Pricing your AI product: Lessons from 400+ companies and 50 unicorns | Madhavan Ramanujam

24:35The best negotiators who taper the concessions. So they would say I can give you a 15%. Okay, I need more. I'll give you five. I need more. I'll give you two. So you're automatically indicating to the other person that the negotiations actually ending, right? So how do your taper concessions also become important? So when you put all of these three things together, if you master your gives and gets, you get better at value selling and use the right negotiation strategy, you can extract full value from every deal. That's probably way more important when you're in the scale of face. This is such great advice.

25:07I love that this is just one small chapter of your book. Like, let's get you make or break your company. It's interesting that you have a whole thing on negotiation in a book about scaling innovation and growing your company. Is the assumption here that your pricing and monetization is so impacted by how well you negotiate because that changes your entire pricing structure and how much you're making. Is that why you put so much effort into this part? Exactly. I mean, in a B2B situation, you can set all the pricing you want, come up with great pricing models, but at least even today it's a human having a human conversation try to negotiate.

25:40So if you cannot contextualize what you put on the table, how do you negotiate around value, how do you contextualize your price, you're leaving a lot of money on the table. So to us, negotiations is yet another monetization topic where you're thinking about it as extracting full value from every deal. And this is not just negotiation tactics, keep your boss at home and just negotiate and things like that. This actual negotiation strategies that are rooted on value selling gives them gets and focusing on extracting full value from every deal. So useful. This idea of throwing out a third like higher price option, say 500K, it's so interesting because usually the advice here is like just throw out twice the number you used to throw out just like put it out there just in case, which is really scary, right, to ask for like what about 50 ,000 dollars.

26:31And this is like a much less scary way of doing that. Okay, but we also have this 500K option. Here's what you get. And then they may be like, oh, that's exactly we want it. Like, oh, we worked. Exactly. It's a very simple hack to get your courage. That is so cool. Good price point. Wow. This is awesome. This is just like a golden nugget within golden nuggets of a fish price. Okay. So you have nine strategies we've covered too. Let's not get into them, but just what are a few more just so people know what else they might be able to learn. Sure. We talk about how to land and expand as in how to design your best free product in such a way that you're landing, but also expanding.

27:09We talk about things like how to have the right packaging strategy, how to stop churn before it happens, how to do price increases effectively because at some point in your scale up journey, you need to increase price, but how do you do that in a meaningful fashion. So we have various strategies that apply both for the startup and the scale up phase, but in combination, all of those things help you articulate and architect towards profitable growth. Awesome. Okay. Let's talk about AI for a bit. A lot of your book is about how AI pricing is very different from other previous traditional pricing strategies.

27:44And it feels like every company wants to be an AI company these days. So I think this is going to apply to a lot of people. How is AI pricing different? Yeah. AI pricing is very different from the previous, you know, vintage of companies. Why is that so? Because AI founders need to tackle monetization from the very early days, like day one in their seed stage, preseed kind of thing, which was not probably the focus for, you know, the previous SaaS companies. Why is that so? Because of two reasons. One, there's for the first time there's cost dynamics to actually navigate. So you need to think about monetization from day one, but there's also a more critical reason, which is value capture, because with AI products, you're actually bringing a lot of value to the table.

28:26And if you don't capture that from day one, then you're training your customers to expect more for less. So for instance, think about this. If you're building a, you know, agentech AI product that taps into labor budgets, labor budgets are 10X compared to soft -fi budgets. So if you use all the old playbooks, then you're under monetizing again from day one and training your customers to expect more for less. So how do you come up with, you know, foundational models that actually allow you to like capture the value that you bring to the table? And why is this become critical? Because, you know, with AI finally, founders can, you know, really solve the attribution problem.

29:03In the previous advantages, like for instance, if you take Slack, you can say that the productivity went up, efficiency happened, but you cannot measure it, monitor it, attribute it to Slack. Okay, that's probably why they were in a seed -based pricing model. But in today's situations, you see companies that say in a Fortune 100 company, I was able to improve throughput by 10%, reduce crap by 5%, and when you get into those kind of situations where an AI is creating core value and it's attributable to the AI, you get a lot of pricing power. So the two questions that we commonly hear from AI founders is, how do I set the right pricing model as in how do I charge, which becomes, you know, way more important than how much you charge, because the underlying business model has changed.

29:51We have moved from software being a pay for access to like now you're paying for work delivered. So like the monetization model has become key. That is the first question that people actually ask us. The second one is, you know, how do I navigate POCs commercial discussions early, because the buyer on the other side also wants to see the value before they engage in a commercial discussion. So those two topics become very critical and we have showcased a lot of this in the book. This episode is brought to you by Persona, the adaptable identity platform that helps businesses fight fraud, meet compliance requirements, and build trust.

