AI in software development, Freemium and more - Tactician #0014

04/12/2023

FUNDRAISING

Jason Lemkin, Founder at SaaStr, answers the question "What’s The #1 Thing An Entrepreneur Should Look Out For In a VC Term Sheet?"

• "One simple thing: complexity. 99% of terms and term sheet should be simple and straightforward"

• "Folks that make problems for you are often the ones that make the most complicated term sheets. With endless tranches, complex terms, complex hurdles, lengthy timelines, excessive due diligence, etc."

AI AND SOFTWARE DEVELOPMENT

Lenny Rachitsky, Founder at Lenny's Newsletter, interviews Inbal Shani, CPO of GitHub, exploring the evolving role of AI in software development, focusing on how it shifts the responsibilities and skills required from developers in "The future of AI in software development"

• Focus on Big Picture and Systems Thinking:

  • Shani's Quote: "Now the software developer or the user of the AI tools to develop software needs to form a different thinking; you need to start thinking more systems, more architecture."

  • Suggestion: Encourage developers to adopt a big-picture perspective, focusing not just on code writing but also on understanding the interconnectedness of systems and the overall architecture of the products.

• Prioritize Developer Happiness and Retention:

  • Shani's Quote: "Most developers spend less than 25 some say less than 20% of their time writing code. So if we're able to give them half an hour back, one, they can write. Second, they can have a break and take a breath so we don't burn them out and they're more happy."

  • Suggestion: Focus on creating an environment that fosters developer satisfaction and efficiency. This involves providing tools that reduce frustration and workload, thereby improving retention and overall morale.

FREEMIUM

Ash Maurya, Founder/CEO at LEANSTACK, aims to challenge the conventional startup strategy of initially offering products for free (Freemium model) and argues for starting with Premium to more effectively test critical business assumptions, particularly around pricing in “Start with Premium Before Freemium"

• Reconsidering the Freemium Approach:

  • "When you have a lot of free users, it’s hard to focus your attention on the right feedback. With average freemium conversion rates of 0.5%-3%, most of your free users will never become customers. However, when given the opportunity, everyone can be a critic. Who do you pay attention to?... Pricing is one of the riskiest assumptions that can make or break your business model and should be tested as early as possible. Freemium delays this learning. Time is the most valuable resource for a startup, and you can’t afford such long learning cycles on something as critical as price."

• Start with the Premium Part of Freemium:

  • "Once you recognize Freemium as a marketing tactic and consciously decide to shorten the validation cycle, it makes sense to start with the premium part of Freemium first... first validate your value proposition with paying customers, then back into a free plan. Once you have learned how your customers are using your product, you can always offer a Free plan if you want to. You would have collected valuable usage data along the way, which puts you in the best position to design multiple upstream and downstream plans."

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