- Upgrades are higher, it is easier to get customers with a small amount and upgrade it as they go. NRR also becomes higher in that case. The overall revenue is also usually higher.
- There is usually a minimum billing slab attached to it which gives some predictability.
Over time, based on the patterns identified, you can also forecast better.
True that, and at some level the Usage based pricing also could lead to ‘higher quality’ revenues as the revenues are truly indicative of how useful a certain solution is to the customers vs seat based (where each seat may / may not actually be using the solution)
How would this impact the attractiveness to investors as there’s less visibility into revenues, relative to a traditional subscription based business?
And if that were the case, how would this model take-off in the short run when most VCs could probably shy away from such a model?
Thank you for the question, Sai.
Investors are also excited about this model as:
- Upgrades are higher, it is easier to get customers with a small amount and upgrade it as they go. NRR also becomes higher in that case. The overall revenue is also usually higher.
- There is usually a minimum billing slab attached to it which gives some predictability.
Over time, based on the patterns identified, you can also forecast better.
True that, and at some level the Usage based pricing also could lead to ‘higher quality’ revenues as the revenues are truly indicative of how useful a certain solution is to the customers vs seat based (where each seat may / may not actually be using the solution)