0:00
The good founders need to be able to dominate both market share and wallet share. It is not a choice.
Search this video
0:04
You need to get better at both.
0:06
It feels like every company wants to be an AI company these days.
0:09
How is AI pricing different?
0:11
>> The winners in AI will need to master monetization from day one.
0:13
If you're bringing a lot of value to the table and you started training your customers to expect $20 a month and you anchored yourself on a raw price point, you're in trouble.
0:22
20% of what you build drives 80% of the willingness to pay.
0:24
But the irony is that that 20% is the easiest thing to build often.
0:29
What would you say is the biggest lesson you want founders to take away?
0:32
If you think about market share and wallet share, let's think about it as a 2x two.
0:35
The quadrant that you really want to be in is the outcomebased pricing model.
0:39
The top right quadrant where you have great autonomy and great attribution.
0:43
About 5% of companies are probably in a true outcomebased pricing model.
0:48
If you want to win in AI, figure out a way to get to that quadrant.
0:53
Do you feel like the popular IDE startups are going to be in trouble down the road?
0:58
>> Some of them yes without naming names.
1:02
>> Today my guest is Mavan Ramanujam.
1:02
Mavan is the smartest person I know on pricing and monetization strategy.
1:07
As managing partner at Simon Kutcher, he's worked with over 250 companies including 30 unicorns to help them figure out how to price, package, and grow their products.
1:18
He's also the author of the book on pricing called Monetizing Innovation.
1:22
And now he's back with a new book, a sequel called Scaling Innovation, which teaches you how to architect your business for long-term profitable growth.
1:29
It also how to avoid the common traps that teams fall into that keep them from building real, durable, sustainable businesses.
1:34
Bill Gurley wrote the forward.
1:36
I had a chance to read an early copy. I absolutely loved it.
1:40
It's a book that every founder needs to read.
1:41
And in this episode, Mavon shares many of the biggest lessons from the book, including how pricing strategy is very different for AI companies, why you need to get your pricing model right from the start in today's market, a very simple 2x two to help you pick your pricing model, how to gain pricing power, a ton of tactical advice for negotiating more effectively, the most common traps founders fall into, and so much more.
2:04
If you order five copies of the book, Mavon is offering a chance to win a free conversation with them, a signed copy of the book, an invite to the book launch, a t-shirt, and more.
2:14
Just send a copy of your purchase receipt to promo at 49palmsvc. com.
2:19
And some more good news, Marvon is now more accessible. He left Simon Kutcher.
2:23
He's now investing full-time with his own fund.
2:25
He focuses on earlystage AI companies.
2:28
If you want to work with him, check him out at 49palmsvc. com.
2:32
If you enjoy this podcast, don't forget to subscribe and follow it in your favorite podcasting app or YouTube.
2:35
With that, I bring you Monavon Ramanujam.
2:40
This episode is brought to you by Interpret.
2:42
Interpret is a customer intelligence platform used by leading CX and product orgs like Canva, Notion, Perplexity, Strava, Hinge, and Linear to leverage the voice of the customer and build best-in-class products.
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3:40
Today's episode is brought to you by dx.
3:42
If you're an engineering leader or on a platform team, at some point your CEO will inevitably ask you for productivity metrics.
3:49
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Visit DX's website at getdx. com/lenny.
4:34
Maravan, thank you so much for being here and welcome to the podcast.
4:37
>> It's exciting to be back, Lenny.
4:37
Thanks so much for hosting me again.
4:39
This is a a very rare second visit to the podcast.
4:44
You've got a new book coming out.
4:44
I've got a very early copy right here.
4:46
If you're watching on YouTube, here's the copy you sent me. It's like 200 pages.
4:52
Did you print this out on your printer, by the way? >> Yes.
4:54
I think I ran out of printer ink after that, I guess.
4:58
>> I appreciate the early copy. It's amazing.
4:59
What we're going to be doing with this conversation is going through some of the biggest lessons that you share in this book to give people a sense of many of the things that you share, many things you've learned since writing the first book.
5:09
Let me start with this question.
5:11
Why did you decide to write another book and what is the difference between scaling innovation which is the name of this book and monetizing innovation is the name of their first book.
5:20
So monetizing innovation, we actually wrote it 8 years ago. Time flies.
5:23
ago. Time flies. Uh and the core thesis of that book was you know how do you build products that are not just cool but are products that people need value and are actually willing to pay for and I think that took a life of its own and over the years we kept getting another question from entrepreneurs that hey we
5:40
built a great product we know there is willingness to pay but how do we build a great business how do we scale this and the brutal truth is that even if you have a great product you might actually not figure out a way to grow fast and grow profitably so we wrote scaling innovation in an effort to actually solve that puzzle. So you can think of
5:54
So you can think of this as a sequel to monetizing innovation and monetizing innovation talked about how to build great products.
6:01
Scaling innovation talks about how to build a great business and you know writing a book is there needs to be a purpose for this.
6:08
For me the reason for writing books is about you know giving a bit back based on what I know to like founders and bookw writing is hard.
6:16
Writing a good book is even harder.
6:18
And just like uh monetizing innovation, scaling innovation is not, you know, marketing fluff.
6:23
It actually has real actionable stuff packed in that you can go on Monday morning and start implementing.
6:30
And uh we wrote this book to give back a bit of what we know and to help companies scale and architect towards profitable growth.
6:36
I love people like you that do the work for I don't know decades at this point learn from real life experiences over and over and over and then just share all this stuff with people like this is the most the highest ROI way to learn is uh letting you do all this work to learn all these things and then you share all your answers with us.
6:57
So that's that's why I love these books.
6:59
If you had to boil down the thesis of this book into just like a simple thought so that we can just start to plant this in founders's heads, what would what would that be?
7:06
So if I have to boil down the core thesis of the book, it is basically that if you want to build an enduring business, you need to be able to architect towards profitable growth.
7:18
What that means is you need to be able to master two engines, market share and wallet share.
7:26
It sounds simple on the surface, but it's actually quite complex because if you unpack that for gaining market share and wallet share, you need to be good at acquisition, monetization, and retention as in get customers, make an initial money on them, but also make money on an ongoing basis and have your customers actually refer more customers.
7:44
Many companies actually what they do is they focus on a single engine strategy.
7:49
So they focus on one of those two topics and pretty much exclude the other one.
7:56
That leads to all kinds of situations.
7:57
You see companies saying I'll grow at all costs and postpone monetization.
7:59
You see some who would say you know I'm going to monetize earlier on but they might miss out on acquisition opportunities or yet others who are so focused on a small set of loyal customer base that they're neither monetizing nor are they actually acquiring.
8:15
So to to the good founders need to be able to dominate both market share and wallet share. It is not a choice.
8:22
You need to get better at both.
8:24
But this does not mean that you're putting equal effort on market share and wallet share at all given points in time.
8:31
But it means you're putting equal attention on both those topics and being thoughtful about the trade-offs and saying how can I actually look at these two topics together so that I'm architecting towards profitable growth.
8:44
That's the core thesis of the book.
8:46
We actually showcase nine strategies that actually allow companies uh you know to architect towards profitable growth.
8:52
And every chapter ends with how this particular strategy uh you know circumvents a single engine problem and helps you you know focus on market share and wallet share at the same time.
9:04
And there's also CEO questions and leadership questions that people should reflect on when they architect towards profitable growth and are they on the right track?
9:12
I mean think of it this way.
9:13
If you're flying a, you know, aircraft, you don't want to fly it on one engine.
9:17
Why do you actually want to do that for your business? Okay.
9:20
So, I imagine many founders or people thinking about starting a company are are not feeling like they are in one bucket or another.
9:30
There's like intuitively you're not like, "Oh, of course, we're going to just focus on growth forever and that's all that matters."
9:34
You had these kind of traps that founders fall into that you referenced a bit.
9:39
Can you just talk again about just like the common traps you find founders fall into that uh people may recognize like that's what I'm doing probably.
