Pricing your AI product: Lessons from 400+ companies and 50 unicorns | Madhavan Ramanujam

Madhavan Ramanujam:The good founders need to be able to dominate both market share and wallet share it is not a choice you need to get better at both

Lenny Rachitsky:It feels like every company wants to be an AI company these days how is AI pricing different

Madhavan Ramanujam:The winners in AI will need to master monetization from day one if you're bringing a lot of value to the table and you started training your customers to expect $20 a month then you anchored yourself on a raw price point you're in trouble 20% of what you build drives 80% of the willingness to pay but the irony is that that 20% is the easiest thing to build often

Lenny Rachitsky:What would you say is the biggest lesson you want founders to take away

Madhavan Ramanujam:If you think about market share and wallet share let's think about it as a two by two the quadrant that you really want to be in is the outcome based pricing model the top right quadrant where you have great autonomy and great attribution about 5% of companies are probably in a true outcome based pricing model if you want to win in AI figure out a way to get to that quadrant do you feel

Lenny Rachitsky:Like the popular IDE startups are gonna be in trouble down the road

Madhavan Ramanujam:Some of them yes without naming names

Lenny Rachitsky:Today my guest is Madhavan Ramanujam Madhavan is the smartest person I know on pricing and monetization strategy as managing partner at Simon-Kutcher he's worked with over 250 companies including 30 unicorns to help them figure out how to price package and grow their products he's also the author of the book on pricing called Monetizing Innovation and now he's back with a new book a sequel called Scaling Innovation which teaches you how to architect your business for long term profitable growth it also had to avoid the common traps that teams fall into that keep them from building real durable sustainable businesses Bill Gurley wrote the forward I had a chance to read an early copy I absolutely loved it it's a book that every founder needs to read and in this episode Madhavan shares many of the biggest lessons from the book including how pricing strategy is very different for AI companies why you need to get your pricing model right from the start in today's market a very simple two by two to help you pick your pricing model how to gain pricing power a ton of tactical advice for negotiating more effectively the most common traps founders fall into and so much more if you order five copies of the book Madhavan is offering a chance to win a free conversation with him a signed copy of the book an invite to the book launch a t shirt and more just send a copy of your purchase receipt to promo at forty nine palms v c dot com and some more good news Madhavan is now more accessible he left Simon-Kutcher he's now investing full time with his own fund he focuses on early stage AI companies if you wanna work with him check him out at 49palmsvc.com if you enjoy this podcast don't forget to subscribe and follow it in your favorite podcasting app or YouTube with that I bring you Madhavan Ramanujam this episode is brought to you by Interpret Interpret is a customer intelligence platform used by a leading CXN product orgs like Canva Notion Perplexity Strava Hinge and Linear to leverage the voice of the customer and build best in class products Interpret unifies all customer conversations in real time from Gong recordings to Zendesk tickets to Twitter threads and makes it available for your team for analysis and action what makes Interpret unique is its ability to build and update a customer specific knowledge graph that provides the most granular and accurate categorization of all customer feedback and connects that customer feedback to critical metrics like revenue and CSAT if modernizing your voice of customer program to a generational upgrade is a 2025 priority like customer centric industry leaders like Canva Notion Perplexity and Linear reach out to the team at interpret dot com slash Leni that's e n t e r p r e t dot com slash Leni today's episode is brought to you by DX if you're an engineering leader or on a platform team at some point your CEO will inevitably ask you for productivity metrics but measuring engineering organizations is hard and we can all agree that simple metrics like the number of PRs or commits doesn't tell the full story that's where DX comes in DX is an engineering intelligence solution designed by leading researchers including those behind the Dora and Space frameworks it combines quantitative data from developer tools with qualitative feedback from developers to give you a complete view of engineering productivity and the factors affecting it learn why some of the world's most iconic companies like Etsy Dropbox Twilio Vercel and Webflow rely on DX visit DX's website at getdx.com/lenny

Lenny Rachitsky:Madhavan thank you so much for being here welcome to the podcast

Madhavan Ramanujam:It's exciting to be back Lenny thanks so much for hosting me again

Lenny Rachitsky:This is a a very rare second visit to the podcast you've got a new book coming out I've got a very early copy right here if you're watching on YouTube here's the copy you sent me it's like 200 pages did you print this out on your printer by the way

Madhavan Ramanujam:Yes I think I ran out of printer ink after that I guess

Lenny Rachitsky:I appreciate the early copy it's amazing what we're gonna be doing with this conversation is going through some of the biggest lessons that you share in this book to give people a sense of many of the things that you share many things you've learned since writing the first book let me start with this question why did you decide to write another book and what is the difference between scaling innovation which is the name of this book and monetizing innovation is the name of the first book

Madhavan Ramanujam:Monetizing Innovation we actually wrote it eight years ago time flies and the core thesis of that book was you know how do you build products that are not just cool but are products that people need value and are actually willing to pay for I think that took a life of its own over the years we kept getting another question from entrepreneurs that hey we built a great product we know there is willingness to pay but how do we build a great business how do we scale this the brutal truth is that even if you have a great product you might actually not figure out a way to grow fast and grow profitably so we wrote Scaling Innovation in an effort to actually solve that puzzle so you can think of this as a sequel to Monetizing Innovation and Monetizing Innovation talked about how to build great products Scaling Innovation talks about how to build a great business and you know writing a book is there needs to be a purpose for this for me the reason for writing books is about you know giving a bit back based on what I know to like founders and book writing is hard writing a good book is even harder and just like Monetizing Innovation Scaling Innovation is not marketing fluff it actually has real actionable stuff packed in that you can go on Monday morning and start implementing and we wrote this book to give back a bit of what we know and to help companies scale and architect towards profitable growth

Lenny Rachitsky:I love people like you that do the work for I don't know decades at this point learn from real life experiences over and over and over and then just share all this stuff with people like this is the most the highest ROI way to learn is letting you do all this work to learn all these things and then you share all your answers with us so that's that's why I love these books if you had to boil down the thesis of this book into just like a simple thought so that we can just start to plant this in founders heads what would what would that be