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31:11Plus Persona's orchestration tools automate your identity process so that you can fight rapidly shifting fraud and meet new waves of regulation. Whether you're a startup or an enterprise business, Persona has a plan for you. Learn more at with Persona .com slash Lenny again, that's with p -e -r -s -o -n -a dot com slash Lenny. Let's talk about this POC piece because I think this is something a lot of people deal with and then I want to talk about this two by two that you have in the book and I'll actually pull it up. So let's talk about POC's first. So POC's, when we talk about POC's many founders think about a POC as a proof of technical functionality and is their product actually working in like their customer environments and they set up the expectation that they're saying, hey, we're going to put the product and we're going to see if it actually works and they would probably say, should I charge for a POC?

32:07Was it not and we will unpack that in a bit should you or should you not? And that's actually a completely wrong way of framing it. The POC should be framed as the entire goal of the POC is to create a business case. Period. Full stop. It is not to like demonstrate, you know, product functionality fit within your customer environments, ability to integrate all of that stuff is a consequence of the business case. So if you frame it this way as you can say, look, it is a 30 -day pilot for co -creating an ROI model and building a business case along with their users. If we see value at the end of the 30 days based on the business case, we can get to commercial discussions.

32:45So that way you've actually not talked about your price, you're only focused on creating a business case with the customer and based on the business case, you can actually come up with a proper commercial agreement and if they see value, they're going to pay you for it. So thinking about the POC is in that kind of manner. And the question that I often get asked is should I charge for a POC? The answer is yes, but smartly. Let's talk about why it's important to charge. The reason you need to charge for a POC is you start isolating people who are just tire kickers versus serious buyers. It becomes a lead qualification mechanism.

33:25If you didn't have that, you're going to attract all of these curious buyers who are just curious about the AI. I just want to see if it works or not. They will say yes, I'll engage with the POC. They will take 30, 60, 90 days with you. They will burn a lot of resources. Never buy. You've just wasted your time, times of the essence. So like having a price tag to your POC actually indicates that there's seriousness on both sides. So you should charge. But how do you actually charge for it? You need to charge for it smartly. What this means is that you need to make sure that your POC pricing is not a reflection of your actual commercial deal.

34:01Because let's say if you just say it's a 10k POC for like a 30 day pilot, if you don't talk about the fact that it is not the same as your commercial discussion, you have now said an anchor that, okay, it's 120k per year kind of deal if the POC works. So you have to be clear that the 10k is only for building a business case. Commercial discussions will follow after that. It is not an indication of the actual commercial discussion. But you're, you know, buy it on the other side. My still push you saying that's all great. But I need a price or a budget. Otherwise, I won't move forward with it. So there are two ways to actually, you know, deflect those kind of questions.

34:40The first way is, you know, contextualize the price on the value. So you can say something like if you push for price, hey, for customers such as yours, you know, we have been able to at least unlock 10 million in very similar situations. And our pricing is, you know, one is to 10x when it comes to ROI. So you're basically said that you're a million dollars to actually get started, but you actually didn't say it. You just said it's a 10 million. And I'm taking one in 10 in exchange for it. So you've kind of given the buyer an indication, but you're framed it in such a manner that that actually is justifiable, right?

35:12One in 10x ROI. So that's one way to do it. They might still say, yeah, that's good, but I need a, you know, budget. So then rather than just give them a budget saying it could be a 200k, you know, option. Don't do that. That's the worst thing you can actually say. Give them a range. You can say something like, look, the final pricing would be anywhere from 500k to a million. And based on the business case that we would co -create with you, we can pick a point in that range that justifies the value that we bring to the table. So you're giving budgetary ranges, right? So that's the other way to actually go about POCs.

35:46So how you navigate your early wins, who you choose is very critical when you're building companies at scale and fast in AI, because that actually dictates the destiny for the, you know, rest of your future. And picking those early wins is very, very critical. And, and having, you know, buyers who are serious, lead qualifying, having the right POC process. And thinking about POCs as frankly, not just trying to see if your product actually works in delivers value, but it's a great chance to have a commercial test and learn experiment and have fun with it and try to see what you can, you know, bring to the table in terms of your value and what portion can you actually take?

36:26So the core kind of takeaway here is for AI companies, you no longer can just grow and figure out monetization later. Your advice here is what you start with is what you're going to end up with. And it's very easy to undermonitize because people aren't realizing that they're now helping with actual labor force savings versus just like SaaS software that's making people a little bit more efficient. Yeah, absolutely. I mean, I strongly believe that the winners in AI will need to master monetization. And they need to master it from day one. I mean, and when we talk to early stage founders, it is a topic that keeps many people up at night, but that's also why we wrote scaling innovation and other assets so that they can get some more courage to think about, you know, pricing correctly from day one.

