How to price your product | Naomi Ionita (Menlo Ventures)

Podcast: Lenny's Podcast: Product | Growth | Career
Source: whisper-tiny
URL: https://api.substack.com/feed/podcast/95654191/fb06ab8e84c3e7f65c84e81ddcbcef30.mp3
Fetched: 2026-03-05 01:10:33

But do not set it, forget it. I see companies do this, where they labor over designs and features, and they build this perfect product that's delightful to use, and then pricing sort of plucks out of thin air, and then they don't revisit it. This was ever known. It was many, many years before we went back and overhauled the pricing. So think about your pricing, just like you do your roadmap. So every six to 12 months, there's probably something meaningful that you're launching for users. So treat that as an opportunity to revisit your monetization strategy and making sure your compensated appropriately. Welcome to Lenny's podcast. I'm Lenny, and my goal here is to help you get better at the craft of building and growing products. Today my guest is Naomi Ianita. Naomi was one of the first early leaders in product life growth and monetization, having built early teams in infrastructure over a decade ago at Evernote. She was also an early contributor to reforge when it was just getting started, and helped create some of their early programs. She was also VP of growth at invoice to go, and currently she's a full-time VC at Menlo Ventures. In her work as a full-time investor, she gets to see what works and doesn't work across many companies, and one area that she spends a lot of time on is monetization. When it's best to start charging for your product, I decided what to charge and how to evolve your pricing. And that's what we spend the bulk of our conversation around. We also touch on a really interesting framework Naomi has been developing that she calls the modern growth stack, which is essentially all the areas that new starter products can help take load off your plate and help your product grow. Naomi's awesome, and I'm excited to share this episode with you. With that I bring you Naomi, I need to right after I worked from our wonderful sponsors. 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Learn more and get started for free at notion.com slash lemme's pod. Take the first step towards an organized, happy team today. Again, at notion.com slash lemme's pod. Naomi, welcome to the podcast. Thank you. Did you know that you're one of the very few VC that I've ever had on this podcast? And so you're basically representing VC kind here. How do you feel about that? Wow. Well, thank you. I think early growth folks, like I just have a unique bond and lens on startups and investing. So, my operating background is something I lean on every day, and it's actually in full and a lot of the pieces, these are areas where I spend time now as an investor. So, hopefully we'll bring it all together in that capacity. Awesome, that's exactly what I was just going to say. So, I'm glad that you covered that. And so, that's a good segue. Just to get into your background briefly, can you talk about some of the wonderful things that you've done in your career and both at Reforward, which you'll touch on and growth stuff and then your VC life now? Perfect. So, I'm a partner at Menlo Ventures. I focus on early sage SaaS from C2, Series B. I started my career in engineering and consulting before getting into tech back in O6. Fellow of the product, did some new product development at a big media company before business school, and well, at business school, I spent time at the design institute at Stanford. So, this was an opportunity to kind of bridge my analytical background with this refreshing view on human-centered design and learning from the founder of IDO. So, brought that with me, then to ever note back in 2011, early days over there, it was there from that 10 to 100 million users. And over that arc, I shifted from more of a core product role to starting our growth product function. This was super organic. I started just collaborating with colleagues from across the business, come up with hypotheses, do user research, run experiments, drive metrics, this was a new way of building product back then. This was a decade ago. So, the acronym PLG had not been coined yet, and I really just thought of myself as a user and data-driven product person. After ever note, I joined A.B. Trapped Mobile SMB company called Emboise to Go. It was the top-grossing business app at the time. There I built teams across product, data, growth engineering, design and research, and again focused on product-led growth and monetization. Over those two jobs, I found myself doing a lot more advising and speaking on the side on these topics. And my board members used to farm me out to their companies to help their founders think through things around product growth and pricing and various topics like that. And re-forge came together at the same time, so I would come in and speak on topics through that community. So, that really accelerated my transition into venture. I realized how much I love having that portfolio view of the world and helping founders look around corners. So, I think it's an incredible privilege to get to do the work that I do. One thing you mentioned is Evernote. I don't know how much you can talk about this, but they just got sold, right? Someone bought Evernote. And if I think back to Evernote, it feels like they could have been notion, which is killing it right now. Any thoughts on what, maybe they missed and didn't