00:00hi everyone welcome to the a 6nz podcast
00:03I am sonal and we are continuing our
00:05series on pricing we've already talked
00:07about why to raise prices how to go
00:09about doing this and now we're talking
00:11more specifically about pricing freemium
00:14to premium as well as open source and
00:17what that means joining us to have that
00:18conversation we have general partners
00:21Peter Levine and Martine casado who
00:23cover all things infrastructure and we
00:25have mark Rainey who heads up our
00:27go-to-market practice as well as our
00:29executive briefing Center welcome guys
00:31thank you all right Peter you wanna kick
00:33so as we think about freemium 2 premium
00:36you could either give something away for
00:38free give some value away for free
00:40the idea of freemium is that people get
00:42to self try and you give away something
00:45it doesn't have to be open open source
00:48does not mean freemium you could have a
00:49closed source product that has a
00:51freemium component to a premium
00:54component but open source tends to lend
00:56itself towards kind of wide adoption
00:59with users using some sort of free
01:03adoption viral kind of penetration
01:06through an organization the way I think
01:09about freemium is that it's a proxy for
01:13marketing spend you tend to have to
01:15spend quite a bit on marketing in order
01:16to get the user to to see the value of a
01:19given product what freemium does is it
01:22offsets the marketing cost you have to
01:23give away some features in your product
01:25but through adoption inside the
01:29enterprise he actually can get some nice
01:32traction and users using your product
01:35through a freemium model and not spend a
01:37lot on marketing because in a sense the
01:40user is the sales organization and the
01:42user is the marketing organization and a
01:44freemium now the whole notion of premium
01:47is that users individual users while
01:51they can certainly get benefit and
01:53appreciate certain features in a product
01:56they often can't see all features that
01:59may be required in an enterprise an
02:00individual who's doing job acts may
02:03appreciate a certain feature but there's
02:06maybe 10 other features in the product
02:07that they wouldn't necessarily use or
02:10appreciate and that may be a different
02:12group who would say yeah those feet
02:14are great in a different sense so the
02:17idea of a premium having premium on top
02:20of a freemium is to start generating
02:23revenue on top of the underlying base
02:25and with that I believe that you need to
02:28have a sales organization actually come
02:30in to sell the premium products such
02:32that the users can be educated the
02:35organization can be educated on the
02:37additional features that are available
02:40outside the base freemium product so all
02:44of this pricing really sort of starts
02:47with a proper go to market model and a
02:49thoughtful articulation of what's the
02:52features are in the base what the
02:54features are in the premium and how you
02:56sort of shape that and take it to them
02:58how do you take the reins on that though
03:00and is it really that thoughtful up
03:01front because bluntly when you think
03:03about the narrative of how a lot of
03:05startups and their products take off
03:07there seems to be this viral phenomenon
03:08that happens where it's being adopted
03:10bottoms up inside the company and and
03:12there's no salesperson so starting point
03:14I've heard both of you say like then you
03:16need to have you still need a sales
03:17force so but do you really it's sort of
03:19a head-fake when you know the best
03:22products the products with this
03:24unbelievably great product market fit
03:27from day zero with freemium start to
03:30take off and the assumption is like oh
03:32wow look at here we don't need a sales
03:34organization let's just go hire more
03:35engineers and the market will just
03:37continue to update but what we see is
03:40over time that curve starts to flatten
03:43out because the number of users and kind
03:46of the virality starts to slow up and
03:49the value that one can get out of the
03:52revenue value that one gets out of that
03:54from an organizational standpoint can
03:56never be realized in the same way as
03:58when you have a sales organization
04:00actually selling and educating the
04:03organization on the benefits of this
04:05from a selling standpoint the key couple
04:08keys one where is that functionality
04:11line or where is that drawn for the
04:15individual user that's using the free
04:17functionality I think in a lot of cases
04:19we see companies wait too long to start
04:22thinking about and drawing that line so
04:24they can get to a premium type offering
04:28and then to the as you move up the stack
04:31in an organization a bigger particularly
04:33the bigger companies and enterprises a
04:35lot of the functionality is going to be
04:38drawn around the lines of how does that
04:41product enable companies to work across
04:44multiple workgroups and then as you move
04:48up another level is what is that going
04:50to mean to the business overall from a
04:52go to market standpoint I understand all
04:55right I need to dig into those three
04:57buckets you know what is the criteria