37:12And it's become very critical for AI companies to do that. Do you feel like the popular IDE startups, I won't name names, do you think they've undermonitized and they're going to be in trouble? Some of them for sure have. I think they will probably run out of it because they might show a lot of, let's say, fast revenue growth, but is that enduring revenue? Are people actually going to stay and is there going to be churn? And, you know, so there are a lot of aspects to archiving profitable growth. It's not just growing fast, but also growing profitably and having an enduring business. So some of them, yes, without naming names, but yeah, I think that's why it's important to be thoughtful about market share and wallet share.

37:54Well, those are different. So they're, I think what you're saying here is they may not, the retention may not work for some of these companies, but on the other hand, they're really cheap, like 20 bucks a month to help your engineer be like 10 times more productive potentially. Like is that too good a deal? Do you think they should have priced a lot higher? Yeah, for sure. I mean, if you're bringing a lot of value to the table and you start at training your customers to expect $20 a month and you anchored yourself on a raw price point, I think there are companies that have actually done that. And they try to undo it with like, you know, having more sophisticated, let's say, products that are actually higher priced or much higher priced, etc.

38:30That's one way to like undo that situation. So it is, it's really a trade -off between, you know, getting more customers and making money at the same time. That's the whole point of the book, market share and wallet share, and how do you dominate both? So if they're being thoughtful about both and have a vision to not grow market share, but also have a clear strategy to land and expand and increase wallet share, those strategies might pan out for those types of companies. If you just threw out a $20 product, hoping to just, you know, accelerate your market share, you're in trouble. Okay, this is a great segue to this 2x2, which goes much deeper into this.

39:02So it's easy to be like, here's what you shouldn't do. Here's your advice on what to actually do. So I'm going to pull up on my screen this 2x2 that you have in your book. So if you're watching YouTube, you'll be able to see it. So talk about this. This is essentially how to figure out, and I have the best possible pricing model and where you have the most power. So when you talk about AI companies and, you know, monetization models, we get as this question, should I be usage -based, should I be outcome, should I be, you know, a copilot mode, or how do I actually think about my pricing model? So we came up with this framework, which is a, you know, relatively simple straightforward framework, but very powerful.

39:39So there are two axes here. One is attribution, and the other one is autonomy. And when you have high attribution and high autonomy, that is when you have high pricing power, and we'll come back to that in a bit, right? So let's take the first, you know, bottom left quadrant. That is the quadrant where your attribution is low, and your autonomy is low. In that situation, the best pricing architect that actually fits is it is actually a seed based on a subscription model, because there's not much to do about it, because you're not, you know, being able to like attribute a lot of value to what you bring, but you're in a copilot mode, and you're not in an autonomous mode.

40:16So a seed based pricing would actually make sense. But if you're at that quadrant, the immediate thing to think about is how do you actually build more attribution and move to the right so that you actually get more pricing power? So if you think about the, you know, bottom right quadrant, those are companies that have actually done that. They have more, they can prove more attribution to like what they actually bring to the table, but they are still not in a fully autonomous mode as in there is still humans in the loop. If you take cursor, for instance, you know, definitely improves productivity can actually bring down the time to actually, you know, do code.

40:50The attribution is clear, but it's still in a copilot mode. In those kind of situations, a hybrid pricing model is the best option, where you still have a, you know, seed based model for the copilot kind of use case, but you also layer in a consumption model, which actually says there are certain number of AI credits or tokens that can layer in the usage aspects. So if you use more and more than you're actually being more on consumption, so it's a hybrid model that actually works there. If you look at the top, you know, left quadrant, those are, you know, products that are very autonomous, but are not strong on attribution.

41:27So these tend to be mostly like backend or infrastructure kind of products that are core critical to like run businesses can be autonomous, but they are not directly impacting the KPIs that businesses are tracking and hence cannot prove attribution very effectively. So, in that situation, you need to be on a pay for what you consume and a usage based model. A seed based model would not make sense because autonomous is no human in the loop, but that's why you're also in a usage based model saying the more you use it, the more you're actually charged and usage becomes a proxy for the value that you bring to the table.