Madhavan Ramanujam:So if I have to boil down the core thesis of the book it is basically that if you want to build an enduring business you need to be able to architect towards profitable growth what that means is you need to be able to master two engines market share and wallet share it sounds simple on the surface but it's actually quite complex because if you unpack that for gaining market share and wallet share you need to be good at acquisition monetization and retention as in get customers make an initial money on them but also make money on an ongoing basis and have your customers actually refer more customers many companies actually what they do is they focus on a single engine strategy so they focus on one of those two topics and pretty much exclude the other one that leads to all kinds of situations you see companies saying I'll grow at all costs and postpone monetization you see some who would say you know I'm gonna monetize earlier on but they might miss out on acquisition opportunities or yet others who are so focused on a small set of loyal customer base that they're neither monetizing nor are they actually acquiring so to to the good founders need to be able to dominate both market share and wallet share it is not a choice you need to get better at both but this does not mean that you're putting equal effort on market share and wallet share at all given points in time but it means you're putting equal attention on both those topics and being thoughtful about the trade offs and saying how can I actually look at these two topics together so that I'm architecting towards profitable growth that's the core thesis of the book we actually showcase nine strategies that actually allow companies you know to architect towards profitable growth and every chapter ends with how this particular strategy you know circumvents a single engine problem and helps you you know focus on market share and wallet share at the same time and there's also CEO questions and leadership questions that people should reflect on when they architect towards profitable growth and are they on the right track I mean think of it this way if you're flying a you know aircraft you don't want to fly it on one engine why do you actually want to do that for your business

Lenny Rachitsky:Okay so I imagine many founders or people thinking about starting a company are are not feeling like they are in one bucket or another there's like intuitively you're not like oh of course we're going to just focus on growth forever and that's all that matters you had these kind of traps that founders fall into that you referenced a bit can you just talk again about just like the common traps you find founders fall into that people may recognize like shit that's what I'm doing probably

Madhavan Ramanujam:So let's unpack the traps that are correlated to the archetypes so if you're a disruptor archetype you might fall into one of two traps the first one is you might land but you might not expand as in your eagerness for acquiring you might have actually given away a lot at less and you have given the farm away but you don't have anything to expand to that's the first trap you are likely to fall into the second trap that you actually fall into is you start you know a market share that is won is different from a market share that is actually held if you are so acquisition focused you're actually focused on getting more and more customers but you're not spending enough time with customers that you actually got to keep them upsell them you know keep them happy etcetera so you might fall into that trap if you're a moneymaker you fall into one of two traps the first one is you might nickel and dime your customers to death you know because you're focused on monetization you might come up with a you know very differentiated pricing model different levers hidden fees things to charge for you know many different things and come across as just trying to nickel and dime your customer the second trap that a moneymaker actually falls into is that you know you fall into the price premium paradox where you think that pricing high actually indicates value but you're priced it so high that you actually start you know hurting your acquisition so just becomes irrelevant for most people if you're in the community builder you actually fall into like two common traps the first one is you're focused so much on the you know foundation that you actually miss the frontier which is you're so focused on your loyal customer base that you forget forget to like attract you know different types of customers and you're not acquiring and the second trap that you fall into if you're a community builder is you know you train your customers to expect more for less because you're so eager to satisfy your loyal base you start giving them more and more and you're trading your best customer base to expect more for less so these six traps are very common across these archetypes being a profitable growth architect means that you're avoiding these traps and you're in in other words you're simultaneously being a disruptor a moneymaker and a community builder all at the same time and how do you actually have that archetype and the right strategies to actually go about your business

Lenny Rachitsky:Okay so this is what you want to not do you mentioned you have nine strategies for how you actually want to approach pricing monetization scaling monetization and innovation can you share a couple of these strategies maybe two or three maybe some of your favorites

Madhavan Ramanujam:Sure so I will unpack a couple of you know strategies maybe the first one I would take is what we call as beautifully simple pricing so in your early days it is by far more important to have pricing that is really simple and is not creating too much friction in the sales conversation I mean the acid test that you probably should go back on Monday morning and do is take some of your early prospects or customers and ask them to articulate the pricing strategy back to you right if they were to actually sell on your behalf how would they describe the pricing strategy and if they cannot you know contextualize that in a simple manner and actually explain you don't have a simple pricing strategy it's as simple as that and having a simple pricing strategy also means that you know your pricing needs to be able to tell a value story as in you need to contextualize your price based on the value that you actually bring to the table a great example here is you know superhuman when they started they were actually competing with like free email products and they were coming up with a premium email experience and how do you actually price that and I thought the team superhuman with Rahul and others did a pretty good job they came up with a $30 price point per month which was pretty simple but the way they kind of told the story was that you know you pay a dollar a day for actually getting four hours of productivity back in the week and then suddenly the pricing doesn't look too off I mean it's like the price for a latte in a week to actually get four hours back why wouldn't I actually do that right and pricing contextualization and value story doesn't need to just apply for premium products if you take another example like the subway $5 footlong is a different way to say a story with pricing that oh for $5 you get a lot of value actually back right so beautifully simple pricing really means coming up with a simple pricing strategy that your customers immediately get and your pricing is actually telling a value story and how do you actually get that so in the book we have a checklist of 10 different things that you actually need to look at to make sure that your pricing is beautifully simple

Lenny Rachitsky:As we go through these strategies is your advice try all these things like you should do as many of these strategies as you can or is it maybe pick a few that work for you or just one is enough

Madhavan Ramanujam:So are nine strategies we have organized that into strategies that apply during your startup phase like just when you get started and strategies that apply to you in your scale up phase so there are four strategies that you need to do in your startup and five in the scale up so it's quite manageable I would argue that all four apply in the startup and all five actually apply in the scale up phase but it's not like you need to start focusing on nine things from day one