9:47
>> So let's unpack the traps that are correlated to the archetypes.
9:50
So if you're a you know disruptor archetype you might fall into one of two traps.
9:57
The first one is you might land but you might not expand as in in your eagerness for like acquiring you might have actually given away a lot at less and you have given the farm away but you don't have anything to expand to.
10:08
That's the first trap you're likely to fall into.
10:11
The second trap that you actually fall into is you start uh you know a market share that is one is different from a market share that is actually held.
10:20
If you're so acquisition focused, you're actually focused on getting more and more customers, but you're not spending enough time with customers that you actually got to keep them, upsell them, you know, keep them happy, etc.
10:32
So, you might fall into that trap.
10:32
If you're a money maker, you fall into one of two traps.
10:36
The first one is you might nickel and dime your customers to death.
10:40
You know, because you're focused on monetization, you might come up with a, you know, very differentiated pricing model, different levers, hidden fees, things to charge for, you know, many different things.
10:49
and come across as just trying to nickel and dime your customer.
10:52
The second trap that a money maker actually falls into is that you know you fall into the price premium paradox where you you you think that pricing high actually indicates value but you priced it so high that you actually start you know hurting your acquisition.
11:08
So it is it is just becomes irrelevant for most people.
11:10
If you're in the community builder you actually fall into like two common traps.
11:15
The first one is you're focused so much on the you know foundation that you actually miss the frontier which is you're so focused on your loyal customer base that you forget forget to like attract you know different types of customers and you're not acquiring.
11:29
And the second trap that you fall into if you're a community builder is you know you train your customers to expect more for less because you're so eager to satisfy your loyal base.
11:39
You start giving them more and more and you're training your best customer base to expect more for less.
11:46
So these six traps are very common across these archetypes.
11:48
Being a profitable growth architect means that you're avoiding these traps and you're in in other words, you're simultaneously being a disruptor, a money maker, and a community builder all at the same time.
12:02
And how do you actually have that archetype and the right strategies to actually go about your business?
12:07
>> Okay, so this is what you want to not do.
12:09
You mentioned you have nine strategies for how you actually want to approach pricing, monetization, scaling, monetization and innovation.
12:14
Can you share a couple of these strategies, maybe two or three, maybe some of your favorites? >> Sure.
12:21
So I will unpack a couple of uh you know strategies.
12:23
Maybe the first one I would take is what we call as beautifully simple pricing.
12:27
So in your early days, it is by far more important to have pricing that is really simple and is not creating too much friction in the sales conversation.
12:37
I mean the asset test that you probably should go back on Monday morning and do is take some of your early prospects or customers and ask them to articulate the pricing strategy back to you. Right?
12:48
If they were to actually sell on your behalf, how would they describe the pricing strategy?
12:53
And if they cannot you know contextualize that in a simple manner and actually explain you don't have a simple pricing strategy. It's as simple as that.
13:01
And having a simple pricing strategy also means that you know your pricing needs to be able to tell a value story as in you need to contextualize your price based on the value that you actually bring to the table.
13:13
actually bring to the table. A great example here is you know superhuman when they started they were actually competing with like you know free email products and they were coming up with a premium email experience and how do you actually price that and I thought the team at Rahul with the team at
13:29
superhuman with Rahul and others did a pretty good job they came up with a $30 price point per month which was pretty simple but the way they kind of told the story was that you know you pay a dollar a day for actually getting four hours of productivity back in the week and then suddenly the pricing doesn't look too off. I mean, it's like the price for a
13:45
I mean, it's like the price for a latte in a week to actually get four hours back.
13:48
Why wouldn't I actually do that, right?
13:49
And pricing contextualization and value story doesn't need to just apply for premium products.
13:55
If you take another example like the Subway $5 footong is a different way to say a story with pricing that oh for a $5 you get a lot of value actually back, right?
14:03
So beautifully simple pricing really means coming up with a simple pricing strategy that your customers immediately get and your pricing is actually telling a value story.
14:15
And how do you actually get that?
14:17
So in the book we have a checklist of 10 different things that you actually need to look at to make sure that your pricing is beautifully simple.
14:23
As we go through these strategies, is your advice try all these things like you should do as many of these strategies as you can or is it maybe pick a few that work for you or just one is enough?
14:33
So there are nine strategies.
14:35
We have organized that into strategies that apply during your startup phase like the just just when you get started and strategies that apply to you in your scaleup phase.
14:43
So there are four strategies that you need to do in your startup and five in the scaleup.
14:49
So it's quite manageable.
14:49
I would argue that all four apply in the startup and all five actually apply in the scaleup phase.
14:54
But it's not like you need to start focusing on nine things from day one.
14:58
So this first one was was the startup phase. >> Yeah.
15:01
The beautifully simple pricing is the startup. Exactly.
15:03
And so in the scaleup phase, I think the one of the most important strategies is to like, you know, master negotiations and really get uh better at acing negotiations, right?
15:15
Especially if you're in a B2B situation.
15:17
And how do you actually do that?
15:19
Because you need to be able to talk about the value and contextualize your price based on those kind of conversations.
15:24
So to master negotiations, it comes down to actually three things.
15:28
mastering gives and gets, being good at value selling, and third having the right negotiation strategies.
15:37
So, let's unpack that each at a time.
15:39
So, giving and getting, why is that important?
15:40
Because in a negotiation, you know, typically you're giving, I mean, you're giving concessions, people are asking.
15:46
If you don't get anything back, you're basically indicating to the other person that they can keep beating you up and you can, you know, you you need to keep giving.
15:53
But if if you're giving something but you ask for something in exchange, then you're basically bringing authenticity into the negotiation because it actually means something you to you to give.
16:03
So you're asking something back.
16:05
It actually makes the negotiation way more effective.
16:07
And you know in the book we actually talk about the top 10 gets in B2B and the top 10 gets in B2C.
16:15
One of my favorite gets in the B2B situation is what I call as conducting a value audit.
16:20
conducting a value audit. So what this means is if you're giving a concession ask for a value audit and exchange where every 6 months you know a team internally from your customers would be commissioned to actually conduct a value assessment of your products so that it becomes their business case and you
16:38
co-create it with them saying how much value is actually produced and this is great because if they actually engage in that that gives you tremendous pricing power for like renegotiations because it is their business case they champion it internally and you're pretty much making your products pretty sticky. So it's a
16:52
So it's a pretty harmless debt, but it could be very powerful for like you know future negotiations.
16:58
So being good at gives and gets is Thank you.
17:01
for being good at gives and gets is really you know critical.
17:06
The second thing in mastering negotiations is being good at value selling.
17:10
And for being good at value selling you need to do three things.
17:14
First you need to be able to like create the needs.
17:16
Second you need to be able to create affirmation loops.
17:19
And the third one is creating a good ROI model.
17:21
And let's talk about each of those.
17:23
So creating needs is very important because you know many uh founders show up and try to understand what are the needs of the customers.
17:31
That's one way to look at it.
17:33
But you need to be able to create needs rather than just discover them right.
17:37
So like for instance if you're a you know marketing automation AI product and uh you know you you save like let's say three weeks of like work that actually needs to be done to actually get stuff in a dashboard that can be analyzed by marketing managers.
17:50
The way you create the need is ask about existing processes and say okay so just so I understand all of this stuff actually takes you three weeks to like put data together to actually have meaningful dashboards for your you know marketing managers to you know take action.
18:06
What if that was available to you instantaneously?
18:10
Oh, you have now just created a need. Right?
18:12
So, be in that mindset of creating a need as opposed to just discovering them.
18:16
The second thing is, you know, creating affirmation loops.
18:20
And this is really important.
18:20
I've seen a lot of founders get into negotiations.
18:24
They're so eager to talk about their products.
18:26
They keep talking about the products without any affirmation from the other side.
18:29
You need to pass and create affirmation loops.
18:31
Things like for instance, okay, so far you have seen all of this.