42:07The quadrant that you really want to be in is the golden quadrant, which is the top right one. That's the outcome based pricing model where you have great autonomy and great attribution. And here is where I think AI can be really magical. So this means you're not only charging for work delivered, but you're charging for work delivered that was delivered by AI without no humans in the loop. So that becomes more of an outcome based model situation. So a classic example here is, you know, Intercom for Fin, what they actually do is they charge based on an AI resolution. So if an AI is able to, you know, resolve the ticket completely, independently without a human in the loop, then they charge for it.

42:49If a human intervention is needed, they don't charge for it. So they're more on an outcome based model or like companies like, you know, charge flow would charge, you know, up to 25 % on a chargeback that they're able to actually recover because these are like, you know, core savings that you actually bring to the table based on your AI. It is highly attributable, highly autonomous. So you can start moving towards an outcome based pricing model. If you look at the state of where AI is today as of the day of recording this podcast, now the most popular model is right now a hybrid pricing model.

43:24So because this is also expected, because you know, the previous SaaS playbook was usually on the seed based model, but they've all now moved on to at least a hybrid to actually incorporate AI credits and usage, etc. About 5 % of companies are probably in a true outcome based pricing model, you know, as of today. But those companies, some of the best ones are able to recover 25 % to 50 % of the value that they actually bring to the table. In the classic SaaS situation, we used to say if you can charge 10 to 20 % of the value, that's actually great. But in AI, you can actually charge 25 % to 50 % because it is autonomous.

44:05You're doing it with the AI. There's no humans in the loop. You're creating incremental value to like the business metrics. You're producing hard cost savings as opportunity costs. You can justify all of that. It's attributable. So you can actually take 25 to 50 % of what you bring to the table. In there, a lot of benchmarks and studies that actually show that and this is also my belief that in the next three years that 5 % number will move to 25%. So what this really means is if you want to win an AI, figure out a way to get to that quadrant because that's a magic quadrant. If you can truly, you know, price based on outcomes, you've achieved an unlock tremendous value.

44:49Wow. Okay. I'm just going to pause again. This is amazing. Madhavan, thank you so much for it. I loved that again. You just spent years, decades studying this stuff. Come here, tell us all the answers of what we should be doing. This is incredible. Let me ask you this. By the way, for people who's not watching on YouTube, the companies you have in the Golden Quadrant, Outcome Based Pricing, Sierra, Finn and Charge Flow, we've got the founder of Sierra and Finn coming on the podcast soon. So we'll talk about all this with those guys. So is the way to use this two by two, figuring out your model?

45:24Is it like, okay, I'm like, cursor, I'm going to go in this quadrant. Or is it, how do I get to Outcome Based No matter what? That's where I need to be. Yeah. So that's a great question. The first one is to actually figure out, you know, what is your right archetype based on where you are today? I think that is most important. Like if you try to rush into an Outcome Based Pricing model, but cannot prove attribution, you will fail. Right? So it is really coming up with, what is the right archetype based on what I'm doing today? But also, use this two by two to say, how do I, you know, paint a vision to actually get to Outcome Based?

45:57And can I get, how can I get close to that? Or can I be purely an Outcome Based model? Right? How do I evolve into that? What that would mean is, you know, how do I build functionality in the products to actually show attribution? How do I build more agentic workforces to like take the human out of the loop and be more autonomous and being thoughtful about your vision and strategy so that you will orient yourself towards more, you know, Outcome Based Pricing models. So when you think about increasing attribution, that means, first of all, understanding, you know, what are the KPIs of your customers?

46:31How do they track their business performance? Can you impact it? Can you productize things in your product that showcase that you are actually affecting those KPIs in a positive manner? Can you build dashboards to show, you know, value attribution? Can you do those value audits that we talked about on an ongoing basis to actually show that you're bringing a lot of value to the table and it's attributable to you. So how do you create these kind of attribution mechanisms become important and also autonomous based on like, you know, building more agentic workforces that can actually be on an autonomous model?

47:03So pick the right archetype and plan to like get to like as close as you can to the Outcome Based Pricing model. That's how I would use the 2x2 and you actually kind of see this happening with certain industries, right? If you think about coding as an overall category, like, you know, back in the day with GitHub everyone, they started with a seed based model, right? They've now moved to like the hybrid based pricing model with curses and everyone else, but the natural move would be more towards the Outcome Based Pricing model where, you know, a agent can probably code everything at the same time debug it and you're kind of almost hiding a AI developer or AI QA person and that actually becomes more prosive to like an Outcome Based model because it's attributable and autonomous.

47:49So that is picking the right archetype and then figuring out your pathway is the key way to interpret this 2x2. That's explains why everyone's building agents. That's where the money's at and what you're telling us here. Yeah. Okay. And it's going to be the age of the matrix. Too many agents agents, so it's everywhere that they didn't turn out too great. So what I'm hearing is a firework canva. So canva here and your model is in bottom right. They're in a hybrid pricing model. They have a base fee and consumption fee. What I would you do if you were helping canvas? What can you build that creates more autonomy and autonomous version of canva?