turn into notion along the way? Yeah, we're going to clear some cobwebs here, and it's been a while, but one challenge Evernote really struggled with was this evolution from single-player to multi-player to team to enterprise. It's a cousin that a lot of bottom-ups, businesses, struggle to cross. Evernote was philosophically anti-social. You know, it was meant to be your second brain, kind of your personal tool. And I think that kept the company's growth potential. You know, I always used to say, you can't retrofit collaboration. You have to be collaboration first, and a lot of companies now really take that for granted, but back in mid-2000s, this is going to be a new way of building product. And so, we missed that bridge. If companies do that well, it benefits every metric. That bridge from single-player to multi-player. You know, acquisition goes up, you grow organically through referrals and shared workflows. Retention goes up, because now you have these shared workflows that are incredibly sticky. Employees are accountable to each other to say, this is how work gets done, like design and figment, you know, we're met planning and ticketing and like, gira or linear, it just becomes a default platform. And monetization goes up, right? You know, revenue scales with usage. And so, the more people using it, the more they use it, you start tripping the wire on paying more and more over time. And so, evernote really struggled in crossing that chasm from the prosumer tool of choice. That employees, while to while we're using, they never became this larger, you know, IACB contract from sales perspective. Yeah. So, it's easy to hide sight to see what could have been better or could have worked out like didn't work out. So, what are you going to do? See, you mentioned monetization, and I know that you spent a lot of time with founders, working on pricing, monetization, especially using monetization as a lever for growth. And so, when I spend some time there, it's going to pick your brain about what founders and growth teams can do and how they should think about monetization in terms of growth. And then perfect. And then you also have this cool concept that you've been developing, that you call the modern growth stack, which is kind of this plan, modern data stack, and so, I want to spend some time there. Perfect. Cool. So, to dive into that first topic of monetization, if you think about when you're starting a company, what are some of the biggest challenges you face, start building a product, especially a B2B product. I always think about pricing and trying to figure out how much to charge, how to charge, your pricing model, how to evolve your pricing, when to charge, all these things. And so, I know that you work with founders, helping them figure these sorts of things out. And so, maybe a first question here is just, what do you find startups most often miss or get wrong when they're starting to think about monetization? There's a lot to cover here. I'll cover a few missed steps that I think are most common. One is waiting too long to monetize, and another one is under pricing, and this isn't just setting the base price too low, but it's also leaving money on the table by not offering different plans to cater to different segments. And the third one is all too often with pricing. People set it and forget it. So, this idea that when your product development work is never done, neither is your pricing, and you need to combat that along the way. So, those are three areas, I think we can cover here. Maybe starting with one, I can jump right in, and I think I'm waiting too long to monetize. So, the beginning of a startup journey is all about creating something of value, right? That's the whole point, hopefully founders have some unique market insight or some authenticity around a pain point, and some novel solution that's going to change the world. So, that business value is really critical, but the other side of the same coin is being properly compensated for that value as a business. So, I understand the vulnerability of being a new startup. You just want people to use your product, and I view that early free beta user feedback loop as an R&D class to make sure you're building the best possible products and other driving a lot of value. But, I see companies wait too long to make that shift from building a product to building a business, and I think that's the true signal of product market fit is ultimately having people open up their wallets and pay you. So, looking for people to get to that, to that angle. And so, again, this is not mutually exclusive. You're going to create business value if you're going to be compensated for it, and prioritize your roadmap over time so that you're building based on what people actually want in our willing to pay you for. So, when you don't monetize, I think you're doing yourself a disservice. The things that I see is, you know, the pain of living money on the table. You're inadvertently cheapening your product. People attribute a lower dollar value or a zero dollar value to what you've built. You're missing out on critical feedback loops to understand what people are willing to pay. And you're shooting your future self in the foot, because this is the other problem is that some coin you're going to start charging, and you're going to experience some backlash. So, it's nice to get ahead of that. A few things to think about, and a food for thought around delaying and sort of kicking a can down the road from