The first time I tried to implement the api economy: how to build a business at scale, everything broke. Not metaphorically. Actually broke.
Your pricing is not just a number; it's a message. I'm sharing some of my favorite pricing psychology hacks that can help you better communicate your value and nudge customers toward the right plan, without being manipulative or deceptive.
Why Most Approaches Fail
Let me be direct: about 70% of the approaches I see to the api economy: how to build a business are fundamentally flawed. Not slightly off. Fundamentally flawed.
The root cause is usually one of three things:
- Copying what big companies do without understanding why they do it. What works for Google doesn't work for a 10-person startup.
- Over-engineering the solution when a simple approach would work better. I've seen teams spend six months building something that could have been done in two weeks.
- Ignoring the human element. Technology is the easy part. Getting people to actually use it is where the real challenge lives.
What I've Learned From 102 Companies
After investing in 200+ startups and running two companies to successful exits, I've developed a pretty clear picture of what works with the api economy: how to build a business.
The biggest misconception is that you need to timing is everything in this game. That's backwards. The companies that win are the ones that customer feedback is the only metric that matters.
I remember sitting with the Anthropic team early on and discussing how they thought about the api economy: how to build a business. Their approach was counterintuitive but brilliant.
The Reality Nobody Talks About
Most people approach the api economy: how to build a business with assumptions that made sense five years ago. The world has moved on. When I look at my portfolio companies, the ones that succeed are doing something fundamentally different.
The first thing to understand is that timing is everything in this game. I've seen this play out across dozens of companies. The pattern is unmistakable.
At RemoteTeam, we learned this the hard way. We spent months going down the wrong path before realizing that you need to move fast and break things. Once we made the switch, everything changed.
What I Tell Founders
When a founder in my portfolio asks me about the api economy: how to build a business, I usually start with three questions:
- What's your timeline? Because the right approach for a company with 6 months of runway is very different from one with 3 years.
- What have you already tried? Most founders have tried something. Understanding what didn't work is often more valuable than knowing what might.
- Who on your team owns this? If the answer is "everyone" or "no one," that's your first problem to solve.
These questions seem simple but they reveal a lot about where a company actually stands.
This connects to broader themes around cloud AI services, usage-based pricing, SaaS metrics that I've been thinking about a lot lately.
What's Next
The world of the api economy: how to build a business is moving fast. What worked last year might not work next year. That's both the challenge and the opportunity.
My advice: stay curious, stay humble, and stay close to the people who are actually doing the work. Read less thought leadership and do more experiments. Talk to fewer consultants and more practitioners.
And if you're a founder building in this space, remember that the best time to get the api economy: how to build a business right is before you need to. Don't wait for a crisis to force your hand.
I'll keep sharing what I learn. This stuff matters too much to keep to myself.
Frequently Asked Questions
How can I apply this thinking to my own situation?
Start by identifying the core principle behind the opinion, not the specific example. Then ask yourself: does this principle apply to my context? If yes, test it in a small, low-risk way before going all in.
What experience informs this perspective?
This perspective comes from over a decade of building companies in Silicon Valley, two successful exits (RemoteTeam to Gusto, MovieLaLa to Gfycat), and investing in 200+ startups including Anthropic, OpenAI, and Scale AI. I write about what I've lived.
Do all experts agree with this view?
No, and that's fine. The best ideas in business are often contrarian. I share my perspective based on my experience and data, but I encourage you to seek out opposing viewpoints and form your own conclusions.