48:25And it's not like you need to do this. It's just you have more pricing power if you figure something out there. Exactly. I mean, and a good case for that is the, you know, Fin product from Intercom because traditionally, you know, all of those kind of companies used to price based on an agent basis. How many customer service agents are actually using the product? It used to be seed based, but they built out Fin, which is a completely AI resolution for those kind of support tickets. And then that actually enables them to like move to the outcome based pricing model quartered. Amazing. So you say you're an AI founder today.

48:59You're thinking about your pricing strategy, your monetization strategy long term. Your advices work with design partners. Create these POCs where you work on this ROI model with them to ideally find some outcome based pricing strategy. Is that a good way to summarize what would you add to that? Yes. I mean, at least be able to contextualize the business case, even if you're not moving to an outcome based pricing model, be clear on the outcome that you're actually, you know, creating for your customers through that business case, which actually will enable you to charge a fair price in exchange for that outcome.

49:36And if you're, you know, if your customers agree with the business case, then you can actually take a portion of that. Fin, actually, they're a new sponsor of the podcast and I've learned at another secast 99 cents for every out, for every support ticket they solve. To AI if it's, either, yeah, exactly if it needs a human intervention, then they don't charge for it. Yeah. And it's just like what that's such a simple story. Your agent costs 20 bucks. This thing's cost 99 cents. Yeah. That is two chapters and one beautifully simple pricing and an outcome based pricing model. And interestingly, they were the least, like the most hated pricing model initially.

50:14I did a survey into everyone's like, what products you pay the most for? And it was always intercom and everyone hated their pricing and they found a solution. I think they have found a great solution. Okay. So is there anything else along these lines that you think companies, especially a company should be thinking when they're thinking about pricing that you want to share before we move on to other stuff? I think we've covered most of the topics. Like we said, it's, you know, being thoughtful about POC is choosing the right, you know, pricing archetype or the pricing models. Those things become very critical in the early stages.

50:47But when you start scaling and let's say you become a multi product company, then you need to start focusing on what kind of packaging strategy should I have? Is it a platform plus add -ons? Should I have like versions of the products like Good Better Best? Should I tackle different use cases? Because now my AI can solve an insurance use case and a, you know, healthcare use case. Should I productize to like different use cases? Is that my packaging strategy? Or should I keep it completely modularized for people to pick and choose? So these kind of questions become more critical. And that's why the chapter on blowing up your packaging from your early days and coming up with your packaging strategy for your scale -up phase become very critical.

51:28So I think that's the next thing that founders would be hit with as in when they build multiple products. They need to think about the whole packaging, cross -selling, upselling motion. This cut touches on something I was about to ask, which is a change in your pricing strategy? How often does is it a success to change the way you price? Like I know we're talking about you need to get a right from the beginning if you're an AI company, in your experience, how often like what does it take to successfully shift the way you price down the road if people are listening to this and I like shit, we already have this pricing strategy.

52:00Back in the day, we used to say that you should revisit your pricing strategy overall pricing model, you know, how much you're charging at least once in two years with AI that's probably reduced in half because of the scale with which and the speed with which companies are built and competing. So I would say that it is an ongoing journey. It is not like you just solve it in day one, fill it and forget it. It has to be, you know, you have to be thoughtful from day one but also be ready to like they vet it rate and you're going to learn along your journey. So the whole point is to think about pricing as also a test and learn opportunity in your early days and there are things that you would change more often and there are things that you probably don't want to change too often.

52:43Things like pricing model unless you really change your attribution autonomy, there is no need to shift your pricing model. Stay within that architect, don't confuse things. But there are things like price points. Should I increase my price because it's been in a six months or a year? Yeah, you should because in a year there's probably prices go up three to five percent for everything that you consume but how can you actually increase your prices and be thoughtful about it so that entire chapter on how to do price increases, you know, smartly become very important in the scale of pace. I think Warren Buffett summarized this really well.

53:19He said the true definition of a company is a pricing power and if you have a prayer session for doing a 10 percent price increase, you have a terrible business. So you have to be able to increase prices over a bit of time. But how do you do it strategically that does not affect too much on but you're also able to like pass on the increases of value exchange? Those things become critical. Awesome. Zoom me out a little bit. Something that I love about your book is you structured it around these axioms. You have a bunch of these really clever axioms that get stuck in your head and help you think about pricing.

