00:00hi everyone welcome to the a six in Z
00:02podcast I'm sonal regular listeners of
00:05the podcast have probably heard us say
00:06more than once that entrepreneurs should
00:09raise prices why and the other question
00:12that comes up often is how on this
00:14episode of the a six in Z podcast we
00:16talked all about pricing packaging and
00:18more joining the conversation our
00:20general partner Martine casado who was
00:22formerly the co-founder and CTO of
00:24nasarah which was later acquired by
00:26VMware and most recently he served as a
00:28general manager for one of their major
00:30business units also joining is Mark
00:33cranny who heads up our go-to-market
00:35practice and our EBC or executive
00:37briefing center and he was a former VP
00:39of Sales and moderating the podcast is
00:42managing partner Scott Cooper hello
00:44everybody this is scott Cooper I'm here
00:45with Martine and Mark and we are here to
00:47talk about pricing one of the reasons
00:49that this podcast in general is so
00:51important is I think that pricing is one
00:53of the least intuitive things for
00:54technical founders having been one it
00:56certainly was my bias you know coming
00:59out of like my PhD and doing a technical
01:01start-up that you almost always want to
01:03like take whatever your technologies and
01:05get into everybody's hands and then you
01:06kind of assume later on that like you
01:09can somehow monetize it Ben Horowitz is
01:11on my board at the time and I was
01:13explaining I was like well I think that
01:14we should kind of enter at a very low
01:15price and that way we'll have more
01:17people that use it and he looks at me
01:19who's this very stern lucky and he says
01:20I want you to be very careful because no
01:23single decision will impact the
01:25valuation you accompany more than the
01:27decision you're about to make on pricing
01:29and so that kind of started my foray
01:32into pricing as long as you've got the
01:33mic I mean let's let's start there so
01:35what's what's wrong with that so why not
01:36why not be cheap and then why can't you
01:38just raise prices later what's the
01:40problem well so there's an interesting
01:41thing especially if you're dealing with
01:43pre chasm type markets so pre chasm
01:45means you're bringing a product to
01:47market where there isn't a market yet or
01:48the market is very immature right so
01:50there may not be a budget there may not
01:52be a buyer they may not know how to
01:53think about it and so here's the fallacy
01:55that many technical founders have and I
01:57had as well as they think if you build
01:59technology there's intrinsic value to it
02:01this is worth so much money because it's
02:03intrinsically valuable and that's not
02:05generally what happens what happens just
02:07in human psychology is actually like
02:09will set the value on whatever they're
02:10getting based on how they acquired it
02:12and so in early market
02:14nobody really knows how to value what
02:15you have and so it's very important for
02:17you to establish the value in the market
02:19otherwise you end up devaluing yourself
02:21right away and you've just cannibalized
02:23your top-line revenue almost immediately
02:25the scenario you describe to begin with
02:28is extremely common and the reason it's
02:31common over and above what you've
02:34outlined is in a lot of cases the tech
02:38that technical founder has not put in
02:41themselves in the buyers shoes to
02:44understand what that perspective buyer
02:47needs to go through because like you
02:50described they don't know what the
02:52criteria is that and how they should
02:54look and or evaluate your solution then
02:57it might not even know it's a solution
02:59because they don't know there's a
03:00problem that's kind of the job of sells
03:02and marketing is to go put yourself in
03:05the that buy her shoes understand what
03:07they're as his environment is answer
03:10those questions along that sales process
03:12of why why should I even do anything to
03:15even evaluate you or look at you and
03:17then why you and then why now the why
03:19now piece is the piece that where the
03:22the pricing really starts to come into
03:24play and that's where you've actually
03:26gotten enough information out to
03:28understand what their return would be
03:30what the Naro I would be and if I can't
03:32go show what that value is and not have
03:35that deep in information about what that
03:38prospects costs are gonna be or what my
03:40impact of their business is gonna be
03:42then yeah it's easy to say I'll give it
03:44away for free and will monetize later so
03:47that's where that comes from that
03:49natural inclination does to I'll figure
03:52this out later mark so you're kind of
03:55describing kind of value-based pricing
03:56right so does that mean in those early
03:58days then that you kind of iterate on
03:59the pricing with the customer or are you
04:02suggesting that people do that analysis
04:04and then present that to you know
04:05customers or is it or is it really just
04:07introduced well I mean a lot of it
04:09depends on what exactly you're you know
04:11what is your value proposition if
04:13there's some kind of standards that are
04:15out there and the customers used to
04:17acquiring a solution you know the and
04:20you're good at your your solution is
04:22going to be similar there's there's
04:24models you can bounce off as far as
04:26what's going on in the
04:27his world what what Martine is talking
04:31about hit what he was doing was so
04:33transformational was hard for a customer
04:36or a prospect to get their arms around
04:38and Martine maybe didn't have enough of
04:41you know the as is just intuitively
