Jan 2, 2019 · 31m · a16z
a16z Podcast | Creating a Category, from Pricing to Positioning
0:00 / 0:00
▶ Watch on YouTube →
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of the a16z podcast, host Sonal Chokshi, General Partner Martin Casado, and Usermind CEO Michel Feaster discuss how enterprise software startups can successfully build, price, and position new product categories. They deliver actionable advice on pricing power, product marketing playbooks, overcoming status quo competition, and navigating complex enterprise buying structures.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. The host holds 18.7% of the talking time here. How this is scored →
The host as informed peer 3.8 Guest teaching 4.4 Guest disagreement 1.3 The host pushing back 3.0
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 24:05 Reframing build-vs-buy anxiety
Michel counters the standard fear around internal customer builds, forcefully asserting that customer build attempts are strong validation of an acute problem.
Hardest push from the host ▶ 4:56 Challenging unproven premium pricingSonal directly questions the guests' pricing premise, pointing out the paradox of demanding top-tier pricing before achieving product-market fit or proving value.
Biggest teaching moment ▶ 21:11 Explaining the gap between academic theory and market readinessMartin educates the host on why having an established academic narrative failed to yield easy sales, as customers were ten steps behind and did not recognize the underlying problem.
The host holds their own ▶ 12:52 Warning against playbook blind spotsSonal demonstrates keen strategic intuition by halting the guests' excitement over rigid sales playbooks to highlight how over-structured execution hides emergent market opportunities.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The host as informed peer | Guest teaching | Guest disagreement | The host pushing back | Why |
|---|---|---|---|---|---|---|
| How Pricing Impacts Business Mechanics and Enterprise Sales | 5 | 4 | 1 | 5 | Sonal asks sharp questions about enterprise unit economics and explicitly challenges the host's assertion that unproven startups can easily set high price points without established value. | |
| Tactical Advice for Early-Stage Pricing and Sales | 3 | 5 | 1 | 2 | The guests deliver a masterclass on product marketing, technical closes, and repeatable sales plays while the host guides the discussion with brief clarification prompts. | |
| Identifying Real Market Signal vs. Founder Charisma | 5 | 5 | 2 | 6 | Sonal interrupts the playbook enthusiasm to raise a critical risk regarding founder blind spots to emergent use cases. Martin and Michel acknowledge the point and explain how founder charisma can fake product-market fit. | |
| Navigating Enterprise Silos and Creating New Organizational Roles | 4 | 4 | 1 | 2 | Sonal sets up the segment with a strong analogy comparing enterprise navigation to urban government. Michel explains how category creation ultimately restructures organizational roles. | |
| Framing Narratives and Competing Against the Status Quo | 4 | 5 | 2 | 5 | Sonal probes why Martin faced immense initial friction selling SDN despite having published comprehensive theoretical papers beforehand. Martin reflects on the disconnect between academic clarity and customer problem awareness. | |
| Overcoming Build vs. Buy and Incumbent Competition | 3 | 5 | 2 | 2 | Michel reframes customer build-vs-buy efforts as strong market validation signals, and both guests outline positioning tactics against incumbents selling vaporware. | |
| Empowering Non-Technical Users and Dual-Stakeholder Pitches | 4 | 4 | 1 | 2 | Sonal explores the nuances of pitching software to non-technical buyers, leading to an insightful breakdown of how enterprise startups must pitch dual stakeholders in IT and line-of-business. | |
| Final Key Takeaways and Podcast Conclusion | 2 | 3 | 0 | 0 | The conversation wraps up with collaborative concluding thoughts and encouragement for founders tackling enterprise category creation. |
Statements from this episode (26)
Feaster: Category creation lets startups dictate their own price point
“Category creation is about creating a net new problem and a net new solution to that problem. And the reason it's important is that if I go and I build a better monitoring tool, the price point of monitoring tools is already set. Whereas if I create a category…”
Casado: Price point is the single metric most tied to valuation
“There's no other single number that like ties to the valuation, the price point. Because basically that's ACV.”
Feaster: Reframing latent enterprise problems allows founders to reset price expectations
“The narrative starts with Framing a problem that may already be latent, or they don't even think about, and making it top of mind. And when you make people see a problem differently, you arbitrarily get to reset the value associated with solving that problem.”