Lenny Rachitsky:So this first one was the startup phase

Madhavan Ramanujam:Yeah the beautifully simple pricing is the startup one exactly and so in the scale up phase I think one of the most important strategies is to master negotiations and really get better at acing negotiations right especially if you're in a B to B situation and how do you actually do that because you need to be able to talk about the value and contextualize your price based on those kind of conversations so to master negotiations it comes down to actually three things mastering gives and gets being good at value selling and third having the right negotiation strategies so let's unpack them each at a time so giving and getting why is that important because in a negotiation you know typically you're giving I mean you're giving concessions people are asking if you don't get anything back you're basically indicating to the other person that they can keep beating you up and you can you know you you need to keep giving but if if you're giving something but you ask for something in exchange then you're basically bringing authenticity into the negotiation because it actually means something you to you to give so you're asking something back it actually makes the negotiation way more effective and in the book we actually talk about the top 10 gets in B2B and the top 10 gets in B2C one of my favorite gets in the B2B situation is what I call as conducting a value audit so what this means is if you're giving a concession ask for a value audit in exchange where every six months you know a team internally from your customers would be commissioned to actually conduct a value assessment of your products so that it becomes their business case and you co create it with them saying how much value is actually produced and this is great because if they actually engage in that that gives you tremendous pricing power for like renegotiations because it is their business case they are championing it internally and you're pretty much making your products pretty sticky so it's a pretty harmless get but it could be very powerful for future negotiations being good at gives and gets is thank you for being good at gives and gets is really critical the second thing in mastering negotiations is being good at value selling and for being good at value selling you need to do three things first you need to be able to create the needs second you need to be able to create affirmation loops and the third one is creating a good ROI model and let's talk about each of those so creating needs is very important because you know many founders show up and try to understand what are the needs of the customers that's one way to look at it but you need to be able to create needs rather than just discover them right so like for instance if you are a marketing automation AI product and you save let's say three weeks of work that actually needs to be done to actually get stuff in a dashboard that can be analyzed by marketing managers the way you create the need is ask about existing processes and say okay just so I understand all of this stuff actually takes you three weeks to like put data together to actually have meaningful dashboards for your you know marketing managers to you know take action what if that was available to you instantaneously oh you have now just created a need right so be in that mindset of creating a need as opposed to just discovering them the second thing is creating affirmation loops and this is really important I've seen a lot of founders get into negotiations they're so eager to talk about their products they keep talking about the products without any affirmation from the other side you need to pause and create affirmation loops things like for instance okay so far you've seen all of this how does this actually play out in your company do you see it as valuable what about this dashboard do you actually like so when you ask these kind of questions and your customers are playing back the value that they actually see in your product you're creating affirmation loops which become tremendously useful when you start selling the product finally because if they have agreed that there's value that is being produced then you also have a better commercial discussion and the third one is you know creating a good ROI model and you know I see a lot of founders work on a POC and after the POC is over they'll show up with an ROI model and try to defend a price you've already lost the battle I mean no one is going to believe an ROI model that you just cooked up everyone is going to challenge you on assumptions the right way to think about an ROI model is to actually co create it with your customers from day one which means you know agree and validate on the assumptions and the inputs so like hey how long does this process take today how many engineers are there so you create ask questions that are all inputs to an ROI model and if you have done that process and the customer agrees on all the inputs they are very unlikely to push back on the output of an ROI model so a POC needs to be framed as the purpose of a POC is to build a business case and we are going to co create an ROI model with the customer as opposed to it being a tech and product functionality feature test and you show up with an ROI model and when you're building an ROI model there are many buckets to focus on but there are three that are very critical the first one is you know what are the incremental gains that you actually bring to the table based on KPIs and metrics that your customer is tracking so this could be things like incremental revenue reduction in churn these are the immediate tangible clear impact to the business line based on the products that you actually bring to the table the second bucket is you know cost savings are you reducing headcount are you reducing license costs like what are the tangible cost savings and the third one which is often overlooked is opportunity cost for instance if you save you know ten hours of time for like a team what do they actually do with that ten hours that can also be quantified so when you put all of these three things together you start building a proper ROI model that you can actually use in your value selling to defend the right price and so we talked about three steps in mastering negotiations the first one was gives and gets the second one was getting better at value selling the third one is actually getting better at even negotiations and what strategies would you actually use and there are a couple of strategies that we have found to be really productive the first one is to show up with options many founders rush with one product and one price and say okay this is a 100 ks product and that's what we are trying to sell inevitably what will happen is the immediate focus of the conversation will be on the price and you're only talking about price but if you have options on the table let's say if you have a good better best if you have a 100 ks product a 200 ks and a 300 ks option then you're not just talking price you're talking value because if your customer is budget conscious they'd say hey I like the 100 k price point but I actually like the functionality in your 200 k product then your immediate question is what in the functionality do you actually like why is that beneficial for you so you switch the conversation back to value as opposed to just talking about price and we have seen that with these kind of conversations you're by far more better off to actually land in a much better place than just showcasing one product and one price and showcasing options doesn't need to be just different products it could even be a pricing model choice and I'd probably give a simple hack that people can try on Monday morning you know I was talking to this founder who said hey I think I think the budget is about 100 k that's what I believe from the key stakeholder but my product really brings crazy value I could even charge let's say a 500 k for this product but I don't have the courage to actually go and ask for a 500 k price because I kind of know 100 k is the budget what should I do right so for those kind of situations actually show up with options in your pricing model so we coached him to go in with a 100 ks plus 10% on any incremental value that you bring or it's a 500 ks fixed so now this is actually a great situation in negotiation because if you're price sensitive you're focused on the 100 ks it's a small fee to actually get started but the conversation will gravitate towards what is that 10% how do you measure value that's a great conversation to have because now you're talking about how you add value where is the value generation what portion would you take and you know you see one of two situations either the customer will say that's great you're putting skin in the game let's go with 100 ks and 10% or 80% of the situations you might actually want to avoid the outcome based pricing as a buyer but you're not really fixated on the 500 at that point it is the premium that you're actually paying for the certainty so no one is focusing on the 500 k because there's a 100 k option on the table and you just put a 500 k and got the courage to do that and in this specific situation that 500 k got negotiated to 400 k and they just forex the deal compared to where they would be right so having options on the table when you negotiate is critical and there's also some tactics that we showcase in the book like anchoring is important if you start high you will also end up higher but the and also tapering concessions like how do you give concessions I mean the worst negotiators will start by giving a small concession and then they give a bit more when someone asks like you might give a 5% discount and the procurement guy says that's not enough okay I'll give you 10% more okay that's not enough I'll give you 15 what are you indicating to the other person you're just basically indicating that I can keep beating you up and I can get more discounts the best negotiators would taper their concessions so they would say I can give you a 15% okay I need more I'll give you five I need more I'll give you two so you're automatically indicating to the other person that the negotiation is actually ending right so how do you taper concessions also become important so when you put all of these three things together if you master your gives and gets you get better at value selling and you use the right negotiation strategy you can extract full value from every deal that's probably way more important when you're in the scale up phase

Lenny Rachitsky:This is such great advice I love that this is just one small chapter of your book like this could make or break your company it's interesting that you have a whole thing on negotiation in a book about scaling innovation and growing your company is the assumption here that your pricing and monetization is so impacted by how well you negotiate because that changes your entire pricing structure and how much you're making is that why you put so much effort into this part

Madhavan Ramanujam:Exactly I mean in a B2B situation you can set all the pricing you want come up with great pricing models but at least even today it's a human having a human conversation trying to negotiate so if you cannot contextualize what you put on the table how do you negotiate around value how do you contextualize your price you're leaving a lot of money on the table so to us negotiations is yet another monetization topic where you're thinking about it as extracting full value from every deal and this is not just you know negotiation tactics like you know keep your boss at home and just negotiate and things like that this is actual negotiation strategies that are rooted on value selling gives and gets and focusing on extracting full value from every deal

Lenny Rachitsky:So useful this idea of throwing out a third like higher priced option say 500 ks it's so interesting because usually the advice I hear is like just throw out twice the number you used to throw out just like put it out there just in case which is really scary right to ask for like what about $50,000 and this is like a much less scary way of doing that okay but we also have this 500 k option here's what you get and then they may be like oh that's exactly what we want you're like oh it worked

Madhavan Ramanujam:Exactly it's a very simple hack to get your courage

Lenny Rachitsky:Is so cool

Lenny Rachitsky:Wow this is awesome this is just like a golden nugget within golden nuggets of fish price okay so you have nine strategies we've covered two let's not get into them but just what are a few more just so people know what else they might be able to learn