04:44having been in these larger environments
04:47to really you know early on understand
04:50what that would mean and there's a long
04:52development cycle before that value
04:54would even be delivered right so the
04:56value-based pricing I think is for sure
04:59true but part of it you just you got to
05:01go through the whole you know a whole
05:03sales process before you can start to
05:05get comfortable and have pricing control
05:06fast forward a little bit you know where
05:08you've gotten or you're down the path of
05:10getting product market fit or your your
05:13beyond that you know I see a lot of
05:15entrepreneurs that kind of get stuck in
05:18the mud on their pricing or they've gone
05:20in too low they're not sure how to go
05:22start to raise pricing a lot of that is
05:24more in the packaging what is your
05:26roadmap you know what sets a
05:28functionality or has the prospect or the
05:31customer already realized value from and
05:34then where you going with the product is
05:36that something you want to just charge
05:37the same price for or do you need to
05:38start chunking that up because they
05:40might be buying different ways the
05:42customer or the prospects actually
05:43asking for additional you know features
05:46and functionality or scalability or
05:48architecture from a wall that shouldn't
05:51be the same price so I need different
05:52type of packaging and a different
05:54pricing model to go build on that and
05:57then there's the option of like I want
05:58to start all cart versus you know in a
06:01package all at once you know some
06:02customers might not need the whole
06:03product when you're first starting out
06:05or they don't need a user or work group
06:07setting but the enterprise as they adopt
06:09will so you're holding some
06:11functionality back and waiting for them
06:14to want that and then go establish that
06:16value to do it but totally understand
06:18where Martines coming from early on
06:20because I see it over and over and over
06:22again and it is in a lot of cases the
06:24value of the Salesforce the other thing
06:26I kind of in his initial answer was you
06:30know I don't want to go you'll spend the
06:32time or the money and now a lot of that
06:34is putting the boots on the ground or
06:36you know inside and the marketing to go
06:39you know pay for that but your
06:41paying for it either way right you're
06:43paying for it by giving everything away
06:44for free because you're not investing in
06:46sales and marketing or you're gonna have
06:48a Channel Partner do it which you're
06:50giving your margin away somebody's
06:51paying for it and if it's something
06:53that's just so new and differentiated
06:55and not defined and it's gonna require a
06:59you know the customer or somebody's got
07:02to go in there and kind of really tease
07:04out how are you doing things now what is
07:07the pain they don't know there's a
07:09better way of doing it that's kind of
07:11our job as entrepreneurs and or as a
07:13sales and marketing organization to be
07:16the translator between the you know kind
07:18of the old world in the new world and
07:20that's where you start to understand you
07:22know how to piece this thing together
07:24from a value based standpoint I think
07:26you can roughly like dissect the world
07:29in two into two pieces you've got you
07:30know market category creation your
07:32constituency whatever they are they wake
07:34up in the morning and think about
07:35everything but not your thing it's like
07:36like it's not even something that like
07:38they consider and then there's mature
07:40markets where you're entering an
07:41existing market where pricing has
07:42already been set through you know a lot
07:44of transactions that have happened and
07:45so on and I think in the kind of post
07:48casimir mature market world I think that
07:49there is existing pricing there are
07:52comparables that you can work but in the
07:54in the in the pre chasm world the thing
07:57doesn't even exist so like not only
07:59you're describing that your thing exists
08:00but you're actually trying to attach a
08:02value to it I've gotten so many times
08:04the question it's like okay so how do
08:05you set that initial price you get a lot
08:07of these pmm types they want to go do
08:08this market research and like all the
08:09stuff and but it's very difficult to do
08:11research on something that doesn't exist
08:13you know I mean if you think about a lot
08:15of pre chasm work from the technical
08:16side you're really being prescriptive
08:17like you're not really asking the
08:19customer they might so here's my
08:20experience you know over a couple of
08:22products the only way I've been able to
08:24establish pricing in a pre chasm market
08:27is is you start pretty high and then you
08:30let the sales people shake it out you've
08:32got really really good sales people that
08:34go in there have the dialogue have the
08:35discussion understand it and it's this
08:38really iterative process we've got the
08:39sales guys piped into the nervous system
08:41of the product development side and then
08:42you get a sense for kind of what the
08:44market will bear I don't think you can
08:45have you know a bunch of MBAs out there
08:48doing research because this is so new
08:49and so I don't work like this is
08:51something you've done a lot of I'd love
08:53to know your thoughts on that well I def
08:55with the start hi it's what easier to go
08:57down is to go up when you talk about pre
09:00chasm and we the first thing we want to
09:01do is really segment and target and get
09:03to those point of the spear type
09:06prospects they're gonna be quicker to
09:08understand that there's probably a
09:10better way and maybe you've gone down