a monetization. So, just to reinforce that, your general piece of advice is that you're building a B2B product, start charging immediately, don't give it away for free, at least have some. Like, you probably give it away for free, make clear, we're going to charge you this much soon. Adi, how do you think about that? Yeah, I don't think those are mutually exclusive. So, this isn't to say that I don't like premium models. Ever know, it was the darling of premium over a decade ago. So, I'm still a big believer in that. It's more a question of where you put the paywall. How much do you give up for free, and then how do you price and package a paid version of your product? So, premium is all about getting that top-of-the-funnel excitement, getting people to build habit, formation, your collapsing time to value, your building habit formation, your building all these champions to use your product. But the idea is to shepherd them along into a paid version of your product. And, again, not to lay the idea, like, what should our premium features even be? What should that paid plan even look like? Again, going back to the misstep, I never know what I think. There was always a premium plan, but it didn't really bridge into enterprise, so we can talk more about that. This kind of a tangent, I know, because you have these two other pieces of underpricing and setting it and forgetting it. I've been talking about, but do you have any advice for deciding what gives it into the premium and what? If it gets you to the aha moment, like that path to hack it formation, that has to be free. That's the core utility of your product. And so, the idea is that in that first session, or first day, someone's getting to see the delight and saying, oh, my God, I'm never going back to the old way. This is how X gets done. If you're looking for some morality or network effect, that's the other thing. Your free users, you might not be getting revenue from, but the idea is that they help you manage hacks. So, these are folks that are driving organic growth for you and helping reduce the incremental cost of your next set of users. So that's another part of the math equation that I think about in giving up revenue. You also have this model that you had mentioned that you mentioned in previous chat we were having offline of this idea of day one versus day 100, like stuff people need on day one versus what they need down the root. You still believe in that and what you people know about that. I do believe in that. That was tied to, we had done this experiment at my last company in voice to go where, you know, typically on the demand curve, the higher you raise the price, average revenue per user or poo, the lower the conversion rate, so these things are inversely correlated. And we were able to do this rebalancing of our pricing and packaging so that we actually doubled our upgrade rate from our starter plan to our pro plan, we'll also increase in the price of the pro plan. So to actually get twice as many people to upgrade, well, paying something like 30% more for that new plan is pretty rare to get the compounding benefits of that. And what we did was, thought a lot about what is a day one premium feature? What is a premium feature that you can get value from the very first time you engage with the product? That's different than your day 100 features. Those are the ones that represent more advanced functionality, maybe they're ones where the value is derived from having a certain scale of data in the platform. And so those, you shouldn't waste or cognitive load for your users to have to even understand or try to appreciate when they're first getting going, push those into a more advanced pro version of your products and monetize them down the road, do an upsell. So big believer in how do you really keep pricing simple? And we've all seen those SaaS pricing pages where there's a laundry list or just like an early matrix of features and functionality. So do you can to think about that journey for a user and how they're going to continue to increase value with your product over time and how you can map your pricing and packaging against that journey? I really like that framework because it's so straightforward and simple, like as you use it, you'll need more enterprise features innately because you're sharing it more widely. Your head of security is going to be like, what are you doing with this thing? Your finance team is going to be like, oh, how do we pay for this thing? So that's a really nice, simple way of thinking about what to put in premium in your free plan versus not so glad we touched on that. Great. Okay. So we were going through the three things that companies and founders do wrong when they're starting to price and so the first you said was they go too late and I tangent eyes to us and so I'll give it back to you. I'm going to keep doing this. This is, this is by far the most common issue and so one framework I like to use here is matching price to value. So when you do that, you create alignment with your user. So this entails picking the right value metric so this is the unit of value that they derive from using your product and it creates this natural escalator because those people use it more and you get paid more over time. So the SaaS was historically built on a seat-based model. That's been sort of historical SaaS pricing and now with the rise of PLG we've seen more of these used based approaches at gaining speed so that's pretty exciting to see. So