Madhavan Ramanujam:Price point

Madhavan Ramanujam:Sure we talk about how to you know land and expand as in how to design your best free product in such a way that you're landing but also expanding we talk about things like how to have the right packaging strategy you know how to stop churn before it happens how to do price increases effectively because at some point in your scale up journey you need to increase price but how do you do that in a meaningful fashion so we have various strategies that apply both for the startup and the scale up phase but in combination all of those things help you articulate and architect towards profitable growth

Lenny Rachitsky:Awesome okay let's talk about ai for a bit a lot of your book is about how ai pricing is very different from other previous traditional pricing strategies and it feels like every company wants to be an ai company these days so i think this is going to apply to a lot of people how is ai pricing different

Madhavan Ramanujam:Yeah ai pricing is very different from the previous you know vintage of companies why is that so because ai founders need to tackle monetization from the very early days like day one in their seed stage pre seed kind of thing which was not probably the focus for the previous saas companies why is that so because of two reasons one for the first time there's cost dynamics to actually navigate so you need to think about monetization from day one but there's also a more critical reason which is value capture because with ai products you're actually bringing a lot of value to the table and if you don't capture that from day one then you're training your customers to expect more for less so for instance think about this if you're building a you know agentic ai product that taps into labor budgets labor budgets are 10x compared to software budgets so if you use all the old playbooks then you're under monetizing again from day one and training your customers to expect more for less so how do you come up with foundational models that actually allow you to capture the value that you bring to the table and why has this become critical because with ai finally founders can really solve the attribution problem in the previous vintages like for instance you take slack you can say that the productivity went up efficiency happened but you cannot measure it monitor it attribute it to slack okay that's probably why they were in a seed based pricing model but in today's situations you see companies that say in a fortune 100 company i was able to improve throughput by 10% reduce scrap by 5% and when you get into those kind of situations where an ai is creating core value and is attributable to the ai you get a lot of pricing power so the two questions that we commonly hear from you know ai founders is how do i set the right pricing model as in how do i charge which becomes you know way more important than how much you charge because the underlining business model has changed it is not we have moved from you know software being a you know pay for access to like now you're paying for work delivered so like the monetization models become key that is the first question that people actually ask us the second one is you know how do i navigate pocs commercial discussions early because the buyer on the other side also wants to see the value before they engage in a commercial discussion so those two topics become very critical and we have showcased a lot of this in the book

Lenny Rachitsky:This episode is brought to you by persona the adaptable identity platform that helps businesses fight fraud meet compliance requirements and build trust while you're listening to this right now how do you know that you're really listening to me lenny these days it's easier than ever for fraudsters to steal pii faces and identities that's where persona comes in persona helps leading companies like linkedin etsy and twilio securely verify individuals and businesses across the world what sets persona apart is its configurability every company has different needs depending on its industry use cases risk tolerance and user demographics that's why persona offers flexible building blocks that allow you to build tailored collection and verification flows that maximize conversion while minimizing risk plus persona's orchestration tools automate your identity process so that you can fight rapidly shifting fraud and meet new waves of regulation whether you're a startup or an enterprise business persona has a plan for you learn more at with persona.com/leni again that's with pers0na.com/leni let's talk about this poc piece because i think this is something a lot of people deal with then i wanna talk about this two by two that you have in the book and i'll i'll actually pull it up so let's talk about pocs first

Madhavan Ramanujam:So pocs you know when we talk about pocs many founders think about a poc as a proof of technical functionality and is their product actually working in like their customer environments and they set up the expectation that way saying hey are going to put the product and we are going to see if it actually works and they would probably say should i charge for a poc versus not and we will unpack that in a bit should you or should you not and that's actually a completely wrong way of framing it the poc should be framed as the entire goal of the poc is to create a business case period full stop it is not to like demonstrate you know product functionality fit within your customer environment's ability to integrate all of that stuff is a consequence of the business case so if you frame it this way you can say look it is a thirty day pilot for co creating an roi model and building a business case along with their users if we see value at the end of the thirty days based on the business case we can get to commercial discussions so that way you've actually not talked about your price you're only focused on co creating a business case with the customer and based on the business case you can actually come up with you know a proper commercial agreement and if they see value they're going to pay you for it right so thinking about the pocs in that kind of manner and you know the question that i often get asked is should i charge for a poc and the answer is yes but smartly let's talk about why it's important to charge the reason you need to charge for a poc is you start isolating people who are just tire kickers versus serious bias it becomes a lead qualification mechanism if you didn't have that you're going to attract all of these curious buyers who are just curious about ai they just want to see if it works or not they will say yes i'll engage with the poc they will take thirty sixty ninety days with you they will burn a lot of resources never buy you've just wasted your time time is of the essence so having a price tag to your poc actually indicates that you know there is seriousness on both sides so you should charge but how do you actually charge for it you need to charge for it smartly what this means is that you need to make sure that your poc pricing is not a reflection of your actual commercial deal because let's say if you just say it's a 10 poc for like a thirty day pilot if you don't talk about the fact that it is not the same as your commercial discussion you have now set an anchor that okay it's a 120 k per per year kind of deal if the poc works so you have to be clear that the 10 k is only for building a business case commercial discussions will follow after that it is not an indication of the actual commercial discussion but your buyer on the other side might still push you saying that's all great but i need a price on a budget otherwise i won't move forward with it so are two ways to actually deflect those kind of questions the first way is contextualize the price on the value so you can say something like if you push for price hey for customers such as yours we have been able to at least unlock 10,000,000 in very similar situations and our pricing is one is to 10x when it comes to roi so you basically said that you're a million dollars to actually get started but you actually didn't say it you just said it's a 10,000,000 and i'm taking one in 10 in exchange for it so you've kind of given the buyer an indication but you framed it in such a manner that that actually is justifiable right a one in 10 x roi so that's one way to do it they might still say yeah that's good but i need a budget so then than just give them a budget saying it could be a 200 k option don't do that that's the worst thing you can actually say give them a range you can say something like look the final pricing would be anywhere from 500 ks to a million and based on the business case that we would co create with you we can pick a point in that range that justifies the value that we bring to the table so you're giving budgetary ranges right so that's the other way to actually go about pocs so how you navigate your early wins who you choose is very critical when you're building companies at scale and fast in ai because that actually dictates the destiny for the rest of your future and picking those early wins is very very critical and having buyers who are serious lead qualifying having the right poc process and thinking about pocs as frankly not just trying to see if your product actually works and delivers value but it's a great chance to have a commercial test and learn experiment and have fun with it and try to see what you bring to the table in terms of your value and what portion can you actually take

Lenny Rachitsky:So the core kind of takeaway here is for ai companies you no longer can just grow and figure out monetization later your advice here is what you start with is what you're going to end up with and it's very easy to under monetize because people aren't realizing that they're now helping with actual labor force savings versus just like saas software that's making people a little bit more efficient