18:36
How does this actually uh you know play out in your company?
18:38
Do you see it as valuable?
18:40
What about this dashboard you actually like?
18:42
So when you ask these kind of questions and your customers are playing back the value that they actually see in your product, you're creating affirmation loops which become tremendously useful when you start selling the product finally because if they've agreed that there's value that is being produced then you also have a better commercial discussion.
19:02
And the third one is, you know, creating a good ROI model.
19:04
And, you know, I see a lot of founders work on a P and after the P is over, they'll show up with an ROI model and try to defend a price.
19:13
You've already lost the battle.
19:15
I mean, no one is going to believe an ROI model that you just cooked up.
19:19
Everyone is going to challenge you on assumptions.
19:20
the the right way to think about an ROI model is to actually co-create it with your customers from day one which means you know agree and validate on the assumptions and the inputs.
19:31
So like hey how long does this process take today?
19:36
How many engineers are there?
19:36
So you create ask questions that are all inputs to an ROI model and if you have done that process and the customer agrees on all the inputs they are very unlikely to push back on the output of an ROI model.
19:50
So a P needs to be framed as the purpose of a P is to build a business case and we are going to co-create an ROI model with the customer as opposed to it being a you know tech and product functionality feature test and you show up with an ROI model and when you're building an ROI model there are many buckets to focus on but the there are three that are very critical.
20:11
The first one is you know what are the incremental gains that you actually bring to the table based on KPIs and metrics that your customer is tracking.
20:21
So this could be things like incremental revenue, reduction in churn.
20:25
These are the immediate tangible clear impact to the business line based on the products that you actually bring to the table.
20:31
The second bucket is you know cost savings.
20:35
Are you reducing headcount?
20:35
Are you reducing license costs?
20:37
Like what are the tangible cost savings?
20:39
And the third one which is often overlooked is opportunity cost.
20:43
For instance, if you save you know 10 hours of time for like a team, what do they actually do with that 10 hours?
20:49
That can also be quantified.
20:51
So when you put all of these three things together, you start building a proper ROI model that you can actually use in your value selling to defend the right price.
21:00
And the so we talked about three steps in mastering negotiations.
21:05
The first one was gives and gets.
21:06
The second one was you know getting better at value selling.
21:08
The third one is actually getting better at even negotiations and what strategies would you actually use and there are a couple of uh you know strategies that we have found to be really uh productive.
21:20
The first one is to show up with options.
21:23
You know many many founders uh rush with like one product and one price and say okay this is a 100k product and that's what we're trying to sell.
21:32
Inevitably what will happen is the you know the immediate focus of the conversation will be on the price and you're only talking about price.
21:37
But if you have options on the table, let's say if you have a, you know, good, better, best.
21:43
If you have 100k product, a 200k and a 300k option, then you're not just talking price, you're talking value.
21:49
Because if your customer is budget conscious, they'd say, hey, I like the 100k price point, but I actually like the functionality in your 200k product.
21:58
Then your immediate question is, what in the functionality do you actually like?
22:01
Why is that beneficial for you?
22:01
So you switch the conversation back to like, you know, value as opposed to just talking about price.
22:07
And we have seen that with these kind of conversations, you're by far more better off to actually land in a much better place than just showcasing one product and one price.
22:17
And and showcasing options doesn't need to be just different products.
22:21
It could even be a pricing model choice.
22:23
And I'd probably give a, you know, simple hack that people can try on Monday morning.
22:28
Um, you know, I was talking to this founder who said, "Hey, I think uh I think the budget is about 100K.
22:35
Um that's what I believe from the key stakeholder.
22:37
But my product really brings crazy value.
22:40
It I could even charge let's say a 500k for this product but I don't have the courage to actually go and ask for a 500k uh you know price because I kind of know 100k is the budget. What should I do? Right?
22:54
So for those kind of situations actually show up with options in your pricing model.
22:58
So I we we coached him to like go in with a 100K plus 10% on any incremental value that you bring or it's a 500k fixed.
23:06
So now this is actually a great situation in negotiation because if you're price sensitive, you're focused on the 100k.
23:12
It's a you know small fee to actually get started but the conversation would gravitate towards what is that 10%?
23:18
How do you measure value?
23:20
That's a great conversation to have because now you're talking about how you add value, where's the value generation, what portion would you take and you know you see one of two situations.
23:30
Either the customer would say that's great, you're putting skin in the game, let's go with 100k and 10%.
23:33
Or 80% of the situations you might actually want to avoid the outcome based pricing as a buyer, but you're not really fixated on the 500k at that point.
23:42
It is the premium that you're actually paying for like the certaintity.
23:46
So no one is focusing on the 500k because there's a 100k option on the table and you just put a 500k and got the courage to do that and in this specific situation that 500k got negotiated to 400k and they just forex the deal compared to where they would be. Right?
24:00
So having options on the table when you negotiate is critical and there's also some tactics that we showcase in the book like anchoring is important.
24:08
If you start high you will also end up higher.
24:09
But the and also tapering concessions like how do you give concessions?
24:14
I mean the worst negotiators will start by giving you know a small concession and then they give a bit more when someone asks like you might give a 5% discount and the procurement guy says that's not enough.
24:26
Okay, I'll give you 10% more. Okay, that's not enough. I'll give you 15.
24:29
What are you indicating to the other person?
24:31
You're just basically indicating that I can keep beating you up and I can get more discounts.
24:34
The best negotiators who taper the concessions so they would say I can give you 15%. Okay, I need more. I'll give you five. I need more. I'll give you two.
24:43
So you're automatically indicating to the other person that the negotiation is actually ending. Right?
24:47
So how do you taper concessions also become important.
24:49
So when you put all of these three things together, if you master your gives and gets, you get better at value selling and you use the right negotiation strategy, you can extract full value from every deal.
25:00
That's probably way more important when you're in the scaleup phase.
25:05
>> This is such great advice.
25:05
I love that this is just one small chapter of your book.
25:10
Like this could make or break your company.
25:12
It's interesting that you have a whole thing on negotiation in a book about uh scaling innovation and growing your company.
25:20
Is the assumption here that your pricing and monetization is so impacted by how well you negotiate because that changes your entire pricing structure and how much you're making.
25:27
Is that why you put so much effort into this part? >> Exactly.
25:31
I mean in a B2B situation you can set all the pricing you want, come up with great pricing models, but at least even today it's a human having a human conversation trying to negotiate.
25:41
So if you cannot contextualize you know what you put on the table, how do you negotiate around value?
25:44
You know how do you contextualize your price?
25:46
You're leaving a lot of money on the table.
25:48
So to us negotiations is yet another monetization topic where you're thinking about it as extracting full value from every deal.
25:56
And this is not just uh you know negotiation tactics like you know keep your boss at home and just negotiate and things like that.
26:03
There's actual negotiation strategies that are rooted on value selling gives and gets and focusing on extracting full value from every deal.
26:13
So useful this idea of throwing out a third like higher priced option say 500k.
26:17
It's so interesting because usually the advice I hear is like just throw out twice the number you used to throw out.
26:24
Just like put it out there just in case which is really scary, right?
26:27
To ask for like what about $50,000?
26:29
And this is like a much less scary way of doing that.
26:32
Okay, but we also have this 500k option. Here's what you get.
26:36
And then they may be like, "Oh, that's exactly what we want."
26:38
And you're like, "Oh, wow. It worked." >> Exactly.
26:40
It's a very simple hack to get your courage.
26:43
>> That is a good price point. >> Wow. Uh this is awesome.
26:45
This is just like a a golden nugget within golden nuggets of of advice. Okay.
26:49
So, you have nine strategies. We've covered two.
26:54
Let's not get into them, but just what are a few more just so people know what else they might be able to learn. >> Sure.
26:59
We talk about how to uh you know land and expand as in how to design your best free product in such a way that you're landing but also expanding.
27:06
We talk about things like how to have the right packaging strategy.
