Startup Business Models and Pricing | Startup School

YC Group Partner Aaron Epstein talks about different startup business models, how to monetize, and how to price your product. Pricing and monetization is one of the most common questions from founders, and this talk outlines 9 business models as well as highlighting business model lessons from the top YC companies.
Business Model Guide: www.ycombinator.com/library/G...
Apply to Y Combinator: yc.link/SUS-apply
Work at a startup: yc.link/SUS-jobs
Chapters (Powered by bit.ly/chapterme-yc) -
00:00 - Introduction
00:13 - Outline
00:42 - 9 business models that build billion-dollar companies
02:28 - Business model lessons from the top 100 YC companies
09:42 - Overall lessons
16:06 - 5 pricing insights from top YC companies
29:15 - Story of Segment - How to charge for your product
32:00 - Wrap-up - Key pricing insights
#startup #tech #entrepreneur

[@ycombinator]

Read the business model guide here: www.ycombinator.com/library/Gh-business-model-guide Which of the nine models does your startup use?

[@danielkim672]

How would you categorize LinkedIn? They seem to have a marketplace where each new user would be adding value and they have a SAAS model as well. They also do some advertising. I know you said a mature firm will evolve, but I remember even in the earliest days they had both the marketplace and SAAS model.

[@danielkim672]

@flipgoo that model is just another way to take a cut from the seller. Whether you call it 'commission' or 'adding 5% on each item'. Same idea, it is a fee aka cost of using your platform.

[@lnareteassessoria2116]

I like yhis job

[@travesseniorchannel]

"Pricing is not permanent". I needed to be taught this.

[@chapterme]

Chapters (Powered by ChapterMe) - 00:00 - Introduction 00:13 - Outline 00:42 - 9 business models that build billion-dollar companies 02:28 - Leaning from the top 100 YC companies 04:19 - Marketplaces 06:13 - Transactional businesses 07:55 - SaaS companies 08:30 - Advertising businesses 09:42 - Overall lessons 09:46 - What's not in the top 100 11:24 - Recurring revenue consistently creates winners 13:24 - Defensible moats 15:36 - Recap - Best businesses 16:06 - 5 pricing insights from top YC companies 16:33 - 1. You should charge 19:40 - 2. Pricing on value, not cost 23:13 - 3. Most startups are undercharging 26:41 - 4. Pricing isn't permanent 28:19 - 5. Keep it simple 29:15 - Story of Segment - How to charge for your product 32:00 - Wrap-up - 5 key pricing insights

[@arjoai]

Your startup has a lot of potential

[@chapterme]

@@arjoaiThank you 😊

[@MelaninMagik]

11:24

[@danielkim672]

The Y Combinator channel is one of the most valuable channels on youtube IMO and this video has been one of the best ones that I have seen not only on this channel but anywhere. Love this and thank you for sharing.

[@Soulis98]

Hello Daniel. Any other channels that you recommend?

[@AdeJolaosho]

Any other channels you recommend?

[@danielkim672]

@@AdeJolaosho The Y Comb channel is great at the blocking and tackling of the startup world. One of the channel I enjoy is This Week in Startups. There is a lot there so you have to pick and choose what episodes to spend time on, but the interviews are usually pretty in depth and gives you a great idea on how tech leaders and investors think. In addition to the interviews, there are topics that you will learn various strategies and their pitch show is pretty interesting to see as well as they provide quick fire feedback to the startups. Outside of youtube, there are a lot of great blogs out there but IMO one of the best and most helpful is the blog by VC firm First Round Capital. Check that out and sign up for their mailer. Great stuff.

[@MarcAndrewII]

Definitely

[@CharlesBohannan]

This is 100% spot on excellence: content, delivery, clarity, tone, and storytelling. Thank you 🎉

[@hidden6051]

Now, that's what we call "Highly Valuable". Thanks for sharing!