Madhavan Ramanujam:Yeah absolutely i mean i strongly believe that the winners in ai will need to master monetization and they need to ma masturbate from day one i mean and when we talk to early stage founders it is a topic that keeps many people up at night but that's also why we wrote scaling innovation and other assets so that they can get some more courage to think about you know pricing correctly from day one and it's become very critical for ai companies to do that

Lenny Rachitsky:Do you feel like the popular ide startups i won't name names do you think they've under monetized and they're going to be in trouble down the road

Madhavan Ramanujam:Some of them for sure have i think they will probably run out of it because they might show a lot of let's say fast revenue growth but is that enduring revenue are people actually going to stay and is there going to be churn and you know so there are a lot of aspects to marketing profitable growth it's not just growing fast but also growing profitably and having an enduring business so some of them yes without naming names but yeah i think that's why it's important to

Lenny Rachitsky:Be thoughtful about market share and wallet share well are different so i think what you're saying here is they may not the retention may not work for some of these companies but on the other hand they're really cheap like $20 a month to help your engineer be like 10 times more productive potentially like is that too good a deal do you think they should have priced a lot higher

Madhavan Ramanujam:Yeah for sure i mean if you're bringing a lot of value to the table and you started training your customers to expect $20 a month then you anchored yourself on a low price point i think there are companies that have actually done that and they try to undo it with like you know having more sophisticated let's say products that are actually higher priced or much higher priced etcetera that's one way to like undo that situation so it is it's really a trade off between you know getting more customers and making money at the same time that's the whole point of the book market share and wallet share and how do you dominate both so if they're being thoughtful about both and have a vision to not just grow market share but also have a clear strategy to land and expand and increase wallet share those strategies might pan out for those types of companies if you just threw out a $20 product hoping to just accelerate your market share you're in trouble

Lenny Rachitsky:Okay that's a great segue to this two by two which goes much deeper into this so it's easy to be like here's what you shouldn't do here's your advice on what to actually do so i'm gonna pull up on my screen this two by two that you have in your book so if you're watching youtube you'll be able to see it so talk about this this is essentially how to figure out an idea of the the best possible pricing model and where you have the most power

Madhavan Ramanujam:So when you talk about ai companies and you know monetization models we get asked this question should i be usage based should i be outcome should i be you know a copilot mode or how do i actually think about my pricing model so we came up with this framework which is a you know relatively simple straightforward framework but very powerful so there are two axes here one is attribution and the other one is autonomy and when you have high attribution and high autonomy that is when you have high pricing power and we'll come back to that in a bit right so let's take the first bottom left quadrant that is the quadrant where your attribution is low and your autonomy is low in that situation the best pricing archetype that actually fits is it is actually a seed based or a subscription model because there's not much to do about it because you're not you know being able to like attribute a lot of value to what you bring but you're in a copilot mode you're not in an autonomous mode so a seed based pricing would actually make sense but if you're at that quadrant the immediate thing to think about is how do you actually build more attribution and move to the right so that you actually get more pricing power so if you think about the you know bottom right quadrant those are companies that have actually done that they have more they can prove more attribution to what they actually bring to the table but they are still not in a fully autonomous mode as in there is still humans in the loop if you take cursor for instance you know it definitely improves productivity it can actually bring down the time to actually you know do code the attribution is clear but it's still in a copilot mode in those kind of situations a hybrid pricing model is the best option where you still have a you know seed based model for the copilot kind of use case but you also layer in a consumption model which actually says there are certain number of ai credits or tokens that can layer in the usage aspects so if you use more and more then you're actually paying more on consumption so it's a hybrid model that actually works there if you look at the top you know left quadrant those are you know products that are very autonomous but are not strong on attribution so these tend to be mostly like backend or infrastructure kind of products that are core critical to like run businesses can be autonomous but they are not directly impacting the kpis that businesses are tracking and hence cannot prove attribution very effectively so you know in that situation you need to be on a pay for what you consume and a usage based model a seed based model would not make sense because it's autonomous there's no human in the loop but that's why you're also in a usage based model saying the more you use it the more you're actually charged and usage becomes a proxy for the value that you bring to the table the quadrant that you really want to be in is the golden you know quadrant which is the top right one that's the outcome based pricing model where you have great autonomy and great attribution and here is where i think ai can be really magical so this means you're not only charging for work delivered but you're charging for work delivered that was delivered by ai without no humans in the loop so that becomes more of an outcome based model situation so a classic example here is intercom for fin what they actually do is they charge based on an ai resolution so if an ai is able to resolve the ticket completely independently without a human in the loop then they charge for it if a human intervention is needed they don't charge for it so they're more on an outcome based model or like companies like you know chargeflow would charge you know up to 25% on a chargeback that they're able to actually recover because these are like you know core savings that you actually bring to the table based on your ai it is highly attributable highly autonomous so you can start moving towards an outcome based pricing model if you look at the state of where ai is today as of the day of recording this podcast you know the most popular model is right now a hybrid pricing model so because this is also expected because know the previous saas playbook was usually on the seat based model but they've all now moved on to at least a hybrid to actually incorporate ai credits and usage etcetera about 5% of companies are probably in a true outcome based pricing model you know as of as of today but those companies some of the best ones are able to recover 25 to 50% of the value that they actually bring to the table in the classic saas situation we used to say if you can charge 10 to 20% of the value that's actually great but in ai you can actually charge 25 to 50% because it is autonomous you're doing it with the ai there's no humans in the loop you're creating incremental value to the business metrics you're producing hard cost savings as opportunity costs you can justify all of that it's attributable so you can actually take 25 to 50% of what you bring to the table and there are a lot of benchmarks and studies that actually show that and this is also my belief that in the next three years that 5% number will move to 25% so what this really means is if you want to win in ai figure out a way to get to that quadrant because that's the magic quadrant if you can truly you know price based on outcomes you've achieved and unlock tremendous value

Lenny Rachitsky:Wow okay i'm just going to pause again this is amazing madhavan thank you so much for i love that again that you just spent years decades studying this stuff come here tell us all the answers of what we should be doing this is incredible let me ask you this by the way for phoebe folks not watching on youtube the companies you have in the golden quadrant outcome based pricing sierra fin and charge flow we've got the founder of sierra and fin coming on the podcast soon so we'll talk about all this with those guys awesome is there a way to use this 2x2 figuring out your model like is it like okay i'm like hursor i'm going to go in this quadrant or is it how do i get to outcome based no matter what that's where i need to be

