SaaS pricing pages offer the best glimpse into how a founding team is thinking through the intersection of product, go-to-market and monetization. B2B SaaS investors care about many of the same criteria when looking at a company for new investment.
Most are table stakes, such as annual recurring revenue, net retention rate, total addressable market (TAM) and growth rates. These startup metrics can check a box to move the fundraising process forward, but they alone will never be worthy of a venture capital firm’s check.
SaaS investors care equally about a founding team’s expertise and track record, target customers, go-to-market strategy, competitive value propositions and much more. These qualitative aspects are dug into during the diligence process, but leadership teams actually have the opportunity to show off in advance of that point — and it’s not in a data room or pitch deck.
“A SaaS pricing page is one of the first places I go when learning about a company prior to meeting the founders,” said Marshall Everson, vice president of investments at York IE. “It tells so much about the skillset of the leadership team, how they perceive their customers and their view on go-to-market strategy.”
So what exactly are SaaS investors looking for as they browse pricing pages?
Market Understanding
Boilerplate naming conventions such as Basic, Pro and Enterprise are a missed opportunity for founders to show SaaS investors how well they understand and design product offerings around specific segments of customers.
Zoom, for example, has a drop-down menu on its page that allows for specific packaging and pricing based on industry and use case. If you’ve done your customer homework, it should be obvious that your different customers do not need the same features and usage limits. Make sure that the names, descriptions and usage included with the packages reflect exactly the type of business that would use it. This will show investors that you as a founder have a deep sense of your customer’s needs and are designing solutions to match those needs.
SaaS Pricing and Revenue Models
In the later stages of the diligence process, a quick glance through a financial model should show an investor what types of revenue streams a company is growing with. But most companies will never share this information, and investors will never ask for models, before a first call.
Instead, SaaS pricing pages tell investors how much a company relies on recurring revenue. Tech-enabled services may be a great way to expand the TAM or bootstrap a business, but SaaS investors want to invest in, well, SaaS. It’s easier for investors to sniff out services-heavy businesses or one-time contracts from the look and feel of the pricing page.
If you are a services-heavy business, best to try to not disguise it. Instead, your pricing page should show how the services a customer pays for will support the recurring purchase of software.
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Product-Led or Sales-Supported Growth
Product-led growth (PLG) is not just a blog buzzword anymore, but a pertinent conversation topic in many VC investment committee meetings. In fact, there are enterprise SaaS investors such as Camber that will only invest in companies with a focus on PLG (as opposed to sales-led growth).
They care because businesses with a heavy sales process and onboarding rely on more staff (and therefore costs) to get software in the hands of buyers. On the other hand, the product-led business that allows customers to try the platform without talking to a sales rep tends to have lower customer acquisition costs, bigger margins and larger lifetime value.
But how do you reflect PLG on SaaS pricing pages? Some good leading indicators include freemium plans, usage caps in packages and trial periods. Many companies may miss the boat altogether by choosing not to display pricing transparently on the website. What buyer likes having to fill out a form and talk to a rep to get a price?
SaaS Pricing Page Considerations
These are just some of the many indicators that pricing pages can offer SaaS investors without even opening a pitch deck. When designing a pricing page, it’s also important to keep in mind the following:
- What message does this promote about my competitive differentiation?
- How will investors view my expansionary revenue potential?
- Does this align with my brand value?
All of these questions are fair game discussion points between founders and investors as it relates to monetization strategy.
There is good news for folks with little expertise in pricing: Bad pricing is rarely the nail in the coffin during the fundraising process. Most investors agree that a bad packaging and pricing model is never a reason to pass on an investment all together, but it is an opportunity to impress your new potential partners out of the gates. An under-optimized pricing model may actually be a huge opportunity for growth within a business. At the very least, founders must be open to coaching and adjusting this critical lever.