05:00the buying criteria of those individual
05:02users what's going to thrill them what
05:04do they need to do their individual jobs
05:06and then take another step back look at
05:10that middle layer of the workgroups
05:13what kind of layers of functionality is
05:15going to be important you know maybe
05:17from a collaboration standpoint or a
05:19workflow standpoint and then an as we
05:22keep moving up you've got things like
05:24security Enterprise hardening working
05:26across multiple geographies how is it
05:28going to scale you know it's more
05:30architecture things as you you get into
05:32the second and third buckets you know
05:34there's a different type of sales force
05:36that may support that it might be
05:38inbound right you know people on the
05:40phone it might be more technical
05:42oriented you need to think about
05:44layering your cells and marketing and
05:45go-to-market efforts across all these
05:48three different buckets can I just
05:50insert a quick note of caution here I
05:51think this is a sufficiently complicated
05:54issue that just saying you know you add
05:58a sales force may not highlight some of
06:02the potential pitfalls so one thing that
06:05we've seen a lot of is is you know in
06:08order to get kind of viral organic
06:10adoption it's good to have a low price
06:11or no price or no and honestly if you
06:16are entering with a low price to get
06:17viral adoption and you're trying to do
06:19something that's bottoms up often you
06:20start setting the price in the market
06:21and that's a very very dangerous a
06:23number of companies said okay instead of
06:25building a sales force we're gonna try
06:28and do bottoms up they set pricing very
06:29low poor-devil developer pricing they
06:31matured the market that way they got
06:32some adoption then because they weren't
06:34you know the customers were educated on
06:36the features somebody wasn't showing the
06:37value you know it started to tail off
06:41Dada Salesforce but the Salesforce is
06:43hampered because they actually have
06:44fairly mature pricing in the market and
06:46so I think going into this knowing that
06:48there's gonna be this two-pronged
06:49approach like knowing beforehand
06:51planning beforehand so you don't
06:53mistakenly said the value too long the
06:55market is pretty important yeah
06:57companies that go take that approach
06:59they end up becoming fairly dominant on
07:02the bottom end but you may have another
07:05competitor that comes in with sales and
07:09marketing maybe even an inferior product
07:11as far as what's attractive to the
07:14actual user but they have those that in
07:17those next two layers of functionality
07:19and they're they're approaching things
07:20more from a top-down standpoint and then
07:23you're in more of a strategic battle so
07:26you could in some cases actually get
07:27pinned down strategically by because the
07:31part of the best product doesn't always
07:32win that's a very powerful and almost
07:35blasphemous statement when you think
07:36about tech I'll take the heat you know
07:38in my experience over multiple products
07:40eighty percent of the dollars comes from
07:41direct sales independent of like how
07:43viral the organic is I mean it just
07:45turns out direct sales produces a lot of
07:47durable revenue and renewable revenue
07:48well just to be clear though when you're
07:50talking about freemium Premium in
07:51general or freemium sort of subsidizes
07:53the premium by default so the revenue
07:55will predominantly come from the premium
07:57sales premium is free then is gonna
08:02count for the majority of the sales but
08:04your point is you're making a further
08:06point say the sales organization I think
08:08that there's this belief that if you
08:11price low enough you will make up for it
08:15through penetration and it turns out
08:18that that's not what the distribution
08:19only looks like even if you skew it for
08:20like low price and higher price the
08:23majority of the revenue comes from
08:24direct Enterprise sales and so that will
08:26be the bulk of the revenue over time I
08:28want to go back to a point both you
08:30touched on delineating the line of
08:32features between freemium and premium is
08:35critical for an freemium it has to have
08:40enough value to where people use it so
08:42here's the sort of conundrum and dilemma
08:44of this whole thing it's got to have
08:46enough value otherwise people don't use
08:48it yet you have to have enough held back
08:51that you can actually have something in
08:54right and so that line becomes a very
08:58very important ingredient in getting
09:00this all to work offer too much there's
09:03nothing to sell on the add on offer too
09:07little and users are like I don't need
09:10this it doesn't it doesn't do anything
09:12for me and that's it that's a very
09:14slippery slope the whole support model
09:16really not being very viable outside of
09:18what Red Hat has done and you know we've
09:20talked about this for years but I would
09:22say that getting that feature said
09:24exactly right up front is really really
09:27important like don't back into it don't
09:29say well we're gonna give everything
09:31away for this year and then we're gonna
09:35strip things down because like once you
09:37give things away you can't just take it