53:51Can you share some of your favorites? Maybe two or three of your favorite axioms from the book. You talked about Sierra being in your part founders. I don't know if that's clay but here's a shout out for like clay. So clay actually read the entire book and gave me feedback, scaling innovation, the similar copy that you actually had. And I had I called it scaling innovation axioms through all the book and the whole point of the axioms was that at the end of the day, if you can just take all the axioms, put it in a printout next to your desk is the summary of the book and it's like pity statements that you will just remember what to do.

54:26So he came up with this idea that hey rather than calling them just generic scaling innovation axioms, you need to brand each and every axiom. And I thought there was a brilliant idea. So I went about coming up with a unique even contributed some of the names. So we came about you know, we came up with some unique names for each axiom. And here's the other fun fact probably I'm geeking out too much but when I counted the number of axioms, there were 42 axioms. So and I didn't try to make this up and if you're Hitchhiker's fan then you know that's the answer to everything. But jokes apart, let me unpack a few axioms.

55:01The first one of my first favorite axioms what I call is the 2080 axiom. So in especially in tech companies, you know, 20 % of what you build drives 80 % of the willingness to pay. But the irony is that the 20 % is the easiest thing to build often. So what founders do is they put this take this 20 % build it, put it out in the market almost for free. And then they're chasing their tears to build 80 % stuff that's only driving 20 % willingness to pay. So if you have not been thoughtful about that, you've given the farm away unintentionally. So truly understanding what drives willingness to pay in your product is critical.

55:42And I think you know people call it the MVP. I think we should change the definition of MVP. It shouldn't be minimum viable product. It should be the most valuable product. And be thoughtful about what are you actually giving out as your early products? I think it's key. That's the 2080 axiom. Probably my second one is the you know price paralysis axioms. So you know what that means is your reluctance to do a price increase. It's often internal and emotional and it's not external and logical. This goes back to the same you know a prayer session that actually do a price increase. If you're holding hands, you have a terrible business right?

56:21I mean so like it's mostly internal and emotional. And how do you how do you be thoughtful about price increases become important? My probably my you know third third favorite one is stopping churn before it happens is stopping churn axiom. So to stop churn, you need to attract customers who won't leave. That sounds counterintuitive but that's the best way to actually stop churn. What does this actually mean? In a most companies would try to stop churn when someone actually says I want to go. It is too late and you're being reactive. At the most you'll throw some offers. They will stay for another six months and they will leave.

56:57They've already made that determination. The way to stop churn is to start up a quieting customers who won't leave. And that is the most important thing. So if you look back at your you know data and say who are the types of customers who actually tend to stay longer. What are their characteristics? How can I focus my acquisition dollars in getting more of those than your stop churn before it happens? And that's the key. That's interesting. I'm surprised you didn't say what was my favorite which is I think it's like if you land make sure to expand. Yeah. That's what I mean. That's what I mean.

57:30Talk about that one. Yeah. Sure. I mean. So if you land you need to also make sure you're expanding in the sense that if you give the farm away and you're into your product you don't have much to actually monetize later. So being thoughtful about what is the fence between your land product? Is it a free experience? What is the gating? And the gating is typically based on are you getting based on features? Are you also getting based on usage? And how do you be thoughtful about that? So you leave stuff for the expansion. Okay. So zoom me out even further to kind of wrap up what would you say is the biggest lesson you want founders to take away that they're probably they think they understand but they probably don't.

58:14Yeah. I think this comes back to what you started with. I think intuitively people get it that they need to think about market share and wallet share if they're going and even if you ask them they'll say like, yeah, I'm thinking about wallet share. But have they really thought about it equally and played equal attention? Have they you know postponed one of them? Are they operating in a single engine strategy consciously or subconsciously? I think that's the key takeaway I have. So the contrarian take is not to put equal effort on both the engines at the same time. In certain stages of your company you might need to be more market share dominating.

58:52In certain stages you might need to be wallet share dominating. It's not equal effort but it's equal attention and like really developing that mindset of being a true profitable growth architect. And that is the main takeaway that I have for people. And if you are not in that mindset already there's a book for you. I'll point them to it. So just so folks know what to do when they're okay. I need to focus on wallet share more. Is the main focus figure out a pricing model that aligns well with pricing power? What's like what's in the bucket of work to do to invest more in wallet share thinking? So it's actually all of those you know market share wallet share acquisition, monetization, retention, or all kind of like correlated.

59:37You can't think about them in isolation. So I wouldn't say only for wallet share what do you need to do? If you want to grow on both the market share and wallet share, let's say for instance you know you need to have the right land and expand strategy. The land helps you with acquisition, the expansion helps you with wallet share. If you have a you know pricing model then you need to have a pricing model that lets you acquire faster because it's intuitive but it should also help you recover value which is like your monetization. And if people understand your pricing model they're actually going to stay.