whether it's number BPI calls or messages send or terabytes of storage use or words written is used based approach really matches price to value over the lifetime of a customer. The other thing that happens when you match price to value is it helps you understand who you're building for and let's you target different customer segments. So in doing that you're able to better serve each segment but you're also able to maximize revenue for the business. Our note always had a business model from it's beginning it had a $45 a year for an annual subscription and this set the foundation for the company and tens of millions in revenue early revenue growth but the approach was suboptimal. So as a growth team we started doing surveys. I was really curious to understand why people converted from our free version to our premium subscription and one of the most popular answers without fail was, well I just feel guilty. I use it so much I get so much value from it that I just feel obligated to pay and like take it in for a second because if guilt is one of the main reasons why people are paying you then your free version is too good and you are leaving money on the table. So a single premium tier is often a mistake and you're going to be leaving money on the table for specific segments and it's important to drill down and understand who those are. So our additional research helped us understand that brand new users with low perceived value of Evernote looked at it like their Apple no pad app that was pre installed on their device and so they couldn't understand the idea of paying $45 for Evernote but then we talked to avid users and these were people that were cross client using it on desktop and mobile you know every device they had they were using it for work and personal they were leveraging OCR capabilities and the web clipper and it was truly their second brain they could not imagine life without it and these people were floored that they were only paying $45 a year they told us that they were getting $100 of value from Evernote. So here the perceived value for avid users was far outpacing what we were asking from them and this intuition and research really led to a bifurcated strategy of having different plans for different personas based on what they actually you know the value they got in the product and the willingness to pay that makes sense when I heard you say that it cost $45 for a year that sounds way too low and so I could see how that sets the like the pattern for Evernote is not making enough money over a long-term. Cool and then the third was that you don't evolve your pricing right that's the third beginning. So do not set it forget it I see companies do this where they labor over designs and features and they build this perfect product that's delightful to use and then pricing sort of plucks out of thin air and then they don't revisit it this was ever known it was many many years before we went back and overhauled the pricing. So think about your pricing just like you do your roadmap so every six to twelve months there's probably something meaningful that you're launching for users. So treat that as an opportunity to revisit your monetization strategy and making sure your compensated appropriately. What advice do you have for founders around just like how to decide in your initial price? Clearly ever not didn't get that correct and I'm sure you learned a lot from that and then other companies have worked with how do you actually decide what to start charging. Yeah there's a full pricing process here so I'm happy to walk through it so that they do here's understanding who your customers are why they pay you what is it that they want to value and how much are they willing to pay you. I encourage you to put together a pricing committee this is not a single threaded exercise that lives in one department or another this very much is a cross functional exercise if you are a PLG company like companies I worked at this was the product growth that I ran so the combination of PNs and data scientists. Hope like that to iterate on pricing if you are an enterprise SaaS business of course sales and finance and revops play a role so think about who that committee should be at your company and commit to being that cross functional team that really owns and and iterate some pricing over time then they are responsible for talking to customers this is like by far in a way the the most basic thing you can do to just increase those feedback loops and understand how much you can push the envelope on pricing you do that with surveys with interviews there's some questions that we like to use around understanding the relative partization of features going back to that laundry list of features and kind of matrices on a pricing page it's very rare that people convert you know equally across all of those features are typically one or two that are the main carrots for conversion so it's good for you to understand the relative rank there and how to reconcile some of your pricing and packaging accordingly so we would make a list of our features that we had and maybe new things we wanted to build and have people rank them as a must have nice to have or not necessary that help us understand the relative partization you can also get at it with like a hundred point question where you give you there's a hundred points and say spend them across these different features and the more points through the future the more value you're signing to it this is to get to like the