Madhavan Ramanujam:Yeah so that's a great question the first one is to actually figure out what is your right archetype based on where you are today I think that is most important like if you try to rush into an outcome based pricing model but cannot prove attribution you will fail so it is really coming up with what is the right archetype based on what I'm doing today but also use this two by two to say how do I paint a vision to actually get to outcome based and can I get close to that or can I be purely an outcome based model right how do I evolve into that what that would mean is know how do I build functionality in the products to actually show attribution how do I build more agentic workforces to like take the human out of the loop and be more autonomous and being thoughtful about your vision and strategy so that you will orient yourself towards more you know outcome based pricing models so you think about increasing attribution that means first of all understanding what are the KPIs of your customers how do they track their business performance can you impact it can you productize things in your product that showcase that you are actually affecting those KPIs in a positive manner can you build dashboards to show value attribution can you do those value audits that we talked about on an ongoing basis to actually show that you're bringing a lot of value to the table and is attributable to you so how do you create these kind of attribution mechanisms become important and also autonomous based on building more agentic workforces that can actually be on an autonomous mode so pick the right archetype and plan to get to as close as you can to the outcome based pricing model that's how I would use the two by two and you actually kind of see this happening with certain industries right if you think about coding as a overall category back in the day with GitHub everyone they started with a seed based model right they've now moved to the hybrid based pricing model with Kerzos and everyone else but the natural move would be more towards a outcome based pricing model where a AI agent can probably code everything at the same time debug it and you're kind of almost hiring a AI developer or an AI QA person and that actually becomes more closer to like a outcome based model because it's attributable and autonomous so that is picking the right archetype and then figuring out your pathway is is the key way to interpret this two by two

Lenny Rachitsky:This explains why everyone's bullying agents that's where the money's at is what you're telling us here yeah okay it's going to be

Madhavan Ramanujam:The age of the matrix too many agents

Lenny Rachitsky:Agent submits everywhere that didn't turn out too great so what I'm hearing is if I were Canva so Canva here and your model is bottom right they're in a hybrid pricing model they have a base fee and consumption fee what you would do if you were helping Canva is what can you build that creates more autonomy an autonomous version of Canva and it's not like you need to do this it's just you have more pricing power if you figure something out there

Madhavan Ramanujam:Exactly I mean and a good case for that is the you know Fin product from Intercom because traditionally you know all of those kind of companies used to price based on an agent basis how many customer service agents are actually using the product it used to be seed based but they built out Fin which is a completely AI resolution for those kind of support tickets and then that actually enables them to move to the outcome based pricing model quadrant

Lenny Rachitsky:Amazing so you say you're an AI founder today you're thinking about your pricing strategy your monetization strategy long term your advice is work with design partners create these POCs where you work on this ROI model with them to ideally find some outcome based pricing strategy is that a good way to summarize what would you add to that

Madhavan Ramanujam:Yes I mean least be able to contextualize the business case even if you're not moving to an outcome based pricing model be clear on the outcome that you're actually creating for your customers through that business case which actually will enable you to charge a fair price in exchange for that outcome and if your customers agree with the business case then you can actually take a portion of that

Lenny Rachitsky:Fin actually they're a new sponsor of the podcast and I learned I didn't know this it cost 99¢ for every support ticket they solve

Madhavan Ramanujam:Through AI exactly if it needs a human intervention then they don't charge for it

Lenny Rachitsky:Yeah and it's just like that's such a simple story your agent costs $20 this thing's cost 99¢

Madhavan Ramanujam:Yeah that is two chapters in one beautifully simple pricing and an outcome based pricing model

Lenny Rachitsky:And interestingly they were the least like the most hated pricing model initially I did a survey on Twitter once like what products you pay the most for and it was always Intercom and everyone hated their pricing and they found a solution

Madhavan Ramanujam:I think they have found a great solution

Lenny Rachitsky:Okay so is there anything else along these lines that you think companies especially AI companies should be thinking when they're thinking about pricing that you'd want to share before we move on to other stuff

Madhavan Ramanujam:I think we've covered most of the topics like we said it's you know being thoughtful about POCs choosing the right you know pricing archetype or the pricing models those things become very critical in the early stages but when you start scaling and let's say you become a multiproduct company then you need to start focusing on what what kind of packaging strategy should I have is it a platform plus add ons should I have like versions of the products like good better best should I tackle different use cases because now my AI can solve an insurance use case and a you know healthcare use case should I productize to like different use cases is is that my packaging strategy or should I keep it completely modularized for like people to pick and choose so these kind of questions become more critical and that's why the chapter on blowing up your packaging from your early days and coming up with your packaging strategy for your scale up phase become very critical so I think that's the next thing that founders would be hit with as and when they build multiple products they need to think about the whole packaging cross selling upselling motion

Lenny Rachitsky:This touches on something I was about to ask which is a change in your pricing strategy how often does is it a success to change the way you price like I know we're talking about you need to get it right from the beginning if you're an AI company in your experience how often like what does it take to successfully shift the way you price down the road if people are listening to this and they're like shit we already have this pricing strategy

Madhavan Ramanujam:Back in the day we used to say that you should revisit your pricing strategy overall pricing model you know how much you're charging at least once in two years with AI that's probably reduced in half because of the scale with which and the speed with which companies are built and competing so I would say that it is an ongoing journey it is not like you just solve it in day one you know fill it and forget it it has to be you know you have to be thoughtful from day one but also be ready to like pivot iterate and you're going to learn along your journey so the whole point is to think about pricing as also a test and learn opportunity in your early days and there are things that you would change more often and there are things that you probably don't want to change too often like things like pricing model unless you have you know really changed your attribution autonomy there is no need to like shift your pricing model stay within that architect don't confuse things but there are things like price points should I increase my price because it's been you know six months or a year yeah you should because in a year there's probably prices go up three to 5% for everything that you consume but how can you actually increase your prices and be thoughtful about it so that entire chapter on how to do price increases you know smartly become very important in the you know scale up phase I think Warren Buffett summarized this really well he said the true definition of a company is a pricing power and if you have a prayer session for doing a 10% price increase you have a terrible business so you have to be able to increase prices over a bit of time but how do you do it strategically that does not affect too much churn but you're also able to like pass on the increase as a value exchange those things become critical

Lenny Rachitsky:Awesome zooming out a little bit something that I love about your book is you structured it around these axioms you have a bunch of these really clever axioms that get stuck in your head and help you think about pricing can you share some of your favorites maybe two or three of your favorite axioms from the book