09:39back and you know if you give too little
09:41you may not get the traction so it's
09:43really important to get that balance as
09:45perfect as possible it's a process not
09:48an event it's something you're gonna be
09:49constantly ranking on knobs and
09:52understanding because and it's got to be
09:53tightly integrated with your vision and
09:56product roadmap a lot of that stuff is
09:58it's gonna change over time and that
09:59balance between you know the community
10:02if it's open source and or the users
10:04taking too much away can slow you down
10:06having been the CEO of an open source
10:08company community is one of the most
10:10challenging open source forces that you
10:14will face as a company and that is how
10:18much do you give away for free versus
10:21how much of the product do you withhold
10:23for revenue and the pressure of the
10:26community to make sure that that line is
10:30properly adhered to right you can't
10:32isolate the community may say well look
10:34we want all of this stuff for free and
10:37as the organization trying to derive
10:40revenue I mean after all open source
10:42companies are for-profit they're not
10:44charities and so you need to figure out
10:46a way to go make money and that's often
10:48in conflict with the community and
10:51there's a lot like religions community
10:54is very religious about so here's the
10:56the issue that a company faces if you
10:58don't manage the community in a proper
11:00way the community will say well they're
11:03not doing what we want we're gonna fork
11:05the code and go run off and do we're
11:08the whole thing there's always that
11:10tension between unlimited free
11:13open-source and all the features versus
11:16kind of constraining things around a
11:18freemium premium I'll start my own
11:20churches so what do you do then you guys
11:25have talked about this multiple times on
11:27the podcast for listeners you can listen
11:28to our podcast on open source and
11:30developers what do you do then do you
11:32just not build a business like that in
11:33the first place or do you find a
11:35different solution and the last pricing
11:36your podcasts I think Mark had the right
11:39advice which is if you're gonna be doing
11:42tearing based on features you've got to
11:44understand this really early on and
11:45that's be part of the product
11:46development cycle you've got to make it
11:47actually part of the orbit of cycle like
11:49you have to think about it every time
11:50you do it even if you are still just
11:53building the frickin product and just
11:55working to keep the free game servers
11:56ready anyone building the product means
11:59having a thoughtful tearing structure in
12:02how this thing unfolds from day zero
12:04let's say you want the product let's say
12:06there are hidden features in the product
12:08that you want to unlock the some
12:11automated fashion just as an example
12:13well you got a plan that in it can't be
12:15an afterthought the freemium product can
12:17actually help to sell itself if you
12:19think about the interface thoughtfully
12:21and some of the other bits and pieces
12:22but that's as important as the the
12:25functionality of the product should
12:27include the pricing and tearing model as
12:29part of that whole exit you know one of
12:31those little you mean those bits and
12:33pieces and knobs of functionality that
12:36are gonna be the triggers yes for the
12:39you know that product to where you
12:42should be charging more exciting what
12:44that individual has either started using
12:47on their own or been able to swipe a
12:49credit card because it's so valuable to
12:51them that they paid for yeah by
12:53themselves and then what what and what
12:56are those next two or three levels of
12:58functionality one could imagine that a
12:59product actually helps to educate the
13:02customer on the benefits through the
13:05interface itself right and if you think
13:09about that as part of the design
13:10criteria you get better adoption you get
13:14better appreciation for those elements
13:16and just bolting it on as an
13:18afterthought is often a disaster because
13:21fit in it doesn't look right and all
13:23these you know kind of it's been its
13:26features that you add ups you know
13:28educational features that you add later
13:30that are not really baked into the DNA
13:33of the product I also think going back
13:35to the question of like how so so how do
13:37you decide what to open source and not
13:38open source here's here's my experience
13:40it looks like the version you charged
13:42for especially in relation to open
13:45source the version you charged for is
13:46kind of a thin layer that you need in
13:49order to make the open source functional
13:51I think the community will decry that
13:54you're creating where and so the
13:56open source needs to be independently
13:58complete and functional like useful for
14:00a purpose totally independently maybe
14:02not all purposes but if you just put it
14:04out there and it doesn't really work or
14:06it doesn't really work for something to
14:07get a job done I think that you're gonna
14:09cause like issues of the community or
14:11maybe not about the community beginner
14:12community the open source community has
