricing strategy can be daunting - it's the moment where you find out how much people actually value your beloved idea and how much they're willing to pay for it. That’s why it pays to get your pricing methods right. What are pricing methods?

Pricing 43

Pricing Scale Market Research Compensation 43

Tom Tunguz

NOVEMBER 7, 2019

The discipline of customer success varies widely depending on price point. At the lower price points, some organizations combine the role of an account manager and the customer success person into a CSAM (customer success account manager). Here are my notes from the session.

Compensation 111

Compensation Scale Benchmarks Customer Success 111

Buffer Resources

FEBRUARY 1, 2024

Buffer pays me fairly and generously It’s important to share that another reason to stay at any company is compensation. One of Buffer’s compensation principles is generosity, and I’ve found that to be true. I’ve learned so much from taking on new projects and trying to attain new results over the years.

Compensation 83

Compensation Social Media Leadership Branding 83

SaaStr

JULY 23, 2020

The average package price is USD 500 for subscription/month. A bit more here: The ultimate guide to SaaS Sales Compensation Plan | SaaStr. Q: What is a good model for SaaS product sales commission? At the end of the day, most SaaS companies pay their reps from 20%-25% of what they close in total comp — base + bonus.

Scale 172

Scale Compensation Subscription Payment Features 172

SaaStr

MARCH 8, 2021

The average package price is USD 500 for subscription/month. A bit more here: The ultimate guide to SaaS Sales Compensation Plan | SaaStr. Q: What is a good model for SaaS product sales commission? Often at roughly a 50/50 ratio. Sometimes for very transactional, low ACV sales, the percent can be lower.

Scale 164

Scale Sales Compensation Churn 164

User Pilot

MARCH 25, 2024

An accurate valuation is necessary to secure the right price for the company or adequate funding without diluting its share value. SDE is the profit of the business owner and his compensation. To calculate the figure, deduct overheads from the gross revenue and add the owner’s compensation (salary, dividends, etc.).

SaaS 92

SaaS Customer Lifetime Value Acquisition Metrics 92