Lessons in pricing and why academics were wrong

Most pricing advice for startups is built to reduce anxiety, not to find truth. Charge less until you have traction. Mirror the market. Cost plus a margin and call it a day. Those moves feel responsible—and they are often how founders undercharge, attract the wrong customers, and discover twelve months later that they trained the market to treat the product as a commodity. Pricing is not a spreadsheet exercise you finish before launch. It is a series of bets about who you serve, what outcome you own, and what you are willing to say no to.

What everyone tells you—and why it breaks

• Start cheap to win logos: You may win logos that only convert at a discount—and churn when the price normalizes
• Price to competitors: Their cost structure, packaging, and strategy are not yours; matching anchors you to their story
• Cost-plus is safe: Customers do not buy your AWS bill; they buy speed, risk reduction, or revenue they cannot get elsewhere
• One price for everyone: Early-stage yes—but ignoring segments hides that one buyer would pay 5× for a outcome others barely value
• Set it and forget it: Packaging, willingness to pay, and competitive context shift every quarter once you are in market

What I learned the hard way

Early strategy

In the early days of our marketplace platform startup—shortly after we raised our $3.2M seed round—my technical co-founder and I were hyperfocused on hardening the product for a proper go-to-market (GTM) launch, which we estimated would take about 12 months. I asked my other co-founder to get some early discovery customers and recruit a few business development and sales development representatives to validate the value proposition of the components of the product that were ready. Our platform at that time could have supported a lightweight consumer marketplace—focused primarily on commerce sites that had “hacked” their way into a marketplace or were running their marketplace vendor management (e.g. inventory, commissions, and logistics) on spreadsheets.

Our early hypothesis was that our vendor management module—one that could sit on top of WordPress, Shopify, and Magento—created way more value than trying to manage vendor commissions, sales, inventory, shipping, and contracts in spreadsheets. We were literally competing with a spreadsheet.

So my co-founder gave it a lot of thought and came back that we should be charging $250 per month for our vendor management software—I pushed back and said double that and see what traction we get. So off the sales team went, targeting the 500+ small marketplaces we found through BuiltWith. In a follow-up a month later, I asked for an update on how many customers we had won and what the initial traction was with the product. To my surprise, we still had our 3 charter customers—and no new ones.

The feedback from the sales team was that we were priced way too high—that we needed to be around $100 per month. Based on what they said, I approved the change and told them to go get us two customers by the end of the month. But alas, the sales team said we were still too expensive. So, being fed up with a lack of progress, I told them they were authorized to give the software away to 10 customers so we could get some feedback—with a mandate to get me at least three new customers.

After 90 days we had made over 100 contacts, and we had exactly 0 new customers. Something was clearly broken—no one we were talking to needed our platform. The co-founder running GTM said we did not have a market and that we should just give the money back. I was unconvinced. Both of the salespeople left the company.

First sign of a value creation story

While I was on vacation with my family in New Orleans, my wife struck up a conversation with another family that were waiting for beignets. When she shared that I had launched a startup helping companies build marketplaces, it struck a chord with the other father. He mentioned that his company was evaluating a very large competitor in our space—Mirakl—but that they did not feel comfortable that it was the right platform for them. He arranged a meeting with his CEO but gave me a very direct insight: “Ryan, whatever you do, price it very high—we are expecting a lot of customization and this is a highly regulated and complicated B2B business.”

Initially my co-founder and I thought we should price it at $1,000 per month; I suggested that we price it at $10,000 per month to be “very high.” My co-founder was baffled—he said there was no way they would pay that or take us seriously. After thinking about it more, I knew where I wanted to price it but I waited until the appropriate moment in the client pitch to share it.

The pitch that shocked all of us

We met with the CEO of a B2B distribution player that had a near monopoly in their segment. They were just shy of a billion dollars a year in gross revenue. The moment of truth had arrived—we met with the CEO, the SVP of Marketplace, and the Program Manager I had met in New Orleans. After walking them through the platform, they were thoroughly impressed with the speed, functionality, and craftsmanship of the product.

