Is your B2B startup New Enterprise or Old Enterprise?
brandonb.cc
brandonb.cc
So even though we're Open Source (and I mean real Open Source, as in "ALv2 license, open bug tracker, code on GitHub, open mailing lists, the whole bit"), we still expect that direct sales through sales-people will be our primary avenue to gain paying customers.
We're Fogbeam Labs - we provide software that helps people make better and faster decisions by putting relevant knowledge at their fingertips. http://www.fogbeam.com
We're SimpleLegal. We developed software that reads legal bills and figures out what lawyers are actually doing. Simplelegal.com
I'm tempted to say the Yammer model might work if there's a viral component. I.e., can an individual employee who uses Synergyse invite others, have it spread through the organization, and then you can contact IT once a bunch of people are already using you?
- How much of the VC funding decision (the one you quoted) is based on economic characteristics like growth potential or need for money? My impression is old enterprise requires more money to scale, and hence could have a bigger need for VCs. I could see the New model being more angel-friendly.
- Do you have any other observations on the revenue models as the driver? Old Enterprise needs bigger contracts.
What I found is that individual VCs are very polarized -- some only invest in Old Enterprise, some only invest in New Enterprise, and a few invest in both models. It's quite confusing since the feedback you get is very bimodal, and generally, while you can convince a VC that your startup is a good fit for one model or the other, you can't convince them to do the New Enterprise model if they invest in Old Enterprise, or vice versa. But once you understand the distinction, then it's pretty easy to figure out who to pitch -- look at their portfolio companies.
Again - thanks for the reply!
My general advice on pricing is to try to make it a "no-brainer."
One way to do that is quantify how much value you add, and then charge a percentage. For example, if you make conversion optimization software, you can charge a percentage of "lift" (revenue from extra conversions). Say your customer's revenue is $10m/year, your product improved their conversions by 10%, and your pricing model is 10% of lift. Then your customer earned an extra $1m in revenue, and you only charged them $100k for it. So it's a complete "no-brainer" for them to buy your product, regardless of the actual increase in lift. They're always making way more from you than they're spending.
It's not always easy to quantify the extra revenue or savings you bring to the customer, but I think effective sales often boils down to showing the customer the ROI. So I'd try to figure out some way to quantify that -- in terms of time saved, extra revenue, direct cost savings, etc.
If you're not sure, the other thing you can try is having a freemium product with a generous free tier. That will ensure pricing isn't a barrier for 90% of your customers; the rest may be a small enough subset that you can make the ROI case directly. But that's playing with fire!