09:11that build-it-yourself type path where
09:15they've got the recognition that there
09:17is another way that's where you make
09:18aynd of one of the first places to start
09:20I'm a segmentation and targeting they're
09:22gonna be those early type customers as
09:24you're going through that product market
09:25fit where you need to be able to
09:28understand what it could mean
09:29financially and I've also partner with
09:32them on what that pricing could be
09:34because they're the ones that are gonna
09:35really get the most information and
09:37input as far as what the value is going
09:40to be it's always going to be involving
09:41i from a pricing standpoint some cases
09:43we may be lowering the price of like the
09:46foundational piece of our technology
09:48because the markets changing right
09:50things are gonna get more commoditized
09:52but we're racing up stack and charging
09:54for new things that are more valuable so
09:57I mean if you think about the whole
09:59lifecycle of pricing you know a lot of a
10:01lot of tech companies it's not just
10:03where it starts its you know it's
10:04something you're constantly should be
10:06looking at so just I put some meat on
10:08the bones and so we're saying look start
10:10high you know to Mark's point we just
10:12look it's always easier to go down it is
10:13an iterative process but within that
10:15context there is some framework for how
10:17to evaluate the value-based pricing
10:18right so and then in ceará case
10:19presumably there are things that
10:21engineers can now do in terms of changes
10:23to the network that they could have done
10:24before and that has demonstrable
10:25business value or there's either fewer
10:27resources that are required there's some
10:29kind of framework where we can begin to
10:31work with the customer to say hey the
10:32value that you would get in the
10:33organization either and headcount cost
10:35reduction or flexibility or new product
10:37rollouts or other things equates to some
10:39portion of that being captured through
10:40the software well one thing may be there
10:42just to keep in mind is from a pricing
10:44standpoint you know if you think about a
10:47large enterprise if you break the
10:50audience's down you know the pricing -
10:52like a user like say in in Martines case
10:55you know like the early people he was
10:58probably talking to network engineers
10:59that kind of Intel is gonna be
11:01completely different than if you're up
11:04at the top of an organization with the
11:09a wider view and you know it's gonna
11:11understand a bigger story and and
11:14they're also gonna understand you know
11:15when you get into headcount reduction or
11:17you get into you know different types of
11:20roi type modeling you know what you're
11:23getting credit for around productivity
11:25from a financial standpoint or a pricing
11:27or a value standpoint is going to be
11:29completely different with mid-level
11:31managers across multiple functions all
11:33the way up to a cxo with higher level
11:35initiatives so that's something that
11:37maybe the first time founder that hasn't
11:38had to go through that whole process is
11:40not gonna it's not gonna be intuitive
11:43right off the bat just to add to that I
11:45think it's just really seductive to
11:46think that like oh you know I'm like I'm
11:48an analytical person and so I can do
11:51some basic research and like based on my
11:53research sitting in my you know offices
11:56in San Francisco I know how to set the
11:58pricing because I've got comparables and
12:01they'll tell me I can talk to my friends
12:09and that's actually kind of where I was
12:12initially like I am such a convert for
12:14it for a couple of reasons one of them
12:15is like the value of the sales team is
12:18certainly to sell and bring in a number
12:19but in my experience when it comes to
12:22setting pricing and to understanding
12:23what the market will bear like there's
12:25nothing that can do it except for sales
12:26like this is just my experience it's not
12:28market research it's not marketing it's
12:30I don't believe if you're doing real
12:31category creation you can just build an
12:32ROI tool I don't think it's that simple
12:34depending on who you talk to in the
12:35organization you're gonna get like
12:36different understandings of what the
12:38value actually is you know some people
12:40aren't gonna want to be held to that or
12:43Ojai right they're taking a risk you
12:45know as you go up in organization
12:46they're gonna want a bigger potential
12:48return for making this type of a bet and
12:51the risk profiles are gonna be
12:53completely different as well yeah and I
12:55think something that entrepreneurs
12:56underestimate is large companies
12:59appetite to learn from startups very
13:03often in a hot area say AI or deep
13:05learning you'll have these like really
13:06smart entrepreneurs that have done the
13:09PhD maybe they just pulled out of Google
13:11or something companies will pay to
13:12engage with them and they may pay a
13:15hundred K or 200 K for a POC and so the
13:17entrepreneurs like I've got product
13:18market fit you know these guys are
13:21the pricing set but the reality
13:22is that makes total sense for the
13:25company to do this and to learn from
13:26them and so I mean one thing I really
13:28learned to appreciate about you know
13:30setting pricing aggressively early on is
13:33you start to get real market feedback
13:35you can't delude yourself anymore people
13:38aren't buying it to learn about it they
13:39aren't doing this because you're super
13:41charismatic you get real signals and the
13:43reality is early on in a company's life