27:11
You know how to stop churn before it happens.
27:13
How to do price increases effectively because at some point in your scaleup journey you need to increase price but how do you do that in a meaningful uh you know fashion.
27:23
So we have you know various strategies that apply both for the startup and the scaleup phase but in combination all of those things help you articulate uh and architect towards profitable growth. Awesome.
27:34
Okay let's talk about AI for a bit.
27:36
A lot of your book is about how AI pricing is very different from other previous traditional pricing strategies and it feels like every company wants to be an AI company these days.
27:46
So I think this is going to apply to a lot of people.
27:49
How is AI pricing different?
27:49
Yeah, AI pricing is very different from the previous uh you know vintage of companies. Why is that so?
27:55
Because AI founders need to tackle monetization from the very early days like day one in their seat stage preede uh kind of thing which was not probably the focus for you know the previous SAS companies. Why is that so? Because of two reasons.
28:09
One there's for the first time there's cost dynamics to actually navigate.
28:14
So you need to think about monetization from day one.
28:17
But there's also a more critical reason which is value capture.
28:22
Because with AI products, you're actually bringing a lot of value to the table.
28:25
And if you don't capture that from day one, then you're training your customers to expect more for less.
28:29
So for instance, think about this.
28:31
If you're building a, you know, aentic AI uh product that taps into labor budgets, labor budgets are 10x compared to software budgets.
28:40
So if you use all the old playbooks then you're under monetizing again from day one and and training your customers to expect more for less.
28:48
So how do you come up with you know foundational models that actually allow you to like capture the value that you bring to the table.
28:54
And why has this become critical?
28:55
Because you know with AI finally founders can you know really solve the attribution problem.
29:01
solve the attribution problem. In the previous vintages like for instance if you take slack you can say that the productivity went up efficiency happened but you cannot measure it monitor it attribute it to slack okay that's probably why they were in a seedbased
29:15
pricing you know pricing model but in today's situations you see companies that say in a fortune company I was able to improve throughput by 10% reduce scrap by 5% and when you get into those kind of situation where an AI is creating core value and is attributable to the AI right? You get a lot of
29:32
You get a lot of pricing power.
29:34
So the two questions that we commonly hear from you know AI founders is how do I set the right pricing model as in how do I charge which becomes you know way more important than how much you charge because the underlining business model has changed.
29:50
It is not we have moved from you know software being a you know pay for access to like now you're paying for work delivered.
29:58
So like the monetization models become key.
30:00
That is the first question that people actually ask us.
30:05
The second one is you know how do I navigate PC's commercial discussions early because the buyer on the other side also wants to see the value before they engage in a commercial discussion.
30:16
So those two topics become very critical and we have showcased a lot of this in the book.
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31:34
Let's talk about this PC piece because I think this is something a lot of people deal with and then I want to talk about this 2 by two that you have in the book and I'll I'll actually pull it up.
31:40
So, let's talk about PC's first.
31:41
let's talk about PC's first. So PC's uh you know when we talk about PC's many founders think about a PC as a proof of technical functionality and is their product actually working in like their customer environments and they set up the expectation that way saying hey
31:59
we're going to put the product and we are going to see if it actually works and and they would probably say should I charge for a P versus not and we will unpack that in a bit should you or should you not and the that's actually a completely wrong way of framing it. The
32:12
The P should be framed as the entire goal of the P is to create a business case. Period. Full stop.
32:19
It is not to like demonstrate you know product functionality fit within your customer environments ability to integrate.
32:25
All of that stuff is a consequence of the business case.
32:29
So if you frame it this way is you can say look it is a 30-day pilot for cocreating an ROI model and building a business case along with your users.
32:39
If we see value at the end of the 30 days based on the business case, we can get to commercial discussions.
32:43
So that way you have actually not talked about your price.
32:47
You're only focused on co-creating a business case with the customer and based on the business case you can actually come up with, you know, a proper commercial agreement and if they see value, they're going to pay you for it. Right?
32:59
So thinking about the PC's in that kind of manner and uh you know the question that I often get asked is should I charge for a PC?
33:08
And the answer is uh yes, but smartly.
33:12
Um let's talk about why it's important to charge.
33:14
Uh the reason you need to charge for a P is you start isolating people who are just tire kickers versus serious buyers.
33:22
It becomes a lead qualification mechanism.
33:23
If you didn't have that, you're going to attract all of these curious buyers who just curious about the AI.
33:29
They just want to see if it works or not.
33:31
They will say yes, I'll engage with the P.
33:32
They will take 30, 60, 90 days with you.
33:34
They will burn a lot of resources. Never buy.
33:36
you've just wasted your time. Time is of the essence.
33:40
So like having a price tag to your PC actually indicates that you know there is seriousness on both sides. So you should charge.
33:47
But how do you actually charge for it?
33:49
You need to charge for it smartly.
33:51
Um what this means is that you need to make sure that your PC pricing is not a reflection of your actual commercial deal.
33:59
Because let's say if you just say it's a 10k P for like a 30-day pilot, if you don't talk about the fact that it is not the same as your commercial discussion, you have now set an anchor that okay, it's a 120k per per year kind of deal if the PC works.
34:16
So you have to be clear that the 10K is only for building a business case.
34:20
Commercial discussions will follow after that.
34:23
It is not an indication of the actual commercial discussion.
34:25
But your you know buyer on the other side might still push you saying that's all great but I I need a price or a budget otherwise I won't move forward with it.
34:35
So there are two ways to actually you know deflect those kind of questions.
34:40
The first way is you know contextualize the price on the value.
34:42
So you you can say something like if if you're push for price, hey for customers such as yours, you know, we have been able to at least unlock 10 million in very similar situations and our pricing is, you know, 1 is to 10x when it comes to ROI.
34:55
So you basically said that you're a million dollars to actually get started, but you actually didn't say it.
35:02
You just said it's a 10 million and I'm I'm taking one in 10 in in exchange for it.
35:05
So you've kind of given the buyer an indication, but you have framed it in such a manner that that actually is justifiable, right? one in 10x ROI.
35:12
So that's one way to do it.
35:15
They might still say yeah that's good but I need a you know budget.
35:19
So then rather than just give them a budget saying it could be a 200k you know uh option. Don't do that.
35:25
That's the worst thing you can actually say. Give them a range.
35:27
You can say something like look the final pricing would be anywhere from 500k to a million.
35:32
And based on the business case that we would co-create with you we can pick a point in in that range that justifies the value that we bring to the table.
35:41
So you're giving budgetary ranges, right?
35:42
So that's the other way to actually go about PC's.
35:44
to actually go about PC's. So how you navigate your early wins, who you choose uh is very critical when you're building companies at scale and fast in AI because that actually dictates the destiny for the you know rest of your future and picking those early wins is very very critical and uh and having you know buyers who are serious lead
36:06
qualifying having the right PC process and thinking about PC's as frankly not just uh trying to see if your product actually works and delivers value But it's a great chance to have a commercial test and learn experiment and have fun with it and try to see what you can you know bring to the table in terms of your value and what portion can you actually take. So the core kind of takeaway here
36:25
So the core kind of takeaway here is for AI companies you no longer can just grow and figure out monetization later.
36:32
Your advice here is uh what you start with is what you're going to end up with.
36:36
And it's very easy to undermonetize because people aren't realizing that they're now helping with actual labor force uh savings versus just like SAS software that's making people a little bit more efficient. Yeah, absolutely.
36:50
I mean, I strongly believe that the winners in AI will need to master monetization and they need to ma master it from day one.
36:56
I mean and when we talk to early stage founders it is a topic that keeps many people up at night but that's also why we wrote scaling innovation and other assets so that they can get some more courage to think about you know pricing correctly from day one and it's uh become very critical for AI companies to do that.
37:16
>> Do you feel like the popular IDE startups I won't name names do you think they've undermonetized and they're going to be in trouble down the road?
37:24
>> Some of them for sure have.