Feaster: Enterprise ACVs inflect after securing 20 to 50 customers
“Somewhere between 20 and 50 enterprise customers, you've got, you know, the top five in a couple verticals, and now all of a sudden you're really defensible. Now all of a sudden you can go into that deal, and you're de-risked in a massive way. And at that poin…”
Martin Casado: Early startups shouldn't discuss pricing before technical close
“Don't discuss pricing until after you've got them to technical close.”
Michel Feaster: Product marketing is the lifeblood of enterprise startups
“Product marketing is just like the lifeblood of an enterprise software company.”
Feaster: Enterprise customer advocacy is the most credible sales tool
“There's nothing more credible than big enterprises talking about in detail their use cases, their value, because now it's not you selling them, it's the customer selling them.”
Casado: Product marketing drives repeatable enterprise sales execution
“There really is no single point in the company that better encompasses the ability to sell something in a repeated fashion than in product marketing.”
Casado: Enterprise sales failures stem from missing GTM tools, not reps
“I find the inclination is you're criticizing sales when often like the salespeople are doing the best that they can. They just haven't gotten the tools.”
Casado: Enterprise sales enablement requires branching algorithms, not static decks
“A lot of people, they view sales as, I'm going to give, you know, one slide deck to somebody, you know, to a salesperson. They'll take that slide deck, and then they'll be successful in selling. No, like, actually, you're developing an algorithm that they need…”
Feaster: Enterprise product marketing must identify repeatable buyer patterns to scale
“Product marketing should be equally data driven. You're looking for patterns in who's the buyer. What's the initiative? What's changing in the organization? Like you're trying to find out what's common about the things that you're doing because that's the stuf…”
Casado: Enterprise license revenue doesn't prove product-market fit until production deployment
“It's quite possible to get a ton of engagement, and a ton of money, and do pox, and pilots, and everything else. And still, it's not actually moving. Like, you can even get license revenue, and it still remains shelfware. But if someone puts it in production, …”
Casado: Repeatable sales without founder involvement signals true product-market fit
“Once you actually start to see a repeatable sale from a non-expert, then I think you now have good signal. So for example, anybody that can push the deal through without actually having the original founder, I think then you're kind of getting close to product…”
Feaster: Creating new customer roles is ultimate category creation
“If you can create a new role in a company, it's the ultimate act of category creation.”
Feaster: Most future enterprise software will be consumed outside IT
“If you look at the future, majority of software applications that are going to be built are going to be consumed by non-IT. They're going to be bought as SaaS.”
Feaster: Dedicated business tech teams will own customer journeys by 2028
“10 years from now, my belief is you're going to end up with a business technology team, whether it dots into IT or it stays in the business, it will own all of the technology end to end, and it will be responsible for end to end customer journeys, end to end c…”
Casado: Enterprise Startups Must Map to Customer Mindsets Before Changing Them
“So much of building an early enterprise company and changing the way the world works is understanding how people view the environment, mapping yourself to that, and then incrementally changing it to understand the value of your solution, which is a multi-step …”
Feaster: Very Few Founders and VCs Have Patience for Category Creation
“I think very few investors and founders have the patience for the level of uncertainty that it takes to build a new category.”
Casado: Category Creation Startups Compete Against Status Quo, Not Competitors
“So often in category creation, you're actually competing with the status quo.”
a16z views existing crummy customer solutions as a positive diligence signal
“We actually look for that in diligence. So like when we're diligent in company, if we find band-aided, like crummy solutions that are already out there, that's positive.”
Feaster: Most enterprises lack the developer talent and money to build in-house
“Majority of companies do not have the amount of money, the commitment to tech, the good enough developers to really actually go deploy it.”
Feaster: The future of innovation is non-technical people coding
“The future of innovation is not having more developers code. The future of innovation is getting Non-technical people to be coding.”
Casado: Enterprise software must position to both IT and business units
“Most of the products we see in this space have to position both to IT and to the line of business.”
Feaster: Enterprise IT will evolve into horizontal integration management
“I think IT's gonna become an integration and configuration organization, and it's gonna become horizontal.”