The B2B Fintech Pricing Journey

▤ Summary

Assuming that the company has a reasonable deal with a cloud services provider and a relatively lean headcount in these early days, COGS should be quite low, which in turn means the product can be priced competitively to yield that magic 80% number. However, in cases where a material component of the solution offered relies on third-party data or services (like, for example, Twilio needing to pay its telecom partners to send text messages to users), COGS can be much higher, making it harder for the business in question to match customer willingness-to-pay and achieve a high gross margin. We expect to see things like: • None Different permutations and combinations of minimum commitments: monthly, annually, quarterly, with different options of how to handle overages, and discounts offered for early payment • None Multiple pricing models working in concert with one another, often blending a combination of fee- and usage-based approaches • None Elimination of legacy sweetheart deals (i.e., all-you-can-eat) to true up customers to a given pricing brand based on their size and usage Not all of these will be right for every “Scale” business, but they are a few examples of the type of nuance we see at this stage of company building. • None Pros: Aligns cost with value, can result in frictionless rapid growth, easier to identify trends in usage by customer and potential churn • None Cons: Spiky, subject to seasonality, operationally burdensome (e.g., reconciling billing), less predictability for you. Some of this feedback may come through via comments in NPS surveys, one-off discussions with account managers or support staff, or other unstructured channels, but we suggest carving out a pricing-specific check-in cadence with a handful of customers from each segment to ensure nothing is too far off the mark.

▦ Linked Companies

Stitch Labs

$5M to $10M

Square

$500M to $1B