37:24
>> Some of them for sure have. I think they will probably run out of it because they might show a lot of uh let's say uh fast revenue growth but is that enduring revenue are people actually going to stay and is there going to be churn and you know so there are a lot of uh uh aspects to architecting profitable growth it's not just growing fast but also growing profitably and having an enduring business so some of them yes
37:46
without naming names uh but uh yeah I think that's why it's it's it's important to be thoughtful about market share and wallet share well those are So there I think what you're saying here is they may not the retention may not work
37:59
for some of these companies but on the other hand they're really cheap like 20 bucks a month to help your engineer be like 10 times more productive potentially like is that too good a deal? Do you think they should have
38:08
Do you think they should have priced a lot higher? Yeah, for sure.
38:09
I mean if you're bringing a lot of value to the table and you started training your customers to expect $20 a month and you anchored yourself on a low price point.
38:18
I think there are companies that have actually done that and they try to undo it with like you know having more sophisticated let's say products that are actually higher priced or much higher priced etc.
38:29
That's one way to like undo that situation.
38:31
So it is it's really a trade-off between you know getting more customers and making money at the same time.
38:37
That's the whole point of the book market share and wallet share and how do you dominate both?
38:40
So, if they're being thoughtful about both and have a vision to not just, you know, grow market share, but also have a clear strategy to land and expand and increase wallet share, those strategies might pan out for those types of companies.
38:52
If you just threw out a $20 product hoping to just, you know, accelerate your market share, you're in trouble.
38:57
Okay, this is a great segue to this 2x two, which goes much deeper into this.
39:01
So, it's easy to be like, here's what you shouldn't do.
39:04
Here's your advice on what to actually do.
39:06
So, I'm going to pull up on my screen this 2 by two that you have in your book.
39:10
So if you're watching on YouTube, you'll be able to see it. Uh so talk about this.
39:13
This is essentially how to figure out an I the best possible pricing model and where you have the most power.
39:19
So when you talk about AI companies and you know monetization models, we get asked this question. Should I be usage based? Should I be outcome?
39:26
Should I be you know a copilot mode or how do I actually think about my pricing model?
39:31
So we came up with this framework which is a you know relatively simple straightforward framework but very powerful.
39:38
So there are two axes here.
39:41
One is attribution and the other one is autonomy.
39:43
And when you have high attribution and high autonomy, that is when you have high pricing power.
39:47
And we'll come back to that in a bit. Right?
39:51
So let's take the first uh you know bottom left quadrant.
39:53
That is the quadrant where your attribution is low and your autonomy is low.
39:57
In that situation, the best pricing archetype that actually fits is it is actually a seedbased or a subscription model because there's not much to do about it because you're not, you know, being able to like attribute a lot of value to what you bring, but you're in a co-pilot mode and you're not in an autonomous mode.
40:15
So, a seatbased pricing would actually make sense.
40:17
But if you're at that quadrant, the immediate thing to think about is how do you actually build more attribution and move to the right so that you actually get more pricing power.
40:26
Uh so if you think about the you know bottom right quadrant those are companies that have actually done that they have more they can prove more attribution to like what they actually bring to the table but they are still not in a fully autonomous mode as in there is still humans in the loop.
40:41
If you take cursor for instance you know it definitely improves productivity can actually bring down the time to actually you know do code the attribution is clear but it's still in a co-pilot mode.
40:53
In those kind of situations, a hybrid pricing model is the best option where you still have a, you know, seedbased model for the co-pilot kind of use case, but you also layer in a consumption model which actually says there are certain number of AI credits or tokens that can layer in the usage aspects.
41:08
So if you use more and more then you're actually paying more on consumption.
41:13
So it's a hybrid model that actually works there.
41:16
If you look at the top uh you know left quadrant those are you know products that are very autonomous but are not uh strong on attribution.
41:24
So these tend to be mostly like backend or infrastructure kind of products that are core critical to like run businesses can be autonomous uh but they are not directly impacting the KPIs that businesses are tracking and hence cannot prove attribution very effectively.
41:44
So you know in that situation you need to be on a pay for what you consume and a usage based model a seatbased model would not make sense because autonomous there's no human in the loop.
41:55
Uh but that's why you're also in a usage based model saying the more you use it uh the more you're actually charged and usage becomes a proxy for the value that you bring to the table.
42:05
The quadrant that you really want to be in is the golden uh you know quadrant which is the top right one.
42:12
That's the outcome based pricing model where you have great autonomy and great attribution.
42:16
And here is where I think AI can be really magical.
42:21
So this means you're not only charging for work delivered but you're charging for work delivered that was delivered by AI without no humans in the loop.
42:30
So that becomes more of an outcome based model situation.
42:33
So a classic example here is you know intercom for Finn.
42:38
Uh what they actually do is they charge based on an AI resolution.
42:40
So if an AI is able to you know resolve the ticket completely independently without a human in the loop then they charge for it.
42:49
If a human intervention is needed they don't charge for it.
42:51
So they are more on an outcome based model or like companies like you know charge flow would charge you know up to 25% on a charge back that they are able to actually recover because these are like you know core savings that you actually bring to the table based on your AI.
43:04
It is highly attributable highly autonomous.
43:09
So you can start moving towards an outcomebased pricing model.
43:14
If you look at the state of where AI is today as of the day of recording this podcast, uh now the most popular model is right now a hybrid pricing model.
43:22
So because this is also expected because you know the previous SAS playbook was usually on the seatbased model but they've all now moved on to at least a hybrid to actually incorporate AI credits and usage etc.
43:35
credits and usage etc. uh about 5% of companies are probably in a true outcomebased pricing model uh you know as of as of today but those companies some of the best ones are able to recover 25 to 50% of the value that they
43:53
actually bring to the table in the classic SAS situation we used to say if you can charge 10 to 20% of the value that's actually great but in AI you can actually charge 25 to 50% because it is autonomous you're doing it with the AI there's no humans in the loop. You know,
44:06
You know, you're creating incremental value to like the business metrics.
44:10
You're producing hard cost savings as opportunity costs.
44:14
You can justify all of that. It's attributable.
44:16
So, you can actually take 25 to 50% of what you bring to the table in there lot of benchmarks and studies that actually show that and this is also my belief that in the next 3 years that 5% number will move to 25%.
44:31
So what this really means is if you want to win in AI, figure out a way to get to that quadrant because that's the magic quadrant.
44:39
If you can truly, you know, price based on outcomes, you've achieved and unlock tremendous value. Wow.
44:47
Okay, I'm just going to pause again.
44:50
This is amazing, Maravan.
44:52
Thank you so much for I love that again that you just spent years, decades studying this stuff.
44:55
Come here, tell us all the answers of what we should be doing. This is incredible. Let me ask you this.
45:01
Uh, by the way, for FEP folks not watching on YouTube, the companies you have in the golden quadrant, outcome based pricing, Sierra, Finn, and ChargeFlow, we've got the founder of Sierra and Finn coming on the podcast soon, so we'll talk about all this with those guys. >> Awesome.
45:17
>> So, so is the way to use this 2 by two figuring out your model like is it like, okay, I'm like cursor, I'm going to go in this quadrant, or is it how do I get to outcome base no matter what?
45:29
that's where I need to be. >> Yeah.
45:32
So that's a great question.
45:32
The first one is to actually figure out uh you know what is your right archetype based on where you are today.
45:39
I think that is most important like if you try to rush into an outcome based pricing model but cannot prove attribution you will fail right.