13:45cycle you really can only take on so
13:46many customers anyways
13:48setting pricing high really helps that
13:49fast forward a little bit let's say
13:51we're let's assume we're getting past
13:53pox in our first five 10 20 customers
13:56but you know I see a lot of situations
13:58that we're getting stuck in the mud with
14:01a lot of companies and the reason they
14:03get stuck in the mud particularly
14:05dealing with these bigger companies is a
14:06lot of earlier stage companies they
14:09haven't thought through what the rest of
14:10that deal is going to look like if it
14:12expanded throughout the entire
14:14environment I see a time and time again
14:16and I constantly press a look you've in
14:18almost any proposal type situation you
14:21wanted to have not only your initial
14:24pricing per unit set but you need to go
14:27model and understand what would happen
14:29if that customer adopted throughout
14:31their entire enterprise now that early
14:34on it sounds like a pipe dream and oh my
14:36gosh I can't think that far ahead
14:37but you've got to go literally kind of
14:40model these things up what because
14:42that's what the customers gonna be
14:43asking themselves alright if I do this
14:45proof of concept for a hundred nodes or
14:48a hundred users but I have a hundred
14:50thousand in my environment nodes or
14:52users or whatever the the model is
14:55they're gonna be thinking ahead because
14:57they've been through this game before so
14:58when you're starting that quote process
15:01to take a lot of friction out of the
15:03whole buying and selling process to be
15:06able to kind of give them you know in
15:08the quotes here's what the small deal
15:10would look like to get started proc
15:11here's what a medium-size deal with
15:13multi bu and then here's what a large
15:15deal would look like you know I've
15:17technically validated I know I can scale
15:19I've no I've got the architecture or
15:21whatever and I know I've got the
15:23security and things but I also I can
15:27actually back that up from a you know
15:29business case standpoint you've been
15:31talking about pricing which is great but
15:32there's organizational issues obviously
15:33they're incredibly important and selling
15:35for different models right
15:36I'm replacing something that has been on
15:38prem now we're offering sass it's two
15:41different timings different accounting
15:43and we were accounting for things
15:44different in the old way I capitalized
15:47in the new way it's it's coming out of
15:49operating and so that slows people down
15:52in a lot of case just from up just
15:54financial chops standpoint and dealing
15:57with the customer and it changes the
15:58budget the other thing that's different
16:00is I mean that might have been
16:01centralized before with you know IT but
16:05the the whole world is changing because
16:07it's a line of business type sell people
16:09get stuck in the mud all the time I
16:10think it's really worth underscoring the
16:13point mark is making which is like you
16:15work so hard and I start up like moving
16:17the ball an inch that often you don't
16:19really consider like the macro success
16:22scenario is I would going in Cinco boy
16:24wouldn't it be great to get to the POC
16:25wouldn't be great to get to the initial
16:27sale but in the reality they're trying
16:29to evaluate the full-on risk which
16:31assumes that they like the technology
16:33and they're going to adopt it which
16:34means they're thinking all the way
16:35through it and so if you don't walk in
16:37having thought through what would it
16:40mean in the full success scenario it's
16:41much more difficult to have the
16:43conversation and this is a trap I think
16:46entrepreneurs in sales but generally
16:48just trying to be incremental in the way
16:50that they build things that kind of goes
16:51into it's a competence and a confidence
16:55type situation as well I might have
16:58technical competence around you know
17:01whatever my solution is but I don't have
17:04that customer knowledge confidence in a
17:08lot of cases we're trying to just throw
17:09a number out there because we don't have
17:11any data for that number we don't have
17:13any confidence in what it's costing them
17:15or what it would mean to them from you
17:17know from a transformative standpoint so
17:20we're kind of guessing and some of that
17:22might just be a lack of knowledge and or
17:24lack of willingness to go invest in you
17:27know the people and the processes that
17:29would you know be able to bring that to
17:31you you see it even with companies that
17:33do have sells and marketing
17:35organizations and you know so I'd be a
17:36little careful to say in any cells and
17:39our marketer is gonna be able to figure
17:42this thing out for me because you know
17:45it does take somebody there's a little
17:46more intuitive that it isn't taking
17:48shortcuts you know somebody that wants
17:50to go understand and create the value
17:52I've actually found you know roughly two
17:55types of salespeople that roughly
17:57aligned with the maturity of the market
17:58and amateur market the customers already
18:00educated so like the type of sales
18:01percent excels in that environment is
18:03very different than in the early days I
18:05actually think that the actual
18:06competency of the salesperson depends on
18:08the size of the market I mean different
18:10salespeople are optimized for different
18:11types of markets I totally agree one one
18:14trap a lot of CEOs or founders might
18:17fall into here is I'm gonna go hire
18:19somebody that's selling something
18:20somewhere to what I sell and if the
18:24problem with that I like in your case if
18:25I want to go you know Menaul network