1:00:09So it's all sort of you know goes hand in hand. So I wouldn't isolate thinking one way or the other. That's why the nine strategies actually are very powerful because if you follow the strategies you're not going to fall into the single engine strap. These are tried and tested strategies of how to build businesses in such a way that you're being thoughtful and paying equal attention to both market share and wallet share. All right that is a very reasonable answer. Monobon is there anything else you wanted to share or leave listeners with before we get through a very exciting lightning round? Read the two books in sequence monetizing innovation and scaling innovation because it's one thing to build a great product.

1:00:47It's yet another thing to build a great business. You cannot build a great business with a not so great product and you cannot do it the other way around either. So I think it's having thinking about pricing early especially for AI companies being thoughtful about it. You know price before product and then thinking about how to actually scale developing a profitable growth mindset. All of these things become critical and I'm looking forward to the feedback from the audience. I feel like your books are kind of like in the the staple of founder reading. There's like all these things you just go know what you're doing and there's a few of these books that are like okay here's all this advice that'll answer so many questions and say these so much heartache and so I'm really excited you're adding something to that bookshelf.

1:01:33With that we reached our very exciting lightning round. Are you ready? Let's go. Let's go. What are two or three books that you find yourself recommending most to other people? The first one that comes to mind is Business Model Can was by Alex Hoster -Walder. It's a classic and one of my favorite books. I recommend a lot of people to read that because I think it nicely ties a lot of what we are also saying from a more strategic business model angle. I like this book thinking fast thinking slow. I think that's also a classic because again you know there's always a human element to things and understanding the customer's psychology is important whether you're in B2C or in B2B because if you're in a B2B situation is humans having a human conversation.

1:02:13It's as much behavioral as it's actually numbers. I love that book and there's a lot of nuggets in there so I recommend a lot. Probably the third one that I recommend is a book called Contegious by Johnna Berger. I love that. He was in the PSG program at Stanford in marketing and he actually wrote this book on how to make messages viral and he's actually seen you know the best viral messages and boiled it down to a framework and he followed that then you can make those messages viral. I've tried to use some of those in my own outtreaches and things of that nature so I think it's a fantastic read.

1:02:51Have you read this out? I have not. I haven't even heard of it. All right. We're gonna go viral. We got the playbook. Contegious. That's the name of the book. Contegious. Okay. We'll link to that. Is there a recent movie or TV show you've really enjoyed? I guess a movie. Sure, let's pick a movie. Definitely enjoyed the mission in Bosable, the final one, eight in the sequence. I think I find that a whole I love those the entire genre one through eight. But what I like about it is my willingness to pay has constantly increased over a period of time. They could have charged me whatever they wanted for the eighth movie.

1:03:28I would have probably gone and seen it, but I wanted to. So I thought there's an interesting example of like a durable brand where you're you know the monetization power actually increased over a period of time. So I think I enjoyed the movie. It was great. Yeah. I mean, by the way, I just realized, am I stands for monetizing innovation and also mission impossible? Maybe subconsciously. That's why I liked it too. And you're the Tom Cruise character. Yeah, exactly. I must that's a I love the only person in the world that thinks of mission impossible through monetization willingness to pay exactly.

1:04:01I think there's too many of these dinner conversations also gravitate towards pricing and monetization. I think it's become my life. We need a we need a version of this movie like a mission possible of Motivon. Sure. I pay I pay anything for that. All right. Next question. Your favorite product you recently discovered that really love? I will probably talk about two products. The first one is Delphi, the digital mind representation. That's a Lennybot that you actually I think put out. So I think I find that product fascinating and also love the founders Dara and Sam there. I truly believe that that is going to be the future for like, you know, talk leadership and how thoughts are consumed by like consumers.

1:04:45Like if I can and I've used your Lennybot, I really enjoy it. Like if I can, you know, co -create some thought leadership piece with talking to you, but it's not you, your AI, and it's actually living and breathing your brain. How cool is that? And I think that I really love the product category. There's a lot of, you know, different use cases, longevity, longevity extension use cases, things of that nature. I'm excited about about the product. I think it's it's been great. I plan to taking inspiration from you plan to create a Delphi of myself. Okay. I think it should be someone for the book.

1:05:18Maybe I'll try to. That's the promise. Try to keep it ready. So I think if you want to talk more about the book or things of that nature and top pricing, you can talk to my AI too. Right? I mean, I find the product fascinating. The second one I would probably say that's been super useful in terms of just productivity is general. We love that product. I think just the ability to take notes and doing all the meetings and, you know, organize it and being able to create things, etc. I think it's been a great product that we recently started trying and we've been really liking it. Cool. That's been the most mentioned product recently.