45:45
will fail right. So it is really coming up with uh what is the right architect based on what I'm doing today but also use this 2x two to say how do I you know paint a vision to actually get to outcome based and can I get how can I get close to that or can I be purely an outcome based model right how do I
46:03
evolve into that what that would mean is you know how do I build functionality in the products to actually show attribution how do I build more agentic workforces to like take the human out of the loop and be more autonomous and being thoughtful about your vision and strategy so that you will orient yourself towards more you know outcome based pricing models. So when you think
46:22
based pricing models. So when you think about increasing attribution that means first of all understanding you know what are the KPIs of your uh customers how do they track their business performance can you impact it can you productize things in your product that showcase
46:37
that you are actually affecting those KPIs in a positive manner can you build dashboards to show you know value attribution uh can you do those value audits that we talked about on an ongoing basis to actually show that you're bringing a lot of value to the table and is attributable to too. So how
46:51
So how do you create these kind of attribution mechanisms become important and also autonomous based on like you know building more agentic workforces that can actually be on an autonomous mode.
47:04
So pick the right archetype and plan to like get to like as close as you can to the outcome based pricing model.
47:09
That's how I would use the 2x two.
47:11
And you actually kind of see this happening with certain industries, right?
47:14
certain industries, right? If you think about coding as a overall category like uh you know back in the day with GitHub everyone they started with a seatbased model right they've now moved to like the hybrid based pricing model with cursors and everyone else but the
47:28
natural move would be more towards a outcome based pricing model where you know a AI agent can probably code everything uh at the same time debug it and you're kind of almost hiring a AI developer or AI QA person and that actually becomes more closer to like a outcomebased model because it's attributable and autonomous. So there is
47:47
So there is picking the right archetype and then figuring out your pathway is is the key way to interpret this 2x two.
47:54
This explains why everyone's bullying agents.
47:58
That's where the money's at is what you're telling us here. >> Yeah. >> Okay.
48:01
And >> it's going to be the age of the matrix.
48:03
Too many agents agent smiths everywhere.
48:05
That didn't turn out too great.
48:05
Um so what I'm hearing is if I were Canva, so Canva here in your model is bottom right.
48:13
They're in a hybrid pricing model.
48:14
They have a base fee and consumption fee.
48:15
What I what you would do if you were helping Canva is what can you build that creates more autonomy, an autonomous version of Canva?
48:23
And it's not like you need to do this.
48:25
It's just you have more pricing power if you figure something out there. >> Exactly.
48:31
I mean and uh and a good case for that is the you know fin product from intercom because traditionally you know all of those kind of companies used to price based on an agent basis.
48:40
how many customer service agents are actually using the product.
48:44
It used to be seedbased but they built out FIN which is a completely AI resolution for those kind of support tickets and then that actually enables them to like move to the outcome based pricing model quadrant. Amazing.
48:55
So you say you're an AI founder today.
48:57
You're thinking about your pricing strategy, your monetization strategy long term.
49:01
Your advice is work with design partners, create these PC's where you work on this ROI model with them to ideally find some outcomebased pricing strategy.
49:14
Is that a good way to summarize?
49:16
What would you add to that? >> Yes.
49:18
I mean, um, at least be able to contextualize the business case.
49:20
Even if you're not moving to an outcomebased pricing model, be clear on the outcome that you're actually, you know, creating for your customers through that business case, which actually will enable you to charge a fair price in exchange for that outcome.
49:35
And if you're, you know, if your customers agree with the business case, then you can actually take a portion of that.
49:43
>> Finn actually, they're a new sponsor of the podcast and I learned I didn't know this.
49:46
It cost 99 cents for every out for every support ticket they sold >> through AI.
49:51
If it's a exactly if it needs a human intervention then they don't charge for it. >> Yeah.
49:56
And it's just like what that's such a simple story.
49:59
Your agent cost 20 bucks.
50:01
This things cost 99 cents. >> Yeah.
50:04
That is uh two chapters in one.
50:06
Beautifully simple pricing and an outcome based pricing model.
50:09
>> And interestingly they were the the least like the most hated pricing model initially.
50:13
I did a survey on Twitter once like what products you pay the most for and it was always intercom and everyone hated their pricing and they found a solution.
50:20
I think they have found a great solution. >> Okay.
50:23
So, is there anything else along these lines that you think companies especially AI companies should be thinking when they're thinking about pricing that you want to share before we move on to other stuff?
50:33
move on to other stuff? I think we've covered most of the topics like we said it's uh you know being thoughtful about PC's choosing the right you know pricing archetype or the pricing models those things become very critical in the early stages but when you start scaling and
50:48
let's say you become a multi-product company then you need to start focusing on what what kind of packaging strategy should I have is it a platform plus add-ons should I have like versions of the products like good better best should I tackle different use cases because now my AI can solve an insurance
51:06
use case and a you know healthcare use case should I productize to like different use cases is that my packaging strategy or should I keep it completely modularized for like people to pick and choose so these kind of questions become more critical and that's why the chapter on uh blowing up your packaging from
51:23
your early days and coming up with your packaging strategy for your scaleup phase become very critical so I think that's the next thing that founders would be hit with as and when they build multiple products they need to think about the whole packaging, cross-selling, upselling motion. >> This touches on something I was about to
51:37
>> This touches on something I was about to ask, which is a change in your pricing strategy.
51:40
Uh, how often does is does it is it a success to change the way you price?
51:46
Like I know we're talking about you need to get it right from the beginning if you're an AI company.
51:50
In your experience, how often like what does it take to successfully shift the way you price down the road?
51:55
If people are listening to this and like we already have this pricing strategy.
51:58
Back in the day, we used to say that you should revisit your pricing strategy, overall pricing model, you know, how much you're charging at least once in two years.
52:08
With AI, that's probably reduced in half.
52:09
Um, because of the scale with which and the speed with which companies are built and competing.
52:16
So, I would say that it is an ongoing journey.
52:18
It is not like you just solve it in day one, you know, fill it and forget it.
52:22
It has to be uh you know you have to be thoughtful from day one but also be ready to like pivot iterate and you're going to learn along your journey.
52:31
So the whole point is to think about pricing as also a test and learn opportunity in your early days and there are things that you would change more often and there are things that you probably don't want to change too often like things like pricing model.
52:43
Unless you have, you know, really changed your attribution autonomy, there is no need to like shift your pricing model.
52:50
Stay within that archetype. Don't confuse things.
52:53
But there are things like price points.
52:55
Should I increase my price because it's been, you know, 6 months or a year?
52:59
Yeah, you should because in a year there's probably prices go up 3 to 5% for everything that you consume.
53:04
But how can you actually increase your prices and be thoughtful about it?
53:07
So that entire chapter on how to do price increases you know smartly become very important in the you know scaleup phase.
53:16
I think Warren Buffett summarized this really well.
53:18
He said uh the true definition of a company is a pricing power and if you have a prayer session for doing a 10% price increase you have a terrible business.
53:26
So you have to be able to increase prices over a bit of time.
53:30
But how do you do it strategically that does not affect too much churn but you're also able to like pass on the increase as a value exchange.
53:36
those things become critical. Awesome.
53:38
Zooming out a little bit, something that I love about your book is you structured it around these axioms.
53:44
You have a bunch of these really clever axioms that get stuck in your head and help you think about pricing.
53:50
Can you share some of your favorites, maybe two or three of your favorite axioms from the book?
53:53
U you talked about uh Sierra being in your part founders.
53:57
I don't know if that's Clay, but he has a shout out for like Clay.
54:01
So Clay actually u read the entire book and gave me feedback scaling innovation the similar copy that you actually had and I had uh I called it scaling innovation axioms throughout the book and the whole point of the axioms was that at the end of the day if you can just take all the axioms put it in a you know print out next to your desk it's the summary of the book and it's like PT statements that you will just remember what to do.
54:24
So he came up with this idea that hey rather than calling them just generic scaling innovation axioms you need to brand each and every axiom and I thought that was a brilliant idea.
54:35
So I went about coming up with a unique he he even contributed some of the names.
54:40
So we came about you know we we came up with some unique names for each axiom.
54:44
And here's the other fun fact uh probably I'm geeking out too much but when I counted the number of axioms there were 42 axioms.
54:50
Uh so and I didn't try to make this up and if you're Hitchhiker's fan then you know that's the answer to everything.
54:56
Uh but jokes apart uh let me unpack a few axioms.