18:29guys remember I probably screamed at you
18:31and you know sometimes they're already
18:36native and what you were doing and in a
18:39lot of cases what other technical
18:42founders are doing is so
18:43transformational that you you're not
18:45even able to sell that salesperson end
18:47or without those teams in a lot of cases
18:48it because they're not even gonna
18:51believe it themselves
18:52yeah but not only that I mean this is
18:53this is something that you told me which
18:55is a listen you can't take someone
18:56that's selling and doumitt rumor can put
18:58them in an immature market here's the
19:00big trap that in and I totally fell into
19:02this and I think a lot of first-time
19:03founders fall into is often the mature
19:05market salesperson is really compelling
19:08yeah III just and I'm probably might
19:11have gotten a little final cuz you've
19:17changed so much between the worse
19:20they're probably like you've really got
19:22to go find somebody that really enjoys
19:25has that intellectual curiosity and that
19:28deep understanding of the you know the
19:31customer and or will tease that out
19:34somebody gets excited about doing this
19:36exact thing it's typically not the one
19:39that's been running in somebody's
19:41playbook it's the one that really
19:43understands how to go create that
19:46playbook from scratch somebody gets
19:48excited about this that can can with the
19:50with the founder and the technical
19:52vision they can go map up to that and
19:55translate that to wow that could be
19:57really transformational that person that
19:59can take you to those early potential
20:01targets and prospects turn
20:04into customers learn stop put the pulled
20:08the recipe you know take the recipe make
20:10it repeatable turn that into a playbook
20:12make that scalable you can't move it out
20:16of the lab you know into production
20:18unless you're you're pretty sure right
20:21that's a different that's a whole
20:23different profile than you know grabbing
20:26someone off the shelf that you know it's
20:28been on a route cell for their whole
20:29career so much of the early customer
20:31engagement should be like figuring out
20:33the product market fit and so you really
20:35want market feedback that you can use
20:38and if you have somebody that like you
20:40know every meeting is a good meeting and
20:42they're using relations doesn't that I
20:43don't think you get real feedback from
20:45the market but if you got like a good
20:47hunter that's looking for the real
20:48opportunity and the large deal and will
20:50fight for it I think that the business
20:52gets that feedback so I think it's so
20:54critical to hire the right type of
20:56salesperson early on so talk more about
20:59packaging you know how do people think
21:01about new functionality how do you think
21:03about upgrades the existing
21:04functionality how does all that play
21:05into it it depends on what we're kind of
21:07product we're talking about but is
21:09though is that customer early on gonna
21:12need everything that's in the product
21:13the way it's packaged or in some cases
21:15let's say there's three buckets of
21:16functionality but in most in a lot of
21:20cases depending on the user maybe some
21:22use maybe some buyers only need one but
21:25as it expands they're gonna need to
21:27and/or maybe eventually they'll need all
21:29three so should we chunk that up to make
21:32it easier for them to get started even
21:34they don't need it the other
21:36functionality or they don't recognize
21:39that need yet so there's you know show
21:41maybe we should have three prices for
21:43for an all cart type version and they
21:45may we have a package if they get it all
21:47upfront but then the other thing is
21:49let's take the the product roadmap and
21:51let's look ahead let's take the feedback
21:54we're getting from the market
21:55understanding what's coming down the
21:57pike or what we're thinking about
21:59building and I think this needs to be a
22:01closed-loop process from the field with
22:04product development as you mature your
22:06product management product marketing all
22:09these groups need to be working together
22:11and kind of challenging each other eyes
22:14is this something that should be added
22:16is this something the customers
22:17gonna get value out of that we should be
22:20charging for because we can put an ROI
22:22to it and we can make it easier to buy
22:25early on and they can grow into it later
22:28on with with the packaging and or
22:31different options the other thing is
22:32that you know one solution in one
22:34vertical land or use case could from a
22:37pricing standpoint or a value standpoint
22:39can be completely different in another
22:42so you've got to kind of balance those
22:44types of things from a value based
22:45standpoint you've got to have the knobs
22:47just ready to crank I think a lot of
22:50companies wait too long and or they drop
22:52the ball on it so you've doing your
22:54company you're creating your product you
22:56know you've set your pricing pretty
22:57aggressively you've established a price
22:59in the market you're very happy but
23:00you've probably necessarily priced
23:02yourself out of some constituencies
23:03right so now you want to go ahead and
23:05expand your footprint you maybe want to
23:07go to like other areas or other
23:09verticals and you know you want to do
23:11this in a way where you maybe have
23:13tiered pricing but the risk of tiered
23:16pricing is cannibalization if you don't
23:18know you're gonna do this beforehand you
23:20may not have the flexibility to actually
23:23pull out independent bits of value and
23:25so now you've got you know on one hand