[@mikejward]

Amazing you put this public. 🙏🏼I've done b2b pricing for a few startups. It's difficult. My feeling is the biggest thing you need are real customers to work on pricing with. Pricing ultimately is what the market will bear so you have to start doing deals to understand what the market will bear. All startups seem to come down to one basic principle - know your customer (and their problems) well. The hardest part is getting out and finding customers but ultimately it's the only thing that matters. Do it early and often (advice I'm giving myself!).

[@scrumtious1]

Funny how for the only business model focused on hardware the short description is basically a negative/risk statement rather than an actual description.

[@myshadow3074]

Remember that this statistic is Y combinators personal statistic. Their investment model is favorable for certain kinds of businesses which is why they see success in the types of businesses that work well according to their investment parameters. Not all kinds of startups are not a good fit for y combinator but that doesn't mean they don't/cant succeed. For example hardware businesses are not in their top 100 because they need so much capital. Easy examples are Nvidia or SpaceX. SpaceX needed 100 million plus capital to create a working product that now is almost monopolizing the market of orbital payload delivery.

[@fokhrulislam2633]

I lost myself for all those 32:33 minutes. Thank you is not enough for such a presentation. Well done.

[@JWilderSmith]

I watch all of the y combinator channel videos and never comment, but for this one I have to make an exception. That was an extremely informative video and helped me a lot-- thank you!

[@TommyBoy8771]

33 minutes absolutely flew by! Brilliant speaker and insights, thank you!

[@OliverSalva]

I really enjoyed this video! Everything was succinct, clear, and actionable! And it provided enough context for the usual advice that one receives.

[@patterntrader690]

Exactly as we’ve been struggling with this issue, YC comes through. Thank you!!

[@coachankitpandey3793]

I was trying to figure out how to show my business model on my investor pitch deck. Your video comes like a savior for me. Law of attraction 😅

[@AnthonyMunyi]

This would easily qualify as having high value content. I needed this video so much!

[@xavierabdulkarem5057]

This content is such valuable why most people watching something else as of today I can start my own startup

[@martinstine]

This one wowed me. Great. Lessons learned. Thanks YC. Thumbs up Aaron.

[@JetSoftProHQ]

Very clear explanation! We believe that all employees of the company should be oriented in how the business works and develop their business acumen. We have already advised our team members to take a look!

[@AnastasiaR-br6tl]

Thank you SO much!!! It is incredible, super relevant, concise, and comprehensive 💥

[@TheMicahwitz]

fantastic content!!! I hope everyone understands how valuable this information is.

[@theAKSpace]

Man this was the most useful thing I ever heard about business and I heard it in the perfect time while im writing down my business model and plan

[@theAKSpace]

Wish me luck 🙏

[@matthewsimon8615]

These business models primarily apply to high growth high investment companies aiming for Billions or 100 mills which makes perfect sense for Y-C but for other entrepreneurs who just want to have several 100k or millions businesses take this list and also learn other things about small/medium businesses. Your plumber or plumbing company makes great money with a simple: build trust, do good work, advertise , hire good employees and send an invoice.

[@krumbo]

Thanks Y Combinator for sharing those valuable lessons

[@gregtaylor9806]

Incredibly good content. No-nonsense. Excellent presenter

[@Samlowkiapeng1888]

This is perfect. I will be rewatching this video along with the ones by thiel and graham

[@titaniumplated7785]

direct to points. very useful video. I wanted to do a video exactly like this

[@michaelr9736]

Fantastic advice. Thank you for putting so much thought into this video.

[@keitumetsepule5192]

This was so valuable - thank you for sharing!

[@andy_chuks]

Awesome teaching. Very insightful.

[@christopherodo7807]

The best channel on KZbin. Contents galore

[@grantwhitbourne]

Incredible insights ❤❤❤🎉 thank you!

[@ZaidKhanPathan]

Some great valuable lessons, thanks YC team!

[@daneseamus999]

This was very informative and helpful. Thanks

[@bennyskim]

It's funny that basically great web design was one of Stripe's differentiators for years. There are a number of times I suggested/chose Stripe just because the docs were so nice. It did save a ton of dev time. Before modern payments APIs, to setup payments on your website you had to dial a number and it made internet noises for a while, then some guy answered and was like "hello?"