54:58
The first uh one of my first favorite axioms what what I call as the 2080 axiom.
55:04
So in in especially in tech companies you know 20% of what you build drives 80% of the willingness to pay.
55:13
But the irony is that that 20% is the easiest thing to build often.
55:18
So what founders do is they put this take this 20% build it put it out in the market almost for free and then they're chasing their tails to build 80% stuff that's only driving 20% willingness to pay.
55:31
So if you have not been thoughtful about that you've given the farm away unintentionally.
55:34
So truly understanding what drives willingness to pay in your product is critical.
55:40
And I think you know people call it the MVP.
55:42
I think we should change the definition of MVP.
55:46
It shouldn't be minimum viable product.
55:49
It should be the most valuable product and be thoughtful about what are you actually giving out as your early products I think is key. That's the 2080 axiom.
55:57
Probably my second one is the you know uh price paralysis axioms.
56:00
So um you know what that means is your reluctance to do a price increase is often internal and emotional and it's not external and logical.
56:12
This goes back to the same uh you know prayer session to actually do a price increase.
56:17
If you're holding hands, you have a terrible business, right?
56:20
I mean, so like it's mostly internal and emotional and how do you how do you be thoughtful about price increases become important.
56:28
My probably my uh uh you know, third favorite one is stopping churn before it happens is stopping churn axiom.
56:34
Um so to stop churn, you need to attract customers who won't leave.
56:38
That sounds counterintuitive, but that's the best way to actually stop churn.
56:42
What does this actually mean?
56:44
You know most companies would try to stop churn when someone actually says I want to go.
56:49
It is too late and you're being reactive.
56:53
At the most you'll throw some offers.
56:55
They will stay for another 6 months and they will leave.
56:56
They've already made that determination.
56:58
The way to stop churn is to start up start acquiring customers who won't leave and that is the most important thing.
57:05
So if you look back at your you know data and say who are the types of customers who actually tend to stay longer, what are their characteristics?
57:13
How can I focus my acquisition dollars in getting more of those than your stop churn before it happens? >> And that's the key. >> That's interesting.
57:22
I'm surprised you didn't say what was my favorite, which is I think it's like if you land, make sure to expand.
57:28
>> Yeah, >> that one really stuck with me.
57:30
>> Maybe talk about that one. Yeah, >> sure.
57:32
I mean, so if you if you land, you need to also make sure you're you're expanding in the sense that, you know, if you give the farm away in your entry- level product, you don't have much to actually, you know, monetize later.
57:41
So being thoughtful about you know what is the fence between your land product uh you know what is it a free experience what what is the gating and the gating is typically based on you know are you gating based on features are you also getting based on usage and how do you be thoughtful about that so you leave stuff for the expansion. Okay.
58:00
So, zooming out even further to kind of wrap up, what would you say is the biggest lesson you want founders to take away that they're probably they think they understand but they probably don't.
58:12
Yeah, I think this comes back to what you started with.
58:14
I think intuitively people get it that they need to think about market share and wallet share if they're going and even if you ask them they say like yeah yeah I'm thinking about wallet share but have they really thought about it uh equally and paid equal attention?
58:28
Have they you know postponed one of them?
58:31
Are they operating in a single engine strategy consciously or subconsciously?
58:38
I think that's the key takeaway I have.
58:40
So the contrarian take is not to put equal effort on both the you know engines at the same time.
58:46
In certain stages of your company you might need to be more market share dominating.
58:50
In certain stages you might need to be wallet share dominating.
58:54
It's not equal effort but it's equal attention.
58:55
effort but it's equal attention. and like really developing that mindset of being a true profitable growth architect and that is the main takeaway that I have for people and if you are not in that mindset already there's a book for
59:10
you I'll point them to it so just so folks know what to do when they're like okay I need to focus on wallet share more is the main focus figure out a pricing model that aligns well with pricing power what's like what's in the bucket of work to do to invest more in wallet wallet share thinking. >> So it it's actually all of those uh you
59:28
>> So it it's actually all of those uh you know uh market share, wallet share, acquisition, monetization, retention are all kind of like correlated.
59:35
You can't think about them in isolation.
59:37
So I wouldn't say only for wallet share what do you need to do if you want to grow on both the market share and wallet share.
59:46
Let's say for instance you know you need to have the right land and expand strategy.
59:49
The land helps you with uh acquisition.
59:51
The expansion helps you with wallet share.
59:53
Um if you have a you know pricing model then you need to have a pricing model that lets you acquire faster because it's intuitive but it should also help you recover value which is like your monetization and if people understand your pricing model they're actually going to stay.
1:00:08
So it's all sort of you know goes hand in hand.
1:00:10
Um so I wouldn't isolate thinking one way or the other.
1:00:16
That's why the nine strategies actually are very powerful because if you follow those strategies, you're not going to fall into the single engine trap.
1:00:24
These are tried and tested strategies of how to build businesses in such a way that you're being thoughtful and paying equal attention to both market share and wallet share.
1:00:34
>> All right, that is a very reasonable answer.
1:00:35
Manabon, is there anything else you wanted to share or leave listeners with before we get to a very exciting lightning round?
1:00:40
read the two books in sequence, monetizing innovation and scaling innovation because it's one thing to build a great product.
1:00:46
It's yet another thing to build a great business.
1:00:50
You cannot build a great business with a not so great product and you cannot do it the other way around either.
1:00:54
So I think it's uh having thinking about pricing early uh especially for AI companies being thoughtful about it know like like you know price before product and then thinking about how to actually scale developing a profitable growth mindset all of these things become critical and I'm looking forward to the feedback from the audience.
1:01:16
>> I feel like your books are kind of like in the the staple of founder reading.
1:01:20
there's like all these things you just don't know what you're doing and there's a few of these books that are like okay here's all this advice that'll answer so many questions and save you so much heartache and so uh I'm really excited you you're adding something to that bookshelf with that we reached our very exciting lightning round argument >> okay let's go
1:01:37
>> let's go two or three books that you find yourself recommending most to other people the first one that comes to mind is Business Model Canvas by Alex Ostraaler is a classic and one of my favorite books I recommend a lot of people to read that because I think it nicely ties a lot of what we are also saying from a more strategic business model angle. I like this book uh
1:01:56
I like this book uh thinking fast thinking slow.
1:01:58
I think that's also a classic because again uh you know there's always a human element to things and understanding the customer psychology is important whether you're in B2C or in B2B because if you're in a B2B situation is humans having a human conversation.
1:02:12
So like it's as much behavioral as it's actually numbers.
1:02:14
So I I love that book and there's a lot of nuggets in there. So I recommend it a lot.
1:02:19
And probably the third one that I recommend is a book uh called Contagious by Jonah Burgerer. Uh I love that.
1:02:25
he was in the PhD program at Stanford um in marketing and he actually wrote this book on how to make messages viral and he's actually seen you know the best viral messages and boil it down to a framework and if you follow that um then you can make those messages viral and I've tried to use some of those in uh you know my own outreaches and things of that nature.
1:02:48
So I think it's a it's a fantastic read. >> Wow.
1:02:51
Check this out and I have not.
1:02:51
I haven't even heard of it. All right.
1:02:54
Well, we're gonna go viral there. So, we got the playbook. >> Contagious.
1:02:57
That's the name of the book. >> Contagious.
1:02:58
Okay, we'll link to that.
1:02:58
Is there uh a recent movie or TV show you've really enjoyed? >> I guess uh movie. Sure. Let's pick a movie.
1:03:06
Um definitely enjoyed uh Mission Impossible uh the final one. Eighth in the sequence.
1:03:12
I I think I find that a whole uh I love those the entire genre 1 through eight.
1:03:19
Uh but what I kind of like about it is my willingness to pay has constantly increased over a period of time.
1:03:26
They could have charged me whatever they wanted for the eighth movie.
1:03:28
I would have probably gone and seen it because I wanted to.