14:15matured over the years and I do believe
14:20that the community is sensitive and is
14:25appreciative of companies needing to
14:27actually make revenue and kind of have a
14:30business as opposed to just being a
14:32charity where everything's given away
14:33for free there are discrete sort of
14:36components of open source that one could
14:39argue here's all the functionality
14:41needed for a given user a given server a
14:43given environment and then the added
14:46value components may be along areas such
14:49as scalability security enterprise kind
14:53of completeness and that tends to work
14:55very well because a lot of those added
14:57on features are not really part of the
14:59open source code anyway and you could
15:01argue it could be but those are more
15:03generalized capabilities for enterprise
15:06adoption they're also in some cases
15:09things that an enterprise can go
15:12configure and/or customized to their
15:14specific use cases and may want to keep
15:16inside their organizations so cranny I
15:19have a question then because we're
15:20describing that the product has inherent
15:22value and ideally even inherent
15:24education to help it take off and sort
15:26of go up from bottoms up do you then
15:29counsel founders to have the enterprise
15:31sales force in at the very beginning or
15:34do they wait till the
15:35adoption happens and they get it at a
15:36certain point like when is the ideal
15:38time to bring in that that enterprise
15:40sales force if you don't want a
15:41competitor to take the top half away
15:43from you in the market in the enterprise
15:44yeah it doesn't have to be right at the
15:47beginning a lot of it you know depends
15:49on the attraction that they're getting
15:51initially a lot of its you know based on
15:54the skill set I think of that founding
15:57team and you know their knowledge of you
16:00know what a you know major buyers or
16:02enterprises are going through to get
16:05that deep understanding in some cases
16:06you may need somebody in fairly early to
16:09really unpack what that functionality
16:12might look like over and above you know
16:14what you know the founders knowledge is
16:17from you know say if it's a DevOps type
16:19tool from a pure dev perspective you
16:22know what's that going to look like in
16:23these different types of enterprises
16:25from a workflow standpoint a lot of it
16:27depends on what kind of momentum they
16:29have what needs to happen to understand
16:32where they can you know start drawing
16:34that line and putting the pricing and
16:36packaging together so I mean it is so
16:39case specific what typically happens is
16:42is they wait too long is in my opinion
16:44to start putting that in and or there's
16:46a Mis misfit from a hire standpoint as
16:49far as the skill set required to go put
16:52well this reinforced is something we've
16:54talked about on the previous podcast
16:55which is this notion of sales a sales
16:58force definitionally as a collaborator
17:00and helping discover by your needs but
17:02one question I have then earlier Peter
17:04you alluded to the fact that in some
17:07ways when you do the freemium to premium
17:08it's a proxy for marketing so what then
17:11happens now to the marketing I mean are
17:13you essentially saying that you don't
17:14need marketing do you agree with that
17:15like I like to pull on that thread you
17:17are I mean you know you might be giving
17:19something away for free but is it really
17:22for free I mean that's something that
17:23you might have spent a lot of money from
17:25a marketing and sales standpoint to get
17:27that kind of usage and adoption and and
17:30closed-loop process feedback and we see
17:33a lot of situations where the you know
17:37as they people put the line in on the
17:39functionality and there's nothing behind
17:42it from a marketing standpoint maybe for
17:45that next level the companies stall or
17:49why does the marketing matter though if
17:51the product has value the marketing
17:52might matter for the community to
17:54educate them on why it's important to
17:56have this next layer or two layers of
17:59functionality for those different
18:02audiences so anybody you know the users
18:04will welcome the support of the selling
18:08organization to go expand that usage and
18:11you know but using the religious term to
18:13proselytize and writing today they're
18:16great missionaries but they might need
18:18some help inside their own organization
18:20you know to get that type of end options
18:22and maybe just to clarify my point here
18:24on trading off marketing for freemium
18:26that's at the starting point where you
18:29have this viral adoption but as you go
18:32to different tiers in the same way you
18:34need to build out a sales organization
18:35to educate on value marketing also helps
18:40to educate that value as well so it
18:42doesn't obviate the need for marketing I
18:45was just making the observation that a
18:47freemium model is an offset to marketing
18:50spend you either choose to give away
18:51features for free or you choose to spend
18:54it in marketing but in one way or
18:56another there's a cost there associated
18:58with freemium that people often don't
18:59see I think used to simplify it I mean
19:01think of layers in a cake you need to go