23:27either you cannibalize yourself with
23:30like an over feature-rich product for
23:32the lower price or you don't get
23:34sufficient market expansion because
23:36you've priced yourself out of it and so
23:37like I think that absolutely right early
23:40on you should make sure that you're
23:41thinking through how you can bifurcate
23:43this when you do your market expansion
23:44another another good example on that is
23:46the you know those early customers
23:48sometimes if you if you've really if
23:51you've done a good job you've got those
23:53early wins and you gave them a the
23:56sweetheart light house type deal you've
23:59really got to pay attention to not just
24:01the pricing but how you've gone and
24:04contracted because later on I've seen
24:06that happen over and over again you that
24:08company's just kicking themselves in the
24:10tail because they really gave up the
24:13farm because some of this you're right
24:14is a product packaging issue have you
24:16literally sold everything that you will
24:18ever build in perpetuity to this
24:19customer I'm trying let's go get those
24:21lighthouse customers but let's put a
24:23fence around the quote unquote the
24:26enterprise thing and you know a lot of
24:28cases it's just the startup is marching
24:31wolf and come on in and you know I'll
24:34huff and puff and blow your house down
24:35and guess what these big companies know
24:38how to negotiate and contract and they
24:41know every trick in the book and we see
24:43some of these teams walk in with their
24:46junior varsity uniforms on and there's a
24:49lot of injuries that happen so you
24:50really got to be careful so how do you
24:52solve that I mean you know get some help
24:53you know make sure you get the right
24:55advisors helping you I'm into early type
24:57deals yeah I think it's important people
24:59understand how deceptive this all is
25:01because many large companies have
25:04outreach programs to start up so like if
25:06you engage with a you know a finance
25:07company like a large bank they'll be
25:09like listen we work to startups all the
25:10time they have whole groups that take
25:13these things in POC them that in my
25:15experience never actually makes its way
25:17over to the pyramid office so while
25:19they're great at you know engaging with
25:21you lightweight process parking finding
25:23value you meet the technical teams you
25:25even have a deployment scoped out and
25:27professional procurement person in the
25:29room and if you don't know what you're
25:30doing I mean I've been in multiple
25:32situations we were very close to
25:33basically giving site licenses to like
25:35hundred thousand person organizations
25:36for almost on pricing and this is when
25:38again mark comes in and in and kind of
25:40sets us straight but it's very very
25:41important to be sure you know for every
25:43one of these large deals which are
25:44pretty out there in the forest but you
25:46will get eaten if you're there after
25:48dark so what how do you fix problems or
25:53fix mistakes what if we've gone out and
25:54we have priced too low or what if we've
25:56you know discovered that we essentially
25:58haven't ring-fenced people and we've
25:59given them stuff how do you even how do
26:01you approach that problem how do you
26:02think about it are there things at least
26:04you know in retrospect companies can do
26:05to kind of right the ship in those
26:07scenarios yeah I mean it's really I mean
26:10it's case specific a lot of it is in the
26:12language of the agreement that you've
26:14done I mean if you're doing if you're
26:15doing term you know term licensing or
26:18subscription type deals the you know
26:20that's different than a per perpetual
26:22that's another piece on this contractual
26:24thing the buyers you know are saying
26:26we're gonna do it on our paper and and
26:28that type of thing this startup you know
26:31doesn't have anything I don't even get
26:33these questions all the time it's like
26:35we're trying to figure out how to deal
26:36with these guys and they want us to mark
26:38up their SLA s and their amylase and you
26:42know master license agreements and stuff
26:45we don't really know what to do it's a
26:46reason all the Dukes you haven't put the
26:48work in to kind of figure out what yours
26:49is gonna be so the ideal situation as
26:51quick as you can you need to think this
26:52stuff through and you need to have your
26:55language and look early on particularly
26:58even later on when you're a big company
26:59you're gonna you're gonna swap paper and
27:02everybody's gonna mark it up but I
27:03should know what you need in from a
27:06language standpoint to protect yourself
27:08as far as redoing the deal it's just
27:11customer or its case specific one thing
27:13I'd like to add though along those lines
27:15though on the product development side
27:17if you think about this early enough and
27:19and it doesn't have to be right at the
27:20onset but as you you you grow the the
27:24product and functionality out from a
27:26product standpoint or there's things I
27:27can kind of turn on and off to help me
27:29module eyes you want to think about how
27:31how I can do that particularly and you
27:33get the Bottoms Up models you know
27:34they're there's a lot of nuance in that
27:36as well and there's always the
27:38resistance and or in the DevOps type
27:40environment on the open sources you're
27:42moving up the stack to the you know the
27:44premium and/or the enterprise type
27:47pricing and functionality and support
27:49that if you're not constantly
27:52understanding where you're at with the
27:54customers and or the in the competition
27:56a lot of cases you're probably putting
