
17 segments available
In this episode, a16z GP Martin Casado sits down with Metronome CEO Scott Woody to unpack how AI is fundamentally changing the value proposition of software—and why that shift demands a rethink of the traditional SaaS business model. They explore how, in the cloud era, value scaled with the number of users accessing a shared system (think Salesforce). However, in the AI era, value shifts to the work the software performs on your behalf, automating tasks such as writing code or resolving support tickets. As a result, the old value metric of “users” is being replaced by “output,” and it’s upending how companies monetize. This conversation goes deep on: - What new pricing models will emerge in an AI-native world - Why usage-based billing is gaining ground—and where it breaks - How to align GTM teams and customer success orgs with evolving value metrics - Strategic advice for SaaS founders navigating hybrid business models and incentive design If you’re selling software today, you don’t want to miss this discussion. Follow everyone on social media: - Scott Woody https://www.linkedin.com/in/scott-woody-21677121 - Martin Casado https://x.com/martin_casado Check out everything a16z is doing with artificial intelligence, including articles, projects, and more podcasts here: https://a16z.com/ai/ Topics Covered: 00:00 Introduction 00:46 What is Metronome? 03:49 Problems and Complexities of Billing 06:14 Usage Based Billing 09:07 The Rise of Hybrid Business Models 11:02 Challenges With Building Billing Infrastructure Software 15:23 Strategic Usage Billing Advice 16:52 Aligning Incentives With Customers 19:36 Top 5 Concerns For CEOs Considering Usage Based Billing 21:09 The Role Of CS Teams 21:55 Core Value Metrics For The Customer 25:15 Which Software Based Companies Will Go To Usage Based Billing? 28:19 Emerging Patterns, and Recommendations 31:12 Pricing Models, Agility, and Shifts In Pricing 35:09 Market Dynamics, Competitive Dynamics, and Spend 36:48 Monetization In This AI Wave 39:25 How To Architecture Business Around Billing 🔔 Subscribe to the a16z YouTube channel for more conversations at the intersection of AI, software, and startup strategy.
"It used to be like the rule of thumb was you don't change your fundamental pricing model more than once every 5 years. Agent Force like literally Salesforce one of the biggest companies in the world c..."
"Really the kind of genesis of what we're doing, the way we think about it is like monetization infrastructure. So kind of take all the process of how a company generates value and captures it and turn..."
">> Is there an inflection point that >> caused you to do this? Has this been like some long outstanding problem that just nobody decided to solve or is there some change >> that caused you to kind of ..."
"through a bit of the history here. So so I sit on a bunch of boards of AI companies. They're all trying to think about how to do usage based billing. Like that book hasn't really been written yet. But..."
">> Okay. So, I think you've already partially just answered what I'm going to ask, but I just think it's worth to call out. So, the idea of usage based billing isn't new. Um, it's been around for a lo..."
"systems team and we couldn't do it and it just turned out to be really hard and I can't tell you how often I hear this story play out with these really good infrastructure ructure companies want to do..."
"didn't appreciate was how strategic usagebased billing is to the actual company implementing it like a lot more than like say recurring or perpetual or something like it actually becomes part of the b..."
">> and by the way this just I the reason I I I actually interjected it's just important to realize like how much this impacts the business broadly including things like sales comp sales behavior post ..."
"what is that punch list for like a new CEO that's like, "Okay, I'm going to do usage based billing like what are like the top five concerns?" >> Yeah. >> Just to give them a a peak at the the implicat..."
">> What happens to CS in this case? >> It's a good question. I think in a lot of cases the role of CS is really much thinner than than you would otherwise have. I think you really do want a team who's..."
"One trend that I've seen in line with this is like CS teams more and more are starting to get comped or guided towards KPIs that are like gross churn and sees set as opposed to like an expansion numbe..."
">> Do you think all software companies go to usage based billing or is there a dividing line that we should be thinking? I'll tell you I am surprised by how many companies that would traditionally be ..."
">> Okay. So let's go back to this theoretical CEO. So let's say that you're trying to change your org to get ready for this sort of thing. Are you seeing any emerging patterns or do you have any emerg..."
">> To that point, where are we in this industry shift? Is it still very early? Are we in the middle or is it already kind of late? Like, if you're not thinking about this, are you behind? >> I definit..."
"tell you it feels like the early internet where brand moes work because the markets are so large and so you have a leader and as soon as they're a category leader it seems it breaks paro they get 80% ..."
">> It's hard for me not to draw parallels to the internet with the internet you know marginal cost of distribution goes to zero you have all this blow up and it all felt very similar. The one big diff..."
"of a new super cycle or we're in a new super cycle? Y >> this is just like you know SAS changed the billing model. This changes the billing model and >> that billing model is more central and strategi..."