1:03:29
So I thought that's a interesting example of like a durable brand where your you know your monetization power actually increase over a period of time.
1:03:37
So I think um I enjoyed the movie u it was great.
1:03:41
Um yeah I mean hey by the way I just realized MI stands for monetizing innovation and also Mission Impossible.
1:03:49
Maybe subconsciously that's why I liked it too.
1:03:52
>> And you're the Tom Cruz character.
1:03:52
You must That's So I love how you're the only person in the world that thinks of Mission Impossible through monetization, willingness to pay. >> Exactly.
1:04:01
I think there's too many of these dinner conversations also gravitate towards pricing and and monetization.
1:04:07
I think it's become my life.
1:04:08
So >> Oh man, we need a we need a version of this movie like a Mission Impossible of Monavon. >> Sure.
1:04:14
>> I pay I pay anything for that.
1:04:17
All right, next question.
1:04:17
Do you have a favorite product you recently discovered that you really love?
1:04:22
>> Um, I would probably talk about two products.
1:04:24
The first one is uh Deli uh the you know digital mind representation.
1:04:28
That's a Lenny bot that you actually uh I think put out.
1:04:30
So I think I find that product fascinating and I also love the founders D and Sam there.
1:04:37
I I truly believe that that is going to be the future for like you know thought leadership and how thoughts are consumed by like consumers.
1:04:44
Like if I can and I've used your Lenny bot. I really enjoy it.
1:04:48
Like if I can, you know, co-create some thought leadership piece with talking to you, but it's not you, your AI, and it's actually living and breathing your brain. How cool is that?
1:04:56
And I think that I I really love the product category.
1:04:59
There's a lot of, you know, different use cases, longit longevity extension use cases, things of that nature.
1:05:06
I'm excited about uh about the product.
1:05:09
I think it's it's been great.
1:05:10
I I plan to taking inspiration from you plan to create a deli of myself.
1:05:15
I think it should be out before the uh book maybe I'll try to that's the promise try to keep it ready.
1:05:20
So I think if you want to talk more about uh the book or things of that nature and talk pricing, you can talk to my AI too, right?
1:05:28
I mean I I find the product fascinating.
1:05:30
The second one I would probably say that's been super uh useful in terms of just productivity is granola. We we love that product.
1:05:37
I think just the ability to take notes and during all the meetings and you know organize it and being able to query things etc.
1:05:44
I think it's been a great product uh that we recently started trying and uh we've been really liking it. Cool.
1:05:50
That's been the most mentioned product recently. How cool is that? Love granola.
1:05:54
Get a year free of granola if you're a paid subscriber to my newsletter. Lenny'snewsletter. com. Click bundle. One year free.
1:05:59
Not just you, your whole team.
1:06:01
What an offer they offer. It's crazy. Uh on Deli.
1:06:03
What's interesting about Lennybot is it's not just my knowledge, it's every single podcast guest's insights and lessons also fed into it.
1:06:14
So, it's uh what an oracle of knowledge this thing's become.
1:06:18
And it's free at this point. completely free. Lennybot. com.
1:06:20
No, I I get nothing from it. It's just out there. Okay, next question.
1:06:25
Uh, do you have a favorite life motto that you often come back to and find useful in work or in life?
1:06:32
>> You know, create value in everything and anything that you touch, everything else will follow. That's my life motto.
1:06:40
>> That resonates deeply. Okay, last question.
1:06:43
You recently moved into investing.
1:06:44
investing. So what's cool is you used to be very expensive to work with at Simon Kutcher I think it was called very expensive a lot of big company stuff now a lot more founders have access to you because you're investing in startups so just talk about that talk about what
1:06:59
you're doing these days sure I mean at at Simon Kutcher you know I got to uh work with over 250 companies and my co-GP now Josh Bloom uh he also had an opportunity to work with about 250 companies so combined we work with over 500 companies more than you know 50 plus unic Cons. It was a great ride. Um, and It was a great ride.
1:07:14
Um, and often we were actually working with them in much later stages, you know, when series D or preipo, post IPO, private equity companies, etc.
1:07:24
Um, but the two of us actually now started a venture firm with an explicit goal of working with early stage AI founders.
1:07:32
And it goes back to the topic that we started with, you know, AI companies needs to deal with monetization from day one.
1:07:40
But for those kind of companies, you know, FIFA service transaction model doesn't necessarily work.
1:07:47
Um, and that's also why we pivoted to like venture.
1:07:49
So our business model is pretty uh, you know, pretty standard right now.
1:07:54
If you get access in the cap table, we roll up our sleeves and work with the founders and all monetization.
1:07:58
So we invested in their success and we will partake in the value creation.
1:08:02
Um, there's no fee for service, no friction on those kind of manners.
1:08:06
But on the flip side, we get to concentrate our efforts uh uh in fund one and probably 20 to 25 companies and that's where we will be spending our time. >> What a deal.
1:08:16
Manavon, two final questions.
1:08:19
Where can folks find you if they want to reach out and talk about this offer?
1:08:22
And how can listeners be useful to you? >> Ways to find out.
1:08:25
I think uh just uh Google for monetizing innovation and scaling innovation.
1:08:29
You'll probably land in a lot of pages.
1:08:31
You can also go to Amazon.
1:08:32
I think if you want to purchase the book actually uh scaling innovation is now available in pre-order.
1:08:36
Um I think we'll have the pot part released uh before the book is actually out.
1:08:41
The book is going to be out on August 5th.
1:08:45
So there's an opportunity to pre-order and maybe I will uh take an inspiration from your master bundle which I really think is the world's best bundle uh and come up with my own bundle for like getting users to like pre-order.
1:08:56
So if you love monetizing innovation I can tell you you would really love scaling innovation.
1:09:01
So, go buy it for your teams, uh, buy it for yourself, and, uh, here's the offer.
1:09:06
So, for anyone who's able to like buy more than five copies, send us a, uh, you know, screenshot of your purchase, pre-order, right?
1:09:15
Send us a screenshot of your purchase to promo at 49psvc. com.
1:09:24
So, that's promo as in promotion at 49pmvc. com.
1:09:30
And here's the bundle offer that I have.
1:09:32
10 people will get access to uh you know bundles as a raffle.
1:09:36
And the bundle is going to include a signed copy of Scaling Innovation, uh a 30 minute ask me anything session, an exclusive invite for a scaling innovation book launch and also a scaling innovation t-shirt.
1:09:49
So that's my uh coming up with a bundle.
1:09:52
I didn't get granola and others to put in for me just yet.
1:09:56
But I think this hopefully suffices and is exciting for folks uh to buy.
1:10:00
Um and yeah, I mean uh if you like the book uh please do leave a review on Amazon.
1:10:06
That always is helpful because if more people review it, um the book takes a life of its own.
1:10:11
And I'm really thankful for also the support that I got over the years from founder community, from the venture community, for monetizing innovation.
1:10:20
And I think there's been, you know, over the last uh 8 years, thousands and thousands of fans of the books.
1:10:25
They've done a whole lot talking about it, writing reviews, uh, you know, posting uh, on LinkedIn and, uh, you know, making things like price before product or, you know, price product market price fit and things as a part of founder vocabulary.
1:10:42
So, I'm very passionate that people actually did that and very thankful for them.
1:10:46
Uh so there's also probably uh in equal measure if you're excited about scaling innovation uh I would love for you to talk about the book. >> Amazing.
1:10:55
And I think the reason people do that is because you give away so much for free.
1:10:58
Like you know you you just shared so much wisdom for free that is going to help so many people.
1:11:03
So >> yeah I just tried to plan my give and get right there. Oh my god. A good call back.
1:11:09
Uh Maravan, this is incredible.
1:11:11
Thank you so much for being here.
1:11:13
>> Thank you so much Lenny. It was a pleasure. >> Same. Bye everyone.
1:11:18
Thank you so much for listening.
1:11:18
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1:11:24
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1:11:30
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1:11:38
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