How to price your early product, Misconception and advantages of crowdfunding - Tactician #0028

04/01/2024

HOW TO PRICE YOUR EARLY PRODUCT

Jason M. Lemkin, SaaStr Founder, provides clear and practical guidance for startups on how to price their SaaS products in the early stages in “How to Price Your Product in the Early Days (Hint: It’s Actually Easy)” 

• Start with Comparables:

  • "Just start with comps... Software is very expensive to build, but for the most part, costs almost nothing to ship... So why is one app $5 a month and another $150 a month? The answer is value provided, yes... and also, comparables."

• Pricing Based on App Value:

  • "If your app is about as valuable as Box, then price it like Box. If your app is about as valuable as Twilio, then price it like Twilio... Your prospects and customers are now veterans for the most part, and they 'know' what an app should cost — based on the value they think it provides relative to other apps they pay for."

• Don’t innovate on pricing:

  • "And even more importantly, pricing that is similar to other similarly valuable apps will remove friction from the buying process.  That’s critical in the early days.  There are no leads to waste. Later, you can raise prices and optimize.  But 95 times out of 100, don’t innovate on pricing.  Especially in the early days.”

MISCONCEPTION AND ADVANTAGES OF CROWDFUNDING

Rebecca Szkutak, Senior Writer at TechCrunch+, challenges the misconception that equity crowdfunding is inferior to venture capital funding in “Debunking the myth that crowdfunding is only good for cash“

• Misconception About Equity Crowdfunding:

  • "Many traditional investors feel equity crowdfunding is only for startups that can’t raise venture money. And they even deem capital raised this way as just cash that lacks the value an investor brings, be it their network that can help with hiring and connections to customers, or their own mentorship and experience."

• Crowdfunding Can Boost Growth for Some Companies:

  • "[...] every time his company raises funding through equity crowdfunding, they see a boost in new customers as people discover the platform."

• Crowdfunding Providing Industry-Specific Networks:

  • “We have found that most venture capitalists don’t have any expertise when it comes to selling to the government,” Farren said. “We thought a way to access more expertise and experience, with our business model, would be to go straight to the people who had worked with the government in some capacity.”

• Growth and Changing Perceptions of Equity Crowdfunding:

  • "In 2016, we probably saw 30 or 40 deals; this year, we will see almost 3,000. [Equity crowdfunding] was a very significant portion of our seed to Series A funding. The numbers are shifting and that old mindset is definitely changing.”

Sign up for Tactician

Curated newsletter of MUST-READ articles for startup founders and operators

No spam. Unsubscribe anytime.