1:05:53How cool is that? Love granola. Get a year free of granola. If you're paid subscriber to my newsletter, Lenny's newsletter .com, click bundle. One year free free, not just you, your whole team. What an offer they offered. It's crazy. Undelphi, what's interesting about Lennybot is it's not just my knowledge. It's every single podcast guests, insights and lessons also fed into it. So it's what an oracle of knowledge of this thing's become and it's free at this point, completely free. Lennybot .com. No, I get nothing from it. It's just out there. Okay, next question. Do you have a favorite life motto that you often come back to and find useful and work or in life?

1:06:32You know, create value in everything and anything that you touch, everything else will follow. That's my life motto. That resonates deeply. Okay, last question. You recently moved into investing. So it's cool is you used to be very expensive to work with at Simon Kutcher, I think it was called very expensive. A lot of big company stuff. Now a lot more founders have access to you because you're investing in startups. Just talk about that. Talk about what you're doing these days. Sure. I mean, at Simon Kutcher, you know, I got to work with our 200 -3P companies and my co -GP now Josh Blom. He also had an opportunity to work with our 250 companies.

1:07:11So combined, we work with our final companies more than 50 plus unicorns. It was a great ride. Often we were actually working with them in much later stages, you know, when in series D, or pre -IPO, post -IPO, private equity companies, etc. But the two of us actually now started a venture firm with an explicit goal of working with early stage AI founders. And it goes back to the topic that we started with. AI companies needs to deal with monetization from day one. But for those kind of companies, you know, FIFA Service Transaction model doesn't necessarily work. And that's also why we pivot it to like venture.

1:07:51So our business model is pretty, you know, pretty standard right now. If you get access in the cap table, we roll up our sleeves and work with the founders and halting monetization. So we are invested in their success. And we will FIFA Service no friction on those kind of manners. But on the flip side, we get to concentrate our efforts in fund one in probably 20 to 25 companies. And that's where we will be spending our time. What a deal. Mar -a -bon. Two final questions. Or Kim folks find you if they want to reach out and talk about this offer. And how can listeners be useful to you? We used to find out.

1:08:26I think just Google for monetizing innovation and scaling innovation, you'll probably land in a lot of pages. You can also go to Amazon. I think if you want to purchase the books, the actually a scaling innovation is now available in pre -order. I think we'll have the part released before the book is actually out. The book is going to be out on August 5th. So there's an opportunity to pre -order. And maybe I will take an inspiration from your master bundle, which I really think was the was best bundle, and come up with my own bundle for like getting users to like pre -order. So if you love monetizing innovation, I can tell you you would really love scaling innovation.

1:09:02So go buy it for your teams, buy it for yourself, and here's the offer. So for anyone who's able to buy more than five copies, send us a screenshot of your purchase pre -order. Right? Send us a screenshot of your purchase to promo at 49pumsvc .com. So that's promo as in promotion at 49pamsvc .com. And here's the bundle offer that I have. Ten people will get access to bundles as an app for and the bundle is going to include a sign copy of scaling innovation. A 30 minute ask me anything session, an exclusive invite for a scaling innovation book launch, and also a scaling innovation t -shirt. So that's my coming up with a bundle.

1:09:54I didn't get granola and others to put in for me just yet, but I think this hopefully suffices and is exciting for folks to buy. And yeah, I mean, if you like the book, please do leave a review on Amazon that always is helpful because if more people review it, the book takes a life of its own. And I'm really thankful for also the support that I got over the years from founder community, from the venture community for monetizing innovation. I think there's been, you know, the last eight years, thousands and thousands of fans of the books. They've done a whole lot talking about it, writing reviews, you know, posting, on LinkedIn, and, you know, making things like price before product or, you know, price product market price fit and things as a part of founder vocabulary.

1:10:42So I'm very passionate that people actually did that and very thankful for them. So there's also probably an equal measure if you're excited about scaling innovation. I would love for you to talk about the book. Amazing. And I think the reason people do that is because you give away so much for free. Like, you know, you just shared so much wisdom for free that isn't going to help so many people. So yeah, I just tried to plan my give and get right there. Oh, God, a good call back. Madhavad, this was incredible. Thank you so much for being here. Thank you so much, Danny. It was a pleasure. Same.

1:11:16Bye, everyone. Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple podcasts, Spotify, or your favorite podcast app. Also, please consider giving us a rating or a leaving review as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show at Lenny's podcast .com. See you in the next episode.