[@mikeg3810]

Wow, that’s a lot of good info! Maybe I don’t really don’t need to get an MBA after all. Just subscribe to this channel!

[@soyeljefe8502]

Great video. Incredibly insightful. Thanks!!

[@theauroralightyr]

This video is priceless. Thank you so much.

[@leeoiou7295]

Excellent talk! more please!

[@segunisrael1]

Really enjoyed watching this...great insight.

[@zetsui0411]

marketplace or transactional tldr 15:50 20:00 cost pricing 21:50 one of four things 2230 complain but stilll pay 23:00 price can't be your only moat 24:00 pricing implies values, and why 26:10 well recognized logo, lock in

[@DrTune]

That is phenomenally useful. Thankyou.

[@abdoulifeshare]

Thank you, very informative

[@MrSunshine669]

Really like your videos. Really wish you could condense them in to 10 minutes or send links to full articles. Your target market for these videos often doesn't have the time to watch 30+ minutes of KZbin with everything else going on

[@jazzybeat28]

Thank you for sharing this knowledge!

[@soumen_das]

Awesome info! Thanks.

[@thegloryshining1471]

extremly valuable , thank you man ❤

[@LuisRdzG10]

Guys, I'm applying to YC for my startup this year. Wish me luck!!

[@lobnakhan8913]

Luck

[@jinettew.3192]

Great work! Thank you

[@_orangutan]

Fantastic explanation!

[@ronrozen2105]

Wow, that was an amazing piece of content, thanks!

[@solomongugu6644]

Very enlightening. Thank you

[@bodwewadmi1]

Dude 🤓 thank you so much to this team

[@timebroua]

wow! its amazing and insightful, thanks!

[@beatlift]

This is amazing!

[@HighEndDigitalArchitect]

This video was great. Love the idea about pricing models and charging instead of going free. But I also feel that for some startups having a free / basic options with limited functionality is a good way attract new customers. If they need and love the product sooner or later they signup for premium account.

[@danielkim672]

exactly. Near the end of the video i shown Gitlabs pricing and it shows the free option with the 2 other paid ones.

[@PerceptiveAnarchist]

Thanks for a great video

[@prathikkarthikeyan6684]

This video, like a lot of YC videos is pure gold for founders.

[@juanbetancourt5106]

Thank you so much YC

[@foundergen3266]

Wow really great value!

[@bluesque9687]

Thank you! Very informative and very well presented... very grateful! However, at the same time very uninspiring... I know these are hard strategies but would I work with somebody just trying to get a biz model right..? Nah.. though these are critically important they are as inspiring as reptiles!

[@vivensuwizeyimana3894]

Great insights 🎉

[@punkpendulums]

11:45 recurring revenue 14:10 enterprise, churn is a lot lower 15:11 organic distribution

[@slymastera]

this was gold 🤝

[@hugoado]

Fantastic!!!

[@Baziz4576]

amazing content well done

[@vfcustodio]

Incredible content.

[@fooflateka]

This is a very valuable vid

[@arthurlins6835]

Amazing Video!

[@JorgeMartinez-uf5dj]

hello! thank you very much. where is the business model guide link?

[@jaigurudevkishorekumar]

Great insights

[@Math_kru_earng]

thank you!

[@tvoyfilmpro]

Very useful information and great thank you for that. At the same time video have horrible sound - speaker deafeningly loud at the first letter of sentence and then quiet to be heard in the end of the sentence. Maybe at least editor should google about how to use the sound compressor.

[@nuthinking39]

This video is incredibly packed of essential information. Thanks for sharing! 🙏

[@cryptoniku6723]

Still gets me thinking that a founder managed to talk to a client who was previously paying $120 a year and asked $120,000 for the same services?! 😂 And then finally settled for $18,000? What's going on?