Madhavan Ramanujam:You talked about Sierra being in your part founders I don't know if that's Clay but here's a shout out for like Clay so Clay actually read the entire book and gave me feedback scaling innovation the similar copy that he actually had and I had I called it scaling innovation axioms throughout the book and the whole point of the axioms was that at the end of the day if you can just take all the axioms put it in printout next to your desk it's the summary of the book and it's like pity statements that you will just remember what to do so he came up with this idea that hey rather than calling them just generic scaling innovation axioms you need to brand each and every axiom and I thought that was a brilliant idea so I went about coming up with a unique he he even contributed to some of the names so we came about you know we came up with some unique names for each axiom and here's the other fun fact probably I'm geeking out too much but when I counted the number of axioms there were 42 axioms so and I didn't try to make this up and if you're hitchhiker's fan then you know that's the answer to everything but jokes apart let me unpack a few axioms the first one of my first favorite axioms what what I call is the twenty eighty axiom so in in especially in tech companies 20% of what you build drives 80% of the willingness to pay but the irony is that that 20% is the easiest thing to build often so what founders do is they put this take this 20% build it put it out in the market almost for free and then they're chasing their tails to build 80% stuff that's only driving 20% willingness to pay so if you have not been thoughtful about that you have given the farm away unintentionally so truly understanding what drives willingness to pay in your product is critical and I think you know people call it the MVP I think we should change the definition of MVP it shouldn't be minimum viable product it should be the most valuable product and be thoughtful about what are you actually giving out as your early products I think is key that's the 2080 axiom probably my second one is the you know price paralysis axioms so what that means is your reluctance to do a price increase is often internal and emotional and it's not external and logical this goes back to the same prayer session to actually do a price increase if you're holding hands you have a terrible business so it's mostly internal and emotional and how do you be thoughtful about price increases become important probably my third favorite one is stopping churn before it happens is stopping churn axiom so to stop churn you need to attract customers who won't leave that sounds counterintuitive but that's the best way to actually stop churn what does this actually mean you know most companies would try to stop churn when someone actually says I want to go it is too late and you're being reactive at the most you'll throw some offers they will stay for another six months and they will leave they've already made that determination the way to stop churn is to start acquiring customers who won't leave and that is the most important thing so if you look back at your data and say who are the types of customers who actually tend to stay longer what are their characteristics how can I focus my acquisition dollars in getting more of those then you stop churn before it happens and that's the

Lenny Rachitsky:That's interesting I'm surprised you didn't say what was my favorite which is I think it's like if you land make sure to expand

Madhavan Ramanujam:Yeah that one really

Lenny Rachitsky:Stuck with me

Madhavan Ramanujam:That's a

Lenny Rachitsky:Good maybe we'll talk about that one yeah

Madhavan Ramanujam:Sure I mean so if you if you land you need to also make sure you're you're expanding in the sense that you know if you give the farm away in your entry level product you don't have much to actually you know monetize later so being thoughtful about you know what is the fence between your land product you know what is it a free experience what what is the gating and the gating is typically based you know are you gating based on features are you also getting based on usage and how do you be thoughtful about that so you leave stuff for the expansion

Lenny Rachitsky:Okay so zooming out even further to kind of wrap up what would you say is the biggest lesson you want founders to take away that they're probably they think they understand but they probably don't

Madhavan Ramanujam:Yeah I think this comes back to what you started with I think intuitively people get it that they need to think about market share and wallet share if they are going and even if you ask them they'll say like yeah yeah I'm thinking about wallet share but have they really thought about it equally and paid equal attention have they postponed one of them are they operating in a single engine strategy consciously or subconsciously I think that's the key takeaway I have so the contrarian take is not to put equal effort on both the engines at the same time in certain stages of your company you might need to be more market share dominating in certain stages you might need to be wallet share dominating it's not equal effort but it's equal attention and like really developing that mindset of being a true profitable growth architect and that is the main takeaway that I have for people and if you are not in that mindset already there's a book for you

Lenny Rachitsky:I'll point them to it so just so folks know what to do when they're like okay I need to focus on wallet share more is the main focus figure out a pricing model that aligns well with pricing power what's in the bucket of work to do to invest more in wallet share thinking

Madhavan Ramanujam:So it it's actually all of those you know market share wallet share acquisition monetization retention are all kind of like correlated you can't think about them in isolation so I wouldn't say only for wallet share what do you need to do if you want to grow on both the market share and wallet share let's say for instance you know you need to have the right land and expand strategy the land helps you with acquisition the expansion helps you with wallet share if you have a you know pricing model then you need to have a pricing model that lets you acquire faster because it's intuitive but it should also help you recover value which is like your monetization and if people understand your pricing model they're actually going to stay so it's all sort of you know goes hand in hand so I wouldn't isolate thinking one way or the other that's why the nine strategies actually are very powerful because if you follow those strategies you're not going to fall into the single engine strap these are tried and tested strategies of how to build businesses in such a way that you're being thoughtful and paying equal attention to both market share and wallet share

Lenny Rachitsky:Alright that is a very reasonable answer Manovan is there anything else you want to share or leave listeners with before we get to our very exciting lightning round

Madhavan Ramanujam:Read the two books in sequence Monetizing Innovation and Scaling Innovation because it's one thing to build a great product it's yet another thing to build a great business you cannot build a great business with a not so great product and you cannot do it the other way around either so I think it's having thinking about pricing early especially for AI companies being thoughtful about it you know like you know price before product and then thinking about how to actually scale developing a profitable growth mindset all of these things become critical and I'm looking forward to the feedback from the audience

Lenny Rachitsky:I feel like your books are kind of like in the staple of founder reading there's like all these things you just don't know what you're doing and there's a few of these books that are like okay here's all this advice that'll answer so many questions and save you so much heartache and so I'm really excited you're adding something to that bookshelf with that we've reached our very exciting lightning round are you okay

Madhavan Ramanujam:Let's

Lenny Rachitsky:Go let's go what are two or three books that you find yourself recommending most to other people

Madhavan Ramanujam:The first one that comes to mind is Business Model Canvas by Alex Ostroval it's a classic and one of my favorite books I recommend a lot of people to read that because I think it nicely ties a lot of what we are also saying from a more strategic business model angle I like this book Thinking Fast Thinking Slow I think that's also a classic because again you know there's always a human element to things understanding the customer psychology is important whether you're in B2C or in B2B because if you're in a B2B situation it's humans having a human conversation so like it's as much behavioral as it's actually numbers so I I love that book and there's a lot of nuggets in there so I recommend it a lot and probably the third one that I recommend is a book called Contagious by Jonah Berger I love that he was in the PhD program at Stanford in marketing and he actually wrote this book on how to make messages viral and he's actually seen you know the best viral messages and boil it down to a framework and if you follow that then you can make those messages viral and I've tried to use some of those in my own outreaches and things of that nature so I think it's a fantastic read

Lenny Rachitsky:Wow have you read it I not I haven't even heard of it all right well we're going to go viral so we got the playbook

Madhavan Ramanujam:Contagious that's the name of the book

Lenny Rachitsky:Contagious okay we'll link to that is there a recent movie or TV show you've really enjoyed