27:58yourself at risk so having that on the
28:01product side be able to turn things on
28:05and off or to bill measure and monitor
28:06and be able to stat not only establish
28:09but measure that value over time I see a
28:11lot of companies even big mature
28:12companies they've done all the front
28:14work they go get the deal everybody
28:16agreed on you know what what the value
28:18is gonna be one of the most valuable
28:19things is to go back and validate that
28:22and put that into a case study and the
28:24best place to sell something is where
28:25you've already sold something right so
28:27that constantly working with the
28:28customer and and with the engineering
28:30and product development to kind of bring
28:32the best value to the customer and then
28:34measure it and make sure everybody's on
28:36the same page and then you know that
28:38helps the next ten twenty hundred
28:41customers come on board too from a
28:43sureness standpoint Scott to your
28:45question about like setting pricing in
28:47the market I mean the bad news about
28:48setting pricing in a market is is really
28:50hard and it takes a long time to
28:51actually set the price in the market the
28:53good news is it takes a long time so you
28:54know if you enter at too low of a price
28:58a long time for these things to solidify
28:59and so I do think that there are options
29:02to kind of raise price you know add
29:03differentiation based on functionality
29:05especially early on in the the product
29:07cycle so it's not kind of like a misstep
29:09that you want to do but if you do it I
29:10do think there's a lot of time to to
29:12I agree I totally agree there's gonna be
29:14a lot of trial and error process I want
29:17to touch on two other things quickly
29:18first one is just so we've been talking
29:20about kind of initial pricing and
29:21packaging and stuff like that how do you
29:23think about kind of the ongoing process
29:24so how often should CEOs and the VP of
29:27Sales and the VP of Product Manager be
29:29thinking about when do I revisit pricing
29:31you know is it on a release basis is it
29:33new competitors enter the market you
29:34know what are the things that people
29:35should be thinking about that give them
29:36some guidance as to you know how often
29:38and how frequently you think about these
29:39types of things I think it's it's almost
29:41constant again a lot of it depends on
29:43the stage but if you're not reviewing
29:45yeah a win-loss type report on a monthly
29:50at least a quarterly you know some kind
29:52of fairly frequent cadence depending on
29:54what's going on in your business and in
29:56the market and doing the post-mortems on
29:59both sides of that I think you're you're
30:01you're putting yourself to risk and
30:03mapping it up with where am I out with
30:05the product where am i out with my
30:07customers that whole roadmap discussion
30:09isn't just an internal discussion that's
30:11something that you're constantly doing
30:13with your early customers that may be
30:16part way down the journey to fully
30:19deploying your solution you're able to
30:22check that from a pricing and
30:24functionality standpoint then what is
30:26the competitive dynamic and landscape
30:29look like I mean I might be getting you
30:32know pressure from below me maybe it's
30:35from the open source world or the
30:36homegrown maybe it's from lower end
30:38competitors that are just doing small
30:40medium and and you're starting top down
30:43in the market you know with the bigger
30:45companies it may be from incumbents that
30:48are reacting and starting to you know
30:50understand that you're you know you've
30:52you've done some damage to them and they
30:54might start being they might be
30:56adjusting what they're doing so a
30:58constant review I think of that is you
31:01know and really a 360 type situation is
31:04something that should be pretty frequent
31:07other question I had was you guys have
31:09also hinted us a couple times but the
31:12the type of sales organization you can
31:13support and what kind of pricing you
31:15have out in the market you know and I
31:16know if there's any heuristics we can we
31:18can give folks but you know in order to
31:20be able to support for example a direct
31:22Enterprise sailing effort selling effort
31:24which requires you know a lot of feet of
31:25high-touch there are probably certain
31:27ways you have to think about pricing and
31:28what's your average selling prices and
31:30what you can get em an account versus
31:31obviously something that might be done
31:32through an inside sales organization so
31:34is that is that something that casinos
31:36and you know VPS of sales and music
31:38products need to think about from the
31:39very beginning which is how it does
31:41pricing relate to the actual mechanism
31:42by which I'm going to go to market and
31:43and how should people think about that
31:45yeah I think it's probably it's pricing
31:47its packaging it's my product type
31:50strategy if I'm gonna be a bottoms-up I
31:52mean it's gonna start with you know some
31:53marketing and you know a framing and a
31:56premium type model and I'm gonna work on
31:58that adoption and then convert them from
32:00freemium more to the premium and later
32:03on it'll be enterprise then that's it
32:04because my transaction my aspies are
32:07gonna be extremely small then that's
32:09going to drive your your go-to-market a
32:12lot of it is product related if it's
32:14something is gonna requires you to come
32:15in high and move left and right and be
32:19agile and organization as well as up and
32:21down and because of the complexity is
32:24that typically means there's also going
32:26to be a big outlay either kept capital
