Jan 2, 2019 · 36m · a16z
a16z Podcast | Pricing, Pricing, Pricing
Mark Craney · 20m spoken Scott Kupor · 13m spoken Sonal Chokshi · 39s spoken Martin Casado · 0s spoken
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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, industry experts discuss core pricing, packaging, and go-to-market strategies for early-stage software startups. They detail how founders can establish high perceived product value, hire effective early sales talent, and navigate complex enterprise procurement.
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 1.9% of the talking time here. How this is scored →
The host as informed peer 5.6 Guest teaching 3.8 Guest disagreement 1.2 The host pushing back 1.3
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 18:13 Mark joking about past heated disagreement
Mark playfully references getting aggressive and screaming at Scott years prior over hiring sales reps from mature legacy markets.
Hardest push from the host ▶ 8:15 Scott rejecting MBA market researchScott forcefully rejects the idea that MBA market research works for pre-chasm category creation, arguing field sales experience is the only valid dynamic.
Biggest teaching moment ▶ 10:41 Mark explaining CXO vs manager ROI dynamicsMark educates Scott on how value perception changes depending on whether a deal is presented to mid-level engineering managers or executive CXOs.
The host holds their own ▶ 24:58 Scott exposing enterprise procurement trapsScott demonstrates deep practical expertise by describing how large enterprise innovation teams lure startups into giving away sitewide access during procurement.
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 |
|---|---|---|---|---|---|---|
| Why Technical Founders Struggle with Early Pricing | 4 | 3 | 1 | 1 | Scott opens by recalling Ben Horowitz warning him on early pricing decisions as a technical founder. Mark explains why technical founders struggle by failing to see the customer perspective. Scott uses his personal experience to frame the initial question constructively. | |
| Value-Based Pricing and Early Sales Cycles | 3 | 5 | 1 | 1 | Scott prompts Mark on value-based pricing and iteration strategies. Mark educates at length on packaging, long development cycles, and paying for sales motions either up front or through lost margins. | |
| Setting Initial Prices High in Immature Markets | 7 | 2 | 1 | 3 | Scott pushes back against relying on traditional MBA/PMM market research for pre-chasm category creation products, arguing founders should start high and let sales shake it out. Mark strongly agrees with starting high. | |
| Value Frameworks Across Organizational Levels | 5 | 4 | 1 | 1 | Mark explains how ROI framing varies dramatically between mid-level managers and CXOs. Scott acknowledges his own past biases about San Francisco office market research vs sales field reality. | |
| Aggressive Pricing as Market Signal and Enterprise Scaling | 6 | 4 | 1 | 1 | Scott offers strong insights into why enterprise customers pay to learn from startups via POCs. Mark highlights the need to model multi-tier quotes to prevent friction during enterprise expansion. | |
| Financial Shifts, SaaS vs. On-Prem, and Sales Competence | 5 | 4 | 1 | 1 | Mark breaks down accounting challenges when transitioning buyers from CapEx on-prem to OpEx SaaS. Scott reinforces this by urging founders to model the macro success scenario early. | |
| Hiring the Right Sales Reps for Early-Stage Companies | 6 | 5 | 3 | 2 | Scott outlines distinct sales rep profiles for mature versus early markets. Mark recalls playfully aggressive past arguments with Scott over hiring legacy reps and emphasizes seeking playbook creators. | |
| Product Packaging, Modularization, and Tiering | 6 | 4 | 1 | 1 | Scott identifies self-cannibalization risks in tiered pricing models. Mark outlines closed-loop feedback between field teams and product development to build flexible feature packaging. | |
| Navigating Procurement and Contracting Traps | 7 | 4 | 1 | 2 | Scott shares direct experience regarding procurement traps where technical teams trick founders into nearly giving away site licenses. Mark cautions against walking into big enterprise deals with junior varsity uniforms. | |
| Remedying Early Pricing Mistakes and Product Controls | 5 | 5 | 1 | 1 | Scott asks how to remediate early pricing errors, noting market pricing takes time to set. Mark delivers practical advice on master license agreements and product-level feature controls. | |
| Cadence for Reviewing Pricing and Market Dynamics | 6 | 4 | 1 | 1 | Scott breaks down unit economics and operational differences between inside sales reps and field reps. Mark emphasizes continuous competitive reviews and aligning go-to-market structure with deal sizes. | |
| Diagnosing Growth Hurdles and Identifying Product-Market Fit | 7 | 2 | 1 | 1 | Scott asks how to diagnose growth hurdles, then delivers an expert concluding monologue on recognizing true product-market fit and reiterating core podcast takeaways. |
Statements from this episode (22)
Kupor: Pricing impacts startup valuation more than any other business decision
“I want you to be very careful because no single decision will impact the valuation of your company more than the decision you're about to make on pricing.”