demand or the the features and functionality that you've created so that's sort of first step one is understanding like what people actually want and and making sure that you know they're not just saying everything but the kitchen sink but they're actually getting a good sense for what's most important to them and then the other side is understanding their willingness to pay I'd say the easiest on ramps here for companies to start digging into that is to use Van Westendorps method here and don't know if you're familiar with that you're not in a little bit it comes up comes up a bunch on the spot okay so I might be repeating myself here but no this is great you're this how we learn if we hear it again if you take those the packages they users doesn't need to does nice to have and must have you make that collection of features in the survey then ask them what's such a cheap price that you start to question the quality of the product ask them what's a good deal or sounds like the right price for this package ask them what's expensive but they would still pay so you're starting to get to that you know level of discomfort and then ultimately what's uh prohibitively expensive well people just say okay that's it you've crossed the line of how much I'm willing to pay here and by plotting those four curves you start to get a sense of how to inform your pricing that's a great way to marry the questions around demand and then the questions around willingness to pay awesome I wish that survey name was simpler to say because I can never remember exactly to pronounce it but you got it so then western door okay just I got it so say that you got a price you launch with something how do you think about and how do you suggest folks experiment with pricing changes and then just what impact have you seen from making a pricing change either in terms of revenue or growth what kind of because I know you work a lot of start to fund these sorts of things some curious yeah what's like like how big of an impact can you see from pricing changes oh it can be huge our friends have opened view doing a really good job of pumping out content and doing these great you know sort of SaaS benchmarking surveys so they did something recently that showed that roughly half of companies that instituted a pricing change saw at least a 25% increase in ARR so that's a pretty massive step function improvement in your revenue from something that doesn't require massive technological overhaul I find that most companies regret not doing it sooner profit well is another group that I've friends at and if a lot of respect for them and the content that they've put out they did a survey once on I think it was over 500 SaaS companies they looked it for a 1% improvement on acquisition retention and monetization how did it impact a company's bottom line and they found that the impact with an improvement on monetization was 4x that of acquisition so this idea like how can you efficiently improve your business monetization is really underappreciated as a growth lover so definitely something people should be thinking about that's part of my goal of doing this podcast is making sure founders are compensated in a way that they deserve so let's hope everyone makes a little more money after today and I've seen I've seen it lift upwards of 10x on revenue but it's sometimes hard to parse just the pricing change because usually it can be coupled with product changes a rebrand a lot of PR you know the launch of a new plan like a team or enterprise plan so it's hard to sometimes understand the just the pricing change in isolation but it really can be pivotal company and when you think through the pricing change is that you've seen is the impact often from raising the price just broadly is it like segmenting more intelligently is it changing for me versus paid is there like a bucket you think of like here's generally where the biggest impact ends up being yeah it comes from doing it holistically I think it's it's very rarely is impactful if you just you know pick a pick a new price or just launch a new plan I really think of it as rebalancing pricing and packaging overall so it's doing this whole exercise of understanding what people actually want what the willingness to pay is and mapping it to that user journey like we talked about from single player mode to multiplayer you know that first of the person you connect with and have a workflow with spreading it to your role teams and ultimately spreading it while to wall across an organization so it's it's a longitudinal view of the user life cycle and thinking about your whole business model holistically I don't know if you can talk about any of these but is there a company or an example that comes to mind where you did a pricing change and just talking about what they changed just to make this even more concrete I have a specific story there with one of our companies on-boy this is this is a fun one so he was just getting started this is on-boy the visitor registration tool that I'm sure a lot of people have used you know especially before COVID probably mostly in SF so imagine folks in other countries don't know about it maybe describe it yes so it is um if you visit an office instead of just signing in to that you know piece of paper in the lobby it's your your name and your email address and what time you checked in it is a digital kind of iPad based way of checking in and sharing information with the person you're visiting and so in talking to Larry