19:03build layers around product and
19:06functionality and and how that fits from
19:08a buying criteria standpoint or there's
19:12Bottoms Up top-down or layering and all
19:14that in at the same time I think it's
19:16worth calling out that like there's
19:18still a lot like if you have a sales
19:19organization you're gonna need marketing
19:21any ways to do sales enablement for
19:23example right to do education a lot of
19:25times to do training on customers and
19:27certifications still really important
19:28analyst relations still really important
19:31to enable sales for us to sell into an
19:34IT organization channel enablement so
19:36marketing isn't just about getting
19:38people to know about your product or
19:39getting the customers I mean marketing
19:42is normally very tightly aligned with
19:44sales anyways I think that what you can
19:45say is like initial outreach initial
19:48branding initial touch point top of the
19:50funnel like that can be aided with
19:52framing and open source but all of the
19:54Sables enablement all of the partner
19:56enablement and the customer
19:57certification and the analyst
19:59relationships certainly this is
20:00something that the marketing function
20:02is that true for developed selling to
20:03developers - I would almost imagine
20:04they'd be allergic to being educated or
20:06certified certainly like developers are
20:09a la an important part of top of the
20:12funnel we like getting thereby and
20:13getting their support and sometimes they
20:15do have budget as well but often you
20:18still need to engage with the
20:19organization so I think that getting the
20:21eyeballs of the developer getting used
20:22from the developer you don't need to
20:24have this kind of deep sales enablement
20:26clearly to get them to use it but once
20:29the developers are using it and there
20:31are large persons seeing decisions from
20:32the organization that's when you do want
20:34to engage a more traditional sale cycle
20:35so if I'm selling to a developer if I'm
20:38appealing to a developer with my product
20:41maybe my marketing spend goes into
20:44community development right where it's
20:47about having you know get-togethers in a
20:50variety of cities you know we all work
20:52together and we do code reviews or
20:54whatever well guess what that costs
20:56something and guess what it comes out of
20:59a marketing budget Marketing has a lot
21:01of different nuances you can call it
21:04whatever you want but these things take
21:06on different phases based on the buyer
21:10and based on the end user and to the
21:13extent that you get that right and you
21:14kind of figure out again to Mark's point
21:16here who the buyer is at these different
21:19layers of the cake there's different
21:21marketing objectives in each of those
21:24layers so Peter going back to something
21:26you said earlier where you mentioned
21:27that freemium and open-source are not
21:29the same thing but they're often
21:30conflated for various reasons can you
21:32sort of break that down for us a little
21:33further freemium and open-source are two
21:35separate things he can always have
21:36freemium you can always have open source
21:39he can have closed source freemium but
21:40then the packaging model for open source
21:43is you can do on prim open source
21:46adoption with with an upsell or many
21:51companies are starting to think about
21:53delivering open source as a service or
21:56the combination and just to clarify when
21:58you say open source as a service you
21:59mean as distinct from open core models
22:01yes this is where open source is that
22:04it's actually provided as a SAS offering
22:07so I run some open source project or
22:11some set of open source projects I stand
22:15I put a wrapper around it or not and I
22:19offer it to an end customer whether free
22:23or not free is not the point it's
22:25offered as a service when open-source is
22:28offered as a service the pricing is
22:32based on the service that you actually
22:35provide and it it makes for a very nice
22:37way to work around some of the nuances
22:42of open-source and the whole what's your
22:44support model and all these other bands
22:46values in the serve value is in the
22:49surface right exactly and it's an up and
22:52there's you know up solo and all these
22:54other things may be actual the reverse
22:57that you know it gets traction in the
23:00user community but because of you know
23:03security or whatever issues and/or
23:06functionality it's need and/or
23:08integration requirements that that tape
23:10same software may need you know it may
23:13need to be you know sold and packaged on
23:15Prem right right just a whole different
23:17complexity of pricing and packaging that
23:21that you may need to consider we've seen
23:23many companies you start with a cloud
23:24I'll say a cloud SAS offering based on
23:27open source viral adoption great uptake
23:31and then enterprises say well like we
23:33need to have that inside our firewall we
23:35want a copy of that so then the
23:38expansion the sales model actually in
23:40that case is taking from SAS to go on
23:44Prem into the enterprise as opposed to
23:46upselling necessarily the SAS model
23:49maybe like a different version if you
23:51just really think about that top layer