[@cryptoniku6723]

Good points nevertheless, but that Founder I want to meet.. 😂😂

[@nuthinking39]

@@cryptoniku6723 enterprise customer. They were embarrased to pay $120, also they feared the startup was going to fail. Interesting founder indeed but for not realizing this eariler.

[@inlander311]

Gold !

[@lev4327]

BRILLIANT

[@pythonstartups536]

Considering that this is the half-year old video and Gitlab at that time has been charging $19 (screenshots in the video), but as we can see now on their website it is $29 for the same plan... they have watched this video too!

[@crystaldesign7387]

If i got this before, may be I can earn more money. Really nice video.

[@joseheliojunior242]

Awesome 👌

[@roopmahalriceadministrativ6129]

What is the business model of Apple according to the nine business models?

[@CroissantCreates]

Would like to see the SaaS model updated to also consider the other ‘as-a-service’ models like TaaS: Transportation-as-a-Service (ours!)

[@koshobai]

Isn't that just a service as a service?

[@CroissantCreates]

@@koshobai all services are as a service. But there is a wide variety of things that can be done as a service with different models and specificities and applications

[@fabdan5745]

If your TaaS works like Lyft, Uber or the likes (which I think it does), then it falls right into the marketplace category, given that it drivers + riders onto the same platform.

[@polygeek5287]

Better described than my mba class

[@mahdi5796]

Very insightful. Please upload more about oricing techniques.

[@naijapropagator9244]

Thank you

[@VitorGomes_]

This is by far the best video I watched from YC.

[@shawnatwork]

How do the 9 business models apply to Healthcare Services companies? e.g. if it's a healthcare provider like Caron Health / Parsley / One Medical?

[@lnareteassessoria2116]

O melhor a explicar sobre startup business no mercado

[@manangarg1]

What type of business model does apple have according to the nine business models explained in the video?

[@lms702]

the high frequencies of the audio here is strangely abrasive

[@givastry]

Awesome

[@MrMajani]

Rather than Bio, I think it's more descriptive to call that business model Patent Royalties

[@navidutube]

Nice!

[@azizahmed6406]

Let's say a company helps it's customers invest, now would this be a marketplace because they are providing investments options or a transactional business because they make their revenue as a percentage of the investments?

[@marktacchi159]

Can you guys figure out the whole audio situation? Love the videos but the audio is really difficult to hear (says the old guy).

[@alamskmustafin4544]

Great 👍

[@lfrobledanoesteban]

This video is brilliant. However, there is usually something not considered, and it is not in this videos: pricing depends on the customer, not on the seller. So, there is no. specific price level where customers drop off. Some customers do at some level others do at some different one. So, we have to be sure our first customers do present our target market, don't we? :)

[@sammsiska]

I didn't understand the part you were talking about lowering price in exchange for your first user, logo etc. What do you mean by that?

[@owensigurdson8610]

3:24 - I wonder if this is partially due to Y Combinator's preference for these types of companies?

[@OfentseKekana]

What is the difference between transactional and e-commerce companies?

[@alicemilcanciftarslan1583]

What about launching a product for a 2 weeks frío trial and then let customers know that it I am going to charge with either transaction fee or by subscription? Is this a good idea to approach on a small size mobile app product? More specifically a marketplace to bring supplier and consumer into the app itself

[@meogo7851]

00:07 Key business model types for successful startups 02:17 SAS, transactional, and marketplaces make up 67% of the top 100 YC companies. 07:00 Transactional businesses are critical infrastructure for companies and have consistent revenue. 09:20 Avoid using ads as primary business model unless a top 10 site on the internet. 13:52 The best businesses have recurring revenue and defensible moats 16:10 Use pricing as a tool to learn faster 20:01 Avoid Cost Plus pricing and focus on capturing the perceived value of your product. 21:53 Find your value proposition and ideal pricing strategy. 25:39 Consider offering lower pricing in exchange for specific benefits 27:31 Adding enough value into the product can support price increase and growth. 31:22 Startups should charge for their product and pricing should be based on value, not cost.