32:28and/or operating and that's probably
32:30going to require you know an outside
32:32direct sales force the pricing better in
32:34that and the size of the deals are gonna
32:36have to map up to support that to go
32:38fund that so you can't have a mismatch
32:40in some cases you're gonna kind of have
32:43all right you're gonna have that you
32:44know the ability to to sell across stall
32:47and you might have to put in the layers
32:48of your go-to-market
32:49you know from a cells and a marketing
32:51and a marketing standpoint to build that
32:54bottoms up you know maybe a mid mid
32:56market type or commercial type teams and
32:59a more the enterprise major account type
33:01name to count situations and different
33:03types of marketing to drive different
33:05types of penetration across the board so
33:09it you know it really hinges around the
33:12product that also can hinge around what
33:13your your product development strategy
33:16is and and war with you what a
33:17competitive landscape might look like
33:19I mean think of tons of examples yeah
33:21often in tactical organization sales
33:24basically dominates like
33:25because it's a variable cost you need
33:27more sales to bring in more money type
33:28thing where R&D is often more fixed and
33:31the cost of like a nice arse gonna be
33:34much less than a direct sales force but
33:36only certain types of products where
33:38markets are amenable to in inside sales
33:41model right like if it's a very mature
33:42market the customers educated is
33:44probably more amenable than if it's
33:45something totally new also if it doesn't
33:49require a lot of integration or isn't
33:50super technical or the product is made
33:51very simple to use it's more amenable to
33:53an ISR an ISR is an inside sales rep
33:55which is basically someone on the phone
33:57which will call rather than you know has
33:59a briefcase opposite an airplane it's
34:01lower contact what we've seen in our
34:03portfolio companies a number of them is
34:06actually they'll experiment with both so
34:07they'll start with iosr and a couple
34:08field and they'll actually play with a
34:10model to understand what works best
34:11especially if they're moving towards
34:13more non-traditional buyers for IT and
34:14so we've seen this in a number of
34:15companies and they're able to determine
34:17over time which model is the most
34:19cost-effective yeah I also see in a lot
34:21of cases you know it starts one way and
34:23they wait too long to add the other
34:24layers in so I mean it's very common on
34:27the inside type bottoms up motion
34:28particularly as you build out the
34:31management that sometimes you they'll
34:33miss moving upmarket because the VP
34:37might not have that skill set you know
34:39to go build out that next level so
34:41that's something I think the first time
34:43SEOs and need to understand and be
34:46questioning themselves and get help to
34:48question am I am I slow on the whole
34:51company down because I've you know under
34:53hire again it depends on the you know
34:55the stage of the company but you should
34:57look at and calibrate and look at both
34:59you know what does a an under versus an
35:03over provision look like and how much
35:05Headroom am I gonna have because you
35:07could damage yourself by waiting too
35:09long so we're talking a lot about kind
35:11of first time CEO is here and let's just
35:14assume products not taking for some
35:15reason it's not selling we're missing
35:17our plan as a CEO how do you know
35:19whether you have a product problem
35:20whether you have a problem with your
35:21sales team whether you have a pricing
35:22problem a packaging problem how do you
35:24tease these things apart in a way that
35:26actually helps you think about you know
35:27ways to address issues like that
35:28the one bit of insider advice that I
35:31would give to you know first-time CEOs
35:33or entrepreneurs is it's really hard to
35:37find product market fit and
35:39this saga that can last for years and
35:42you know you're gonna doubt yourself
35:44you're gonna doubt the product and
35:46you're gonna doubt the market and you
35:48know all sorts of different feedback and
35:49especially if you're doing like serious
35:51category creation I mean it takes a long
35:53time for markets to mature markets
35:55mature at their own pace so I don't have
35:57a simple answer for what to look for but
36:01I do know that you have to be patient
36:03and you have to be persistent you know
36:04takes a while and I also know having
36:06seen it once you hit the inflection it's
36:09really obvious once you know you hit
36:11product market fit you start to get more
36:14engagements in the organization can
36:16handle and you can't scale enough mark
36:18Martine thank you for the time it's time
36:20for us to wrap so just to kind of
36:21capsulate what we talked about you know
36:23price early price often this is
36:25definitely never process get your sales
36:27guys in and the right sales guys right
36:28whether they're the kind of hunter or
36:30gatherer folks and early to help you
36:31with this process and then you know kind
36:33of the important point that you know
36:34mark always makes which is you got to
36:36think about packaging right don't give
36:37away basically you know the entire
36:39collection of stuff that you will build
36:40for the next 20 years to your first
36:42customer so think about how to segment
36:43it both in terms of users as well as
36:45features and functionality so lots of
36:47things for people to chew on here and be
36:49aggressive with pricing be aggressive
36:50the pricing that's right thank you thank
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