Kupor: Low initial pricing devalues tech products and cannibalizes revenue
“What happens just in human psychology is actually like, we'll set the value on whatever they're getting based on how they acquired it. And so in early markets, nobody really knows how to value what you have. And so it's very important for you to establish the …”
Cranney: Startups always pay for go-to-market execution one way or another
“You're paying for it either way, right? You're paying for it by giving everything away for free. Cause you're not investing in sales and marketing, or you're going to have a channel partner do it, which you're giving your margin away. Somebody's paying for it.”
Cranney: Early sales teams act as translators for new workflows
“And if it's something that's just so new and differentiated and not defined, and it's going to require a, you know, the customer or somebody's got to go in there and kind of really tease out, how are you doing things now? What is the pain? They don't know ther…”
Kupor: Start with high pricing in pre-chasm markets and iterate
“The only way I've been able to establish pricing in a pre-chasm market is, is you start pretty high and then you let the salespeople shake it out.”
Cranney: Lowering high prices is easier than raising low prices
“It's way easier to go down than it is to go up.”
Kupor: Only direct sales feedback can accurately determine enterprise pricing
“When it comes to setting pricing and to understanding what the market will bear, like there's nothing that can do it except for sales. Like this is just my experience. It's not market research. It's not marketing. It's not the entrepreneur. I don't believe if …”
Kupor: Aggressive early pricing filters out passive learning buyers
“One thing I really learned to appreciate about, you know, setting pricing aggressively early on is you start to get real market feedback. You can't delude yourself anymore. People aren't buying it to learn about it. They aren't doing this because you're super …”
Cranney: Enterprise quotes must model full deployment pricing early
“In almost any proposal type situation, we wanted to Have not only your initial pricing per unit set, but you need to go model and understand what would happen if that customer adopted throughout their entire enterprise. Now early on, it sounds like a pipe drea…”
Cranney: Generic sales hires cannot figure out early product pricing
“And, you know, so I'd be a little careful to say any sales and or marketer is going to be able to figure this thing out for me. Cause it, you know, it does take somebody that's a little more intuitive that, that isn't taking shortcuts, you know, somebody that …”
Cranney: Hiring sales reps from similar mature products is a trap
“One trap a lot of CEOs or founders might fall into here is I'm going to go hire somebody that's selling something similar to what I sell.”
Cranney: Early startups must hire reps who create playbooks from scratch
“Somebody that gets excited about doing this exact thing, it's typically not the one that's been running in somebody's playbook. It's the one that really understands how to go create that playbook from scratch.”
Kupor: Early sales hires must seek honest market feedback over superficial success
“So much of the early customer engagement should be like figuring out the product market fit. And so you really want market feedback that you can use. And if you have somebody that like, you know, every meeting is a good meeting and they're using relations, thi…”
Kupor: Startups must plan modular packaging early to prevent revenue cannibalization
“If you don't know you're going to do this beforehand, you may not have the flexibility to actually pull out independent bits of value. And so now you've got You know, on one hand, either you cannibalize yourself with like a, an over feature rich product for th…”
Kupor: Corporate proof-of-concept programs rarely connect directly to procurement
“Many large companies have outreach programs to start up. So like if you engage with a, you know, a finance company, like a large bank, they'll be like, listen, we work with startups all the time. They have whole groups that take these things and pock them. Tha…”
Kupor: Inexperienced startups nearly give away site licenses to enterprise buyers
“I've been in multiple situations. We were very close to basically giving site licenses to like a 100,000 person organizations for almost no pricing.”
Kupor: Startups have time to fix early underpricing mistakes
“The bad news about setting pricing in a market is it's really hard and it takes a long time to actually set the price in the market. The good news is it takes a long time. So, you know, if you enter at too low of a price point, like it takes a long time for th…”
Cranney: Startups must review win-loss reports at least quarterly
“If you're not reviewing, you know, a win loss type report on a monthly, at least a quarterly, you know, some kind of fairly frequent cadence, depending on what's going on in your business and in the market and doing the postmortems on both sides of that. I thi…”
Cranney: Deal sizes must be large enough to fund direct enterprise sales
“If it's something that requires you to come in high and move left and right and be agile in the organization as well as up and down, and because of the complexity is, that typically means there's also going to be a big outlay, either cap, capital and or Operat…”
Kupor: Inside sales models require mature markets and simple products
“The cost of like an ISR is going to be much less than a direct sales force, but only certain types of products or markets are amenable to an inside sales model, right? Like if it's a very mature market and the customer's educated is probably more amenable than…”
Cranney: Bottoms-up startups often fail going upmarket due to sales leadership
“It's very common on the inside type bottoms up motion that particularly as you, they build out the management that sometimes you, they'll miss moving up market because the BP might not have that skillset, you know, to go build out that next level.”