7/ A good example is Datadog (146% NDR) where cloud native drove up volumes of monitoring data even at relatively static companies. We’re likely to see similar levels of NDR in areas such as realtime data (eg. Confluent) and automation (eg. UIPath) where market is driving usage.
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8/ In cases where there's not an underlying shift in demand, usage based pricing can still be effective but you need to be cognisant of where usage will be capped within customers (e.g for a usage based candidate screening tool it'll be capped by recruitment growth at customers).
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9/ Seat based pricing works most effectively where you can enter a company with one team or individual and then expand throughout the entire organisation with time. Great examples include Zoom (140%) and Slack (143%). This is becoming an increasingly popular bottom-up approach
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10/ However if a product is only likely to be used by a limited number of users (e.g. specific teams) or is used company-wide from day one then seat based expansion can become capped by your customer's own employee growth rate.
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11/ Feature based pricing is often used in SaaS. Typically based on charging premiums for features such as security, compliance, enterprise integrations and SLAs. While this can be a good source of revenue growth, it typically requires meaningful sales effort for the upsell.
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12/ The final route is through cross-selling new products - this is generally the hardest approach with each new product having to find PMF with the existing customers. However it's also inevitable for most startups in the long term, as core up-sell channels saturate over time.
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13/ AWS have refined this approach to an art-form launching a new product on average every 26 days. Often at growth stage companies you'll see firms turning to M&A to add products that already have PMF with their existing customer base (e.g Salesforce's acquisition of Pardot).
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14/ However at the early-stage I'd advise against adding additional products for cross-selling, it can easily become a distraction when you don't already have a good PMF and stable customer base happy with your core product.
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15/ In practice you'll end up with a mix of these approaches (e.g per seat + feature pricing) - but the key question you should be asking is "how can I structure my pricing (and product) so I can expand within my customers faster than my customers are growing?"
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16/ If you're a European startup with great Net Dollar Retention, we'd love to speak to you at team
@blossomcap about how we can help you grow even faster :)1 reply 0 retweets 2 likesShow this thread
@threadreaderapp unroll plz
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Replying to @thijsniks
Hello the unroll you asked for: Thread by
@imranghory: "1/ One of the areas I often get questions from early-stage b2b founders is on business & pricing models - and increa […]" https://threadreaderapp.com/thread/1179046867663020035.html … Enjoy :)
0 replies 0 retweets 1 likeThanks. Twitter will use this to make your timeline better. UndoUndo
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