23:53from a cxo standpoint you know they're
23:55thinking of all right that whole on Prem
23:58private cloud versus hybrid versus
24:01public and if you can start answering
24:03those questions there's a different type
24:05of value that you know these companies
24:08can be providing and different types of
24:10functionality that can avoid things like
24:12you know they're avoid the fear from
24:15maybe the executive of being locked into
24:17one public cloud provider and or you
24:21know or I'm locked into just what I'm
24:23doing internally from a private cloud
24:26standpoint and or on Prem standpoint so
24:29those are the types of you know more
24:31strategic product discussions a company
24:35can be having internally as well as
24:36customer facing you know understanding
24:39what's going on in the minds and and the
24:42businesses of these big enterprise
24:43there's a certain humility to it because
24:45if you have a religious view like you
24:47I'm never gonna serve hybrid I'm never
24:49gonna do hybrid I'm never gonna do you
24:50know it's pure cloud or nothing you kind
24:52of realize like well people are what are
24:54people willing to buy for where they're
24:56psychologically already added sometimes
24:58the religion goes out the door when the
24:59money starts sometimes it's on-prem off
25:03Prem is like like maybe not the right
25:07I mean thing I think customers want to
25:09now consume things as a service and
25:11whether that's on Prem Roth Prem is less
25:13important than whether the operating
25:15model is managed or not yeah why even
25:17make it about that religious debate like
25:18just talk about what you need to read
25:20back into reality right outside of the
25:22geography we're sitting in right now if
25:24you it is a big issue particularly in
25:26your when you're talking about
25:27regulatory regulated type environments
25:29and that they're just at this time
25:32there's just not the option date based
25:35on what they're doing you know maybe
25:37it's been serve or healthcare or so
25:39government know that I totally agree I'm
25:41just saying like from a product
25:42development perspective that doesn't
25:43have to be two products I mean a lot of
25:48the argument for doing assess as opposed
25:50to shipping software's when you ship
25:51software you've got to deal with all the
25:52on-prem stuff of like heterogeneous
25:54environments and maybe not skilled
25:56administrators or everything else
25:57another thing you can do from product
25:59development standpoint saying listen up
26:01actually this is the same bits we're
26:03just going to if we do it on Prem we're
26:05just gonna go ahead and manage it we
26:06don't have to deal with all of this
26:07complexity so a lot of times like this
26:09on Prem off Prem meant two different
26:11products two different service offerings
26:13two different shipping bits two for the
26:14engineering organizations and I actually
26:16don't think that's the case well I think
26:17that the evolution of enterprise
26:19software which may be a whole nother
26:21topic is is much more to the SAS
26:24packaging and it's exactly SAS or
26:27offerings and it's the same thing and I
26:29told her a lot of benefits from a
26:32ease-of-use standpoint and
26:34simplification and you skirt all the
26:36regulatory issues and everything I think
26:38if you look at the major the major cloud
26:40providers you're gonna you're gonna see
26:43yep happened well they're gonna be a big
26:45part of that equation for what's
26:47important for the listeners is like the
26:49traditional model is like there's like
26:50two different types of software you
26:51build for this and it looks like the
26:53convergence now is there's one type of
26:54software right and the customers are
26:56having a managed platform that's
26:58actually managed by the providing entity
27:00so that you don't have like city of
27:02they're at different different places on
27:05that journey I can assure you as far as
27:07I agree a wholeheartedly with you from a
27:10product development standpoint but where
27:12each the customers are at all different
27:15places in that journey for a lotta more
27:18struggling with it yeah when we were
27:20working with the government well we had
27:21a model that we just needed to connect
27:23to the internet like that's it I said
27:24I'll solve a need with Internet
27:25connectivity like we download software
27:26you could run it you can run it on any
27:28hardware you want we just needed
27:29Internet connectivity and the
27:31environments that they were running
27:32didn't have anything because these are
27:33these kind of like isolated networks oh
27:36there's a there's a gradient but I would
27:39say that you don't necessarily have to
27:41make a choice like if I look at some of
27:43the companies that offer both an on-prem
27:44and a service offering the revenue split
27:46is 50/50 so these are the significant
27:48businesses on both sides and that
27:50doesn't necessitate having to build two
27:52products to do that I mean I think that
27:53if I were to do it today I would build
27:55one product that can be on Prem or off
27:57Prem and it'd be as much as possible the
27:59same product which is going to require
28:01some gives on the on Prem site if it
28:03doesn't require two different products
