Why You Should Raise Your Prices
And an idea for Masterworks for farms
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Here’s today at a glance:
Opportunity → NetJet for farms
Framework → Buyer’s Pyramid
Tool → Imagekit
Trend → Data Lakehouse
Quote → Pathological Customers
💡 Opportunity: Masterworks for Farms
Have you ever rode in a private jet?
It’s fun. There’s no TSA checkpoint, the seats are actually comfortable, and you can pop champagne with your friends.
It used to be that you had to own a private jet to ride in one (or know someone who did). These days you can be slightly less rich and do a timeshare of sorts with others to split a single jet. The same thing’s true for yachts, vacation homes, expensive art, and more high-net-worth-individual-type-things.
Sam Lessin thinks farms are next:
Lessin’s one of my favorite thinkers about startups because I don’t always agree or disagree with his takes, but they usually make me stop and think.
In this case I actually think you could take it one step further than he implies.
While the market of “very very rich” people he talks about might help get revenue coming in to allow you to grow the business, I’d love to see someone treat that like the Tesla Roadster and use a strategy similar to Elon’s Master Plan for Tesla to build Masterworks for farms.
Upgrade to see the full structure of how it would work:
🧠 Framework: The Buyer’s Pyramid
“Figuring out” your startup’s TAM is somewhat useless. Most of the time it’s made up, or at least very generous, and everyone knows it. But the real sin about TAM is that it’s just one giant number.
Sure, you have SAM and SOM as well but those aren’t much better. They don’t tell you anything actionable like, for example, how ready to buy your market is.
The Buyer’s Pyramid does, though, and I’ve found it pretty helpful. It’s broken down into five states a potential customer can be in:
Buying / ready to buy
Open to buying
Not thinking about buying
Don’t think they’ll buy
Know they won’t buy
The numbers below are just arbitrary. What I like about the framework is that you can use different strategies for each distinct user group, track performance with simple tagging when potential customers are in your funnel, and audit whether you’re spending your time and money most effectively with sales and marketing.
🛠 Tool: Imagekit
Struggling to work with images and videos? Imagekit is a unified solution to store, manage, collaborate, optimize, and publish media to the web all through simple real-time APIs. Delivering high quality visual content on the web is no longer a hassle.
The best part: Imagekit has a startup program where Houck’s Newsletter readers can get access to some of their enterprise-tier features at a huge discount for a full year. Try Imagekit here.*
📈 Trend: Data Lakehouse
A data lakehouse sounds like a fake term that someone just decided to make up one day. In actuality it’s an open data management architecture that combines the flexibility, cost-efficiency, and scale of data lakes with the data management capability of data warehouses.
And they’re trending.
If you believe they’ll continue to gain popularity, there’s a lot of low hanging fruit to build clone-ish tools of what users are used to how to manipulate, access, and otherwise interact with their data in more traditional architectures.
💬 Quote: Pathological Customers
On his podcast, Tim Ferris asked Marc Andreessen what’s the one thing he’d like to put on a billboard. Marc said he’d put the billboard in the heart of San Fransisco and it’d say just two words, “Raise Prices.”
One reason to raise prices is to get rid of bad customers. You’ll attract better customers who actually value your product and can help shape its direction.
This is doubly important in the early days because lower prices attract customers who aren’t really in your target market. If they are, they will have a higher willingness to pay. These (and only these) are the customers you want to spend time listening to, learning from, and making product decisions around early on.
Other “tourist” customers will give just as much feedback, but it won’t lead to faster growth like listening to your target customers will.
I originally priced my new marketplace product, Megaphone, at $1,000/mo for this reason. Today, Megaphone users pay a much lower $49-89/mo subscription and then spend money on our platform with creators.
The original $1k model included a certain amount of on-platform spend. This meant the only people signing up really felt the pain point Megaphone was solving.
I spent a lot of 1:1 time chatting with the four pilot users we got at that price point in dedicated shared Slack channels, so I had to be sure what I was learning from them would actually help shape the product’s direction.
🔗 Houck’s Picks
Honest reflections on building a third startup from a two-time founder (Link)
A guide for finding product market fit for B2B (Link)
An outline to help founders raise before the end of the year (Link)
Upgrade for the full batch of picks this week:
How to do effective email outreach to VC’s
How to hire a chief of staff
One of the biggest misconceptions about entrepreneurship
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