Madhavan Ramanujam:I guess movie sure let's pick a movie definitely enjoyed Mission Impossible the final one eighth in the sequence I I think I find that a whole I love those the entire genre one through eight but what I kinda like about it is my willingness to pay has constantly increased over a period of time they could have charged me whatever they wanted for the eighth movie I would have probably gone and seen it when I wanted to so I thought that's an interesting example of a durable brand where your monetization power actually increased over a period of time so I think I enjoyed the movie it was great yeah I mean hey by the way I just realized MI stands for Monetizing Innovation and also Mission Impossible maybe subconsciously that's why I liked it too

Lenny Rachitsky:And you're the Tom Cruise character

Madhavan Ramanujam:Yeah exactly

Lenny Rachitsky:That's so I love how you you're the only person in the world that thinks of Mission Impossible through monetization willingness to pay

Madhavan Ramanujam:Exactly I think there's too many of these dinner conversations also gravitate towards pricing and monetization I think it's become my life

Lenny Rachitsky:So man we need a version of this movie like Mission Impossible of Madhavan sure I'd pay anything for that all right next question do you have a favorite product you recently discovered that you really love

Madhavan Ramanujam:I would probably talk about two products. The first one is Delphi, the digital mind representation. That's a Lennie bot that you actually, I think, put out. So I think I find that product fascinating and I also love the founders Dara and Sam there. I truly believe that that is going to be the future for thought leadership and how thoughts are consumed by consumers. And I've used your Lennie bot. I really enjoy it. If I can co-create some thought leadership piece with talking to you, but it's not you, you're AI and it's actually living and breathing your brain. How cool is that? And I think that I really love the product category. There's a lot of, you know, different use cases, longevity extension use cases, things of that nature. I'm excited about the product. I think it's been great. Plan to taking inspiration from you, plan to create a Delphi of myself. Okay, I

Madhavan Ramanujam:I think it should be open for the book. Maybe I'll try to. That's the promise, try to keep it ready. So I think if you want to talk more about the book or things of that nature and talk pricing, you can talk to my AI too, right? I mean, find the product fascinating. The second one I would probably say that's been super useful in terms of just productivity is Granola. We love that product. I think just the ability to take notes and doing all the meetings and, you know, organize it and being able to query things, etc. I think it's been a great product that we recently started trying and we've been really liking it.

Lenny Rachitsky:Was going ask.

Lenny Rachitsky:Cool. That's been the most mentioned product recently. How cool is that? Love Granola. Get a year free of Granola if you're a paid subscriber to my newsletter, lennysnewsletter.com. Click bundle one year free for you, not just you, your whole team. What an offer they offered, it's crazy. On Delphi, what's interesting about LennieBot is it's not just my knowledge, it's every single podcast guest's insights and lessons also fed into it. So it's what an oracle of knowledge this thing's become and it's free at this point, completely free. lennybot.com. No, I get nothing from it, it's just out there. Okay, next question, do you have a favorite life motto that you often come back to and find useful in work and life?

Madhavan Ramanujam:You know, create value in everything and anything that you touch. Everything else will follow. That's my life motto.

Lenny Rachitsky:That resonates deeply. Okay, last question, you recently moved into investing. So what's cool is you used to be very expensive to work with at Simon-Kutcher, I think it was called, very expensive, a lot of big company stuff. Now a lot more founders have access to you because you're investing in startups. So just talk about that, talk about what you're doing these days.

Madhavan Ramanujam:Sure. I mean, at Simon-Kutcher, you know, I got to work with over 250 companies and my co-GP now Josh Bloom, he also had an opportunity to work with over 250 companies. So combined we worked with over 500 companies, more than, you know, 50 plus unicorns. It was a great ride and often we were actually working with them in much later stages when it's Series D or pre-IPO, post-IPO, private equity companies, etc. But the two of us actually now started a venture firm with an explicit goal of working with early stage AI founders and it goes back to the topic that we started with, you know, AI companies need to deal with monetization from day one. But for those kind of companies, you know, fee for service transaction model doesn't necessarily work and that's also why we pivoted to venture. So our business model is pretty, you know, pretty standard right now. If you get access in the cap table, we roll up our sleeves and work with the founders in halting monetization. So we are invested in their success and we will partake in the value creation. There's no fee for service, no friction on those kind of manners. But on the flip side, we get to concentrate our efforts in FundOne and probably 20 to 25 companies and that's where we will be spending our time.

Lenny Rachitsky:What a deal Madhavan. Two final questions, where can folks find you if they want to reach out and talk about this offer and how can listeners be useful to you?

Madhavan Ramanujam:Ways to find out, I think just Google for Monetizing Innovation and Scaling Innovation. You'll probably land in a lot of pages. You can also go to Amazon, I think, if you want to purchase the books. Actually, Scaling Innovation is now available in preorder. I think we'll have the part released before the book is actually out. The book is gonna be out on August 5, so there's an opportunity to preorder. And maybe I will take an inspiration from your master bundle, which I really think is the world's best bundle, and come up with my own bundle for like getting users to preorder. So if you love Monetizing Innovation, I can tell you you would really love Scaling Innovation. So go buy it for your teams, buy it for yourself. And here's the offer. So for anyone who's able to buy more than five copies, send us a screenshot of your purchase preorder, right? Send us a screenshot of your purchase to promo49palmsvc.com. So that's promo as in promotion at forty nine p a l m s v c dot com. And here's the bundle offer that I have. 10 people will get access to, you know, bundles as a raffle. And the bundle is going to include a signed copy of Scaling Innovation, a 30-minute ask me anything session, an exclusive invite for a Scaling Innovation book launch, and also a Scaling Innovation T-shirt. So that's my coming up with a bundle. I didn't get Granola and others to put in for me just yet, but I think this hopefully suffices and is exciting for folks to buy. And yeah, I mean, if you like the book, please do leave a review on Amazon. That always is helpful because if more people review it, the book takes a life of its own. And I'm really thankful for also the support that I got over the years from founder community, from the venture community for Monetizing Innovation. I think there's been over the last eight years thousands and thousands of fans of the books. They've done a whole lot talking about it, writing reviews, posting on LinkedIn, and making things like price before product or, you know, price product market price fit and things as a part of founder vocabulary. I'm very passionate that people actually did that and very thankful for them. So there's also probably in equal measure if you're excited about Scaling Innovation, I would love for you to talk about the book.

Lenny Rachitsky:Amazing. And I think the reason people do that is because you give away so much for free. Like, you know, you just shared so much wisdom for free that it's going to help so many people. So

Madhavan Ramanujam:It was. Yeah, just nice tried to plan my give and get right there.

Lenny Rachitsky:Oh my God, a good callback Madhavan. This was incredible. Thank you so much for being here.

Madhavan Ramanujam:Thank you so much Lenny. It was a pleasure.

Lenny Rachitsky:Same. Bye everyone. Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. Also, please consider giving us a rating or leaving a review as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show at lennyspodcast.com. See you in the next episode.