28:04does it still require two different type
28:07of sales organizations and marketing
28:09organizations because one of the things
28:11that we've constantly talked about is
28:12that selling on Prem versus SAS is very
28:15different that's a good question I think
28:17it's key specific but you know in
28:19general probably that that SAS model is
28:23makes it easier for users to get
28:26involved without a lot of friction and
28:28and to have that bottoms up and that
28:31might require a different type of you
28:33know sells a marketing support model
28:34versus the they aren't Prem because
28:37typically when you are doing things
28:38internally and these big companies
28:40there's you know hard core reasons that
28:42are specific to their business and that
28:45is you know in most cases going to
28:47require a higher end higher cost sells a
28:52marketing model because you know from a
28:53development support standpoint you're
28:57hardened requirements and or in some
28:59cases configure customize or integrate
29:01into things or be forced to have you
29:03know api's and integrations into into
29:06these environments that might have
29:08legacy issues that scale back you know
29:10you know decades in some cases so and
29:13that's all that's the cost of doing
29:15business to really help these companies
29:16get to the next skin from a platform or
29:19a functionality or a benefit standpoint
29:21and you know the the pricing should
29:23reflect that so one of the themes that
29:25I've heard throughout and we talked
29:27about this across multiple podcast and
29:28in this podcast is that we want to keep
29:30prices high and you want to figure
29:32things out as early as possible even if
29:34you haven't fully built it out yet to
29:36like go through this sort of mental
29:37model exercise of going through that and
29:40modeling that but as a start-up founder
29:42your business by definition is often
29:44very unpredictable where you don't know
29:47where the product is gonna go especially
29:48if you're still working out product
29:50market fit so what do you kind of
29:51counsel founders who are saying yes but
29:54what if we pivot like what happens then
29:55like what happens if the product changes
29:57so I mean I actually think I'm pivots
30:00the problem is easier because you're
30:01selling a different product I mean it
30:03depends on the nature of the pivot and
30:05of course these are all gonna be case
30:06specific I think the failure modes are
30:08if you're very aggressive about reaching
30:11as many people as possible
30:12or as many customers as possible and as
30:15a result you set your pricing too low I
30:16think that's hard to recover from a
30:18ideally you're not pivoting you're
30:20you're just changing direction right if
30:22you're you get a little more agility and
30:24I think some of that comes with in a lot
30:26of cases it's the thing that got you to
30:28the point where you have to pivot is
30:30maybe going too far down a path that you
30:33know just didn't work out because you
30:34there might Bend some hardheadedness
30:36some sometimes that that stubbornness
30:38might be great to push through that but
30:41you know sometimes religion leads you to
30:44that point where you could have adjusted
30:45earlier yeah and maybe a takeaway for
30:48folks who want to operationalize on this
30:52I always think about creating a little
30:53bit of a framework in the beginning
30:55early on with some milestones along the
30:58way that you can actually measure that
31:00way you know let's say I start out and
31:02say okay here's the features of say
31:04freemium and then premium here's the
31:06dates by which we want to have X number
31:10if these things start to not happen the
31:13way you originally thought well then you
31:15have at least some framework by which
31:17you can self correct what I find many
31:20times is people sort of blunder into the
31:23into the unknown without knowing really
31:25where they're going what their pricing
31:27is what their go-to market is and then
31:29they're sort of in the middle of the
31:31forest saying well like this isn't
31:33working but yeah I think part of that
31:35state they expect the customer to tell
31:39them right versus right you're standing
31:42they're gonna have to go right maybe
31:44guide the customer exactly that's very
31:46important like oh we'll just let the
31:48customer decide customers don't really
31:50custom errs no they've never bought this
31:52stuff before and they if they've never
31:54bought or used something and you want to
31:56have an innovative product what do they
31:57know and so we I mean one of our
32:00investment criteria and looking for
32:02entrepreneurs that we want to back is do
32:05you have a real feel for what the future
32:08of the market is going to be and you got
32:11to believe in yourself and got to
32:12believe in that vision and then you have
32:15to educate customers and bring them to
32:16you and that's where the cells in
32:17marketing or exams in is is you know to
32:20be able to guide to help guide that
32:22customer to help them with the criteria
32:24you know here's where we think it's
32:26going and here's how you can go thank
32:29you so much you guys
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