Then the question came from the CEO: “This is great, Ryan—it looks like this is a very flexible platform that can support us, and your fintech background is really compelling given the regulatory issues we face. What are we looking at in terms of pricing?” I confidently snapped back that our platform was $100,000 per month with a one-year contract minimum. He sat there quiet for an uncomfortable amount of time with a puzzled look on his face and retorted—“You can’t be serious… I’m sorry, but we can’t go with you. I appreciate your time; you have an impressive product, but it’s just not going to work for us.”

As soon as we jumped off the call—in utter shock—my co-founder berated me, saying he had told me that we blew our chances because we priced it ridiculously high. A few seconds later, my phone rang. It was the Program Manager I had met in New Orleans. I answered the phone eagerly to find out how we could still win the business.

“Hey Ryan, got a minute?” I immediately apologized and asked if it was too expensive. He said, “No, Ryan—if you had added a zero to that number you would have won the contract. He said we were priced so low relative to the competition that they could not take us seriously. Their CEO said that if we were at least $1 million per month he could consider us, but not when we were a full order of magnitude off.”

Lesson learned from pricing relative to value

That phone call forced two conclusions we could not unsee. First, we were going after the wrong target market—optimizing for small shops that might pay $100 a month while the buyers who actually needed us looked like regulated, nine-figure distributors comparing us to Mirakl, not spreadsheet hacks. Second, pricing has to track value creation—the payroll, risk, and revenue the platform unlocks—not the anxiety in your sales team or the feature list on a slide.

My thesis was blunt: our software should eliminate at least two headcount—an accountant untangling vendor commissions in Excel and a marketplace manager owning inventory, shipping, and contracts. Assume $75,000 per year each, fully loaded. That is $150,000 a year in labor you do not hire as volume grows—before you count fewer errors, faster close, or an audit trail finance will defend. Capture a fraction of that savings and you are still a bargain; price like a lightweight plugin and enterprise buyers hear “toy.” My working anchor became about $10,000 per month—not because spreadsheets are expensive, but because value capture should leave the customer most of the upside while you earn a credible seat at the table.

Successfully achieved our quest for 12 and 1

In October 2021, I told the team we were going to market in December on a quest for 12 customers and $1 million in ARR ahead of Q1—the peak ecommerce platform buying season. They asked when I thought we would get there—I said 9 to 12 months. We had finally aligned market, message, and pricing.

We launched with a $10,000 per month starting point, anchored to GMV revenue buckets so larger operators paid more as value scaled. It was the renewed go-to-market blitz—same product, different buyer, a number that signaled enterprise seriousness. We crossed $1 million in ARR in the first 90 days—not in nine months. The lesson from New Orleans was not “charge more for relevance.” It was price to the value you create, to the segment that can absorb it, and let the spreadsheet tier go find someone else.

Contrarian moves that worked

• Package for the buyer, not the feature list: Buyers fund problems solved, not checkbox parity with incumbents—pricing dictates implied value creation
• Offer tiered pricing: This innovation made us win significant business from competitors that charged a percentage take rate
• Say no to custom discounts in year one: Exceptions become the real price list; discipline now saves revops pain later
• Walk away from perceived easy wins: The spreadsheet target market looks attractive, but they are not experiencing enough pain to value what you sell

A discipline you can run without copying our numbers

You do not need our exact price points—you need the sequence we learned the hard way. Quantify value creation in terms the buyer already budgets: headcount removed, GMV or revenue enabled, regulatory risk reduced, time-to-launch compressed. Pick a segment in enough pain to fund that outcome; our spreadsheet hunt produced contacts, not customers, because the pain was not acute enough to justify switching. Treat price as a credibility signal in enterprise deals: when a nine-figure operator evaluating Mirakl says you are “not serious,” ask whether you are too expensive—or an order of magnitude too cheap relative to the problem and the incumbent.

Then package and meter to value. We anchored at $10,000 per month and scaled with GMV buckets so larger marketplaces paid more as they grew—while competitors leaned on percentage take rates that finance teams hated to forecast. Tiered pricing let us win deals on predictability and alignment, not feature checklists. And when sales asks to “just get to $100 a month,” pause: you may be optimizing for logos that will never expand, not for the buyer who would pay $1 million a month if you showed up as a peer to the platforms they already respect.

If you had added a zero to that number you would have won the contract.

Program Manager, New Orleans