Three years ago, I sat across from a founder who was about to make the same mistake I made with the case for usage-based pricing in every saas company. I told them the truth.
How do you compete when every startup has access to the same powerful, off-the-shelf AI models? The answer isn't to build a better model. I'll share my framework for building a defensible AI SaaS business through proprietary data, unique workflows, and brand.
The Counterintuitive Truth
Here's what surprised me most about the case for usage-based pricing in every saas company: the best practitioners do less, not more.
When I was building MovieLaLa, we tried to do everything at once. We had the best technology, the smartest team, and we still almost failed because we spread ourselves too thin.
The lesson I took from that experience, and from watching hundreds of other companies, is that you should focus on one thing and do it exceptionally well. It sounds simple. It's incredibly hard to execute.
The Framework That Actually Works
I'm going to share the exact framework I use when evaluating the case for usage-based pricing in every saas company. It's not complicated, but it requires discipline.
Step 1: customer feedback is the only metric that matters This is where most people go wrong. They skip this step entirely and jump straight to execution. Don't do that.
Step 2: most founders overthink this and underspend on execution Once you have the foundation right, this becomes much easier. I've watched founders struggle with this for months when the answer was staring them in the face.
Step 3: Iterate relentlessly Nothing works perfectly the first time. The companies in my portfolio that nail the case for usage-based pricing in every saas company are the ones that treat it as an ongoing process, not a one-time project.
Why Most Approaches Fail
Let me be direct: about 70% of the approaches I see to the case for usage-based pricing in every saas company 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.
The Numbers Don't Lie
I've tracked the performance of companies in my portfolio that take the case for usage-based pricing in every saas company seriously versus those that don't. The difference is stark.
Companies that invest early in the case for usage-based pricing in every saas company see, on average, 2-3x better outcomes within 18 months. That's not a small edge. That's the difference between raising your next round and running out of runway.
One of my portfolio companies went from struggling to profitable in under a year after they finally got serious about this. The founder told me later that they wished they'd started sooner.
This connects to broader themes around AI APIs, serverless AI, usage-based pricing, cloud AI services that I've been thinking about a lot lately.
What's Next
The world of the case for usage-based pricing in every saas company 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 case for usage-based pricing in every saas company 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.
What's the most common pushback you get on this?
People often push back by citing exceptions or edge cases. And they're usually right that exceptions exist. But building a strategy around exceptions rather than patterns is a losing game for most founders.
How has this view evolved over time?
My thinking on most topics has changed significantly over the years. Early in my career, I held many conventional views that experience proved wrong. I try to update my beliefs when the evidence changes.