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Entrepreneur Office Hours - Issue #85
A warning about how to price your startup's product
I’ve never been particularly good about figuring out how to price a product. Pricing has always seemed like one of those kind-of-art, kind-of-science, kind-of-intuition things that just never really clicked for me. Then I had a conversation with Phil Fernandez, who founded Marketo — one of the most important SaaS companies in history — and it made me realize I’ve probably been thinking about pricing completely wrong for most of my career. I explain why in this issue’s featured article.
Perhaps not surprisingly, you’ll also find this issue’s featured podcast includes my full conversation with Phil and the story of Marketo. Even if you’re not a B2B, SaaS junkie like me, lots to learn from him, so make sure you listen.
Also, don’t skip the Q&A this week. It’s not really a question, but it’s an observation I appreciated and one that’s definitely worth taking some time to consider a bit more closely.
If finding the perfect price for your startup’s product is hard, it’s probably because you’re approaching your market the wrong way.
Whether you love subscription software or hate it, you're going to enjoy the newest episode of Web Masters. It features a conversation with Phil Fernandez, founder of Marketo, one of the companies that helped revolutionize SaaS and make subscription-based software the industry gold-standard.
Listen now on:
…or search “Web Masters” wherever you listen to your favorite podcasts.
FROM THE ARCHIVES…
Since this issue already seems heavily themed toward marketing-related topics anyway, might as well pull out an old article from my archives about how the needs of marketers impact pretty much everything we see. (And how maybe that’s not such a good thing.)
Office Hours Q&A
I was reading through your last two articles about venture capitalists and getting venture capitalists to say “no”. As a female founder, I couldn’t help but notice that you never gendered your references to VCs in the article.
As I think we all know, the vast majority of venture capitalists are cis, white, middle-aged males. And basically every article I read about fundraising refers to VCs as men. So I was curious if your decision to keep them gender-neutral was intentional and, if so, your reason behind doing that.
It’s certainly different to see. And a bit refreshing (I think). But I also wonder if maybe I’m just reading too much into things.
Thank you for all your great writing and teaching. It’s helped me a lot over the last year.
Thanks for this question/observation. Honestly, I’m surprised anyone noticed… though maybe I shouldn’t be?
Yes, the decision was intentional. As you allude to, the startup world struggles with diversity. Recognizing this shortcoming, I try to be thoughtful about the ways my articles appear so they avoid contributing to those stereotypes of who can or can’t be entrepreneurs. That includes everything from the imagery I use to the stories I tell to the ways I gender (or don’t) gender people. To be clear, I don’t always get things “right” (whatever “right” means), but I try to at least be thoughtful about the choices I make, particularly within the limitations of my resources. (e.g. I don’t have infinite access to high quality photos, so sometimes I’m stuck with limited options in terms of what people are represented in a given image.)
By the way, one area where I know I fall short is with my podcast. There’s already limited diversity within the cohort of people who built successful early Internet companies. Add to that the fact that I can’t make people agree to talk with me, and I’m kind of stuck with whomever says “yes.” Luckily, as the podcast has grown, more people are willing to talk, and that’s starting to expand the range of people in my guest list. I mention this just so anyone reading knows I’m aware of this particular shortcoming, and I’m constantly working to improve.
Anyway… since you noticed my attempt to make VCs gender neutral, I’d like to take a moment to explain why. Simply put, I believe entrepreneurship is more effective when it’s inclusive.
Fundamentally, entrepreneurship isn’t about building companies. It’s about solving problems. Everyone in this world has problems they need help solving, and entrepreneurs can do that. But we can’t do it as effectively when we only see the world from our own perspectives. No matter who we are, our perspectives are inherently limited. We need to include the perspectives of other people with different lived experiences in order to help us solve problems in effective ways.
Case in point: the first airbags in cars had a nasty tendency of killing women and children. Do you know why?
It was because airbags were originally designed by only men. In other words, by not having diversity in the innovation process, people’s wives and mothers and sisters and children died.
Are you starting to appreciate why diversity in the innovation process is critical?
But maybe you’re one of those people who thinks entrepreneurship really is just about the $$$. You’re certainly allowed to believe what you want. However, in that case, I’ll share the example of an entrepreneur named Tristan Walker whose company, Bevel, sells beauty products for people of color. You can listen to his story on this excellent episode of Reid Hoffman’s Masters of Scale podcast. The gist is that Tristan struggled to fundraise because he was pitching the aforementioned white, male VCs who didn’t understand the problem his company was solving.
That didn’t mean he wasn’t solving a real problem. It just meant the VCs didn’t understand it because they didn’t have the right knowledge, perspective, and/or lived experiences. In reality, the problem Tristan’s company tackles is huge. In fact, as Tristan points out in the podcast episode, there are more people of color in the world than not. They just aren’t the people who traditionally get recognized or supported by venture capital. That means Tristan is targeting an enormous and wildly underserved market, which is usually a recipe for significant entrepreneurial success. (FYI – Tristan recently sold his company to Proctor & Gamble for ~$40m… not too shabby.)
I guess what I’m trying to convey with this response to your observation is that I personally believe in the importance of diversity and inclusivity in entrepreneurship. Because of that, I try to create a space where everyone can comfortably learn how to be more successful entrepreneurs, and we can all work together to help solve important problems and make the world around us a better place. I hope that comes through, and I hope I can keep improving.
Got startup questions of your own? Reply to this email with whatever you want to know, and I’ll do my best to answer!