and getting a feel for how he sort of his evolution around pricing he he tells the story that I love so he was meeting with a big hospitality company and the conversation was going really well this this prospect was really leaning in and excited about about using on-boy and the conversation shifted to pricing so in that moment because Larry was feeling some good vibes he decided to 10X the price that he was typically charging people so just in the moment he decided to go for it go out on a limb and ask for a 10X the typical price and in that moment the exact said okay sure sounds good like not not a minute of hesitation not a second of hesitation and what he learned in that moment was that one he was wildly underpriced it was it was very clear that he hadn't even thought about what the ceiling was but the truth was he probably could have pushed it even further considering there was no hesitation so what I encourage users to do in especially in like his enterprise conversations is to continue to ask for more to understand where the upper bound might be and to understand that it's okay sometimes to lose some deals due to price something on the order of 20 to 30 percent is is reasonable so that you can get a sense for where where the limit might be the vast majority companies are are definitely under charging like we discussed so go out on a limb like Larry at on-boy and you can see that sometimes you can 2X 4X even 10X your price that's an awesome story and the touches on exactly what you said where people often under price imagine it's strategically smarter not to go straight to 10X it may be go 2 or 3X until people start pushing back because you lose a lot of data there but that's one way to just zoom to the to an answer yeah they're all feedback loops right so I think there's some incrementality to it but you've got to understand who these different segments are and if you don't have enough data points it's hard to really understand how to continue to optimize any other tips that you want to leave listeners with around pricing or monetation or even testing pricing anything there before we shift to our second topic yes so we talked a bit about research methods and different surveys you can do to help inform your pricing and with enterprise it's all about continuously asking for more but if you're a PLG company and you have the public facing pricing page I'd encourage you to experiment this is something people shy away from and frankly they're having historically been great tools for companies and sort of infrastructure to be able to do this work so I didn't voice to go we invested very heavily in the internal pooling we had a whole metering and humanage management and experimentation system in house there's a big growth engineering undertaking and with that we tested different value metrics we tested different hotel limits price points promotions you name it we tracked the consumption of our pays you go model and you know with that back into the product so we can nudge users along the life cycle to get them to convert up greater renew once quota limits were reached so on there's a lot there I'm excited about this new wave of modern tools to actually help you do this and not sink a bunch of engineering time and developing something in house so that's something we can talk about in a bit but that investment was very worthwhile we had we had you drove new gains by being able to iterate in a way that was more streamlined there's some things to to watch out for though it's it's hard to test pricing there's a lot of different variables to isolate so you got to make sure you're bringing a consistent test experience to the in product experiment experience you are pricing page maybe mobile app stores or life cycle emails that you're sending one trick you can do is we would segment these test by geo so we would do some tests in Canada or Australia before rolling out in the US that was a nice way to just put some constraints around our experimentation and the other thing you really have to think about is the long-term nature of pricing experimentation so knowing if you succeeded and failed off and requires understanding the implications on them sure let's say part of your test is like your one discount you need to understand how to users perform in year two and have a sense of the trade-offs around user growth retention or poo so all of these things are different levers that you want to optimize over time this episode is brought to you by Vanta help you streamline your security compliance to accelerate growth if your business stores any data in the cloud then you've likely been asked or you're going to be asked about your sock to compliance sock to is a way to prove your companies taking proper security measures to protect customer data and build trust with customers and partners especially those with serious security requirements also if you want to sell to the enterprise proving security is essential sock to can either open the door for bigger and better deals or can put your business on hold if you don't have a sock to there's a good chance you won't even get a seat at the table beginning a sock to your port can be a huge burden especially for startups it's time consuming tedious and expensive enter Vanta where 3,000 fast-growing companies use Vanta to automate up to 90% of the work involved with sock to Vanta can get you ready for security audits in weeks instead of months less than a third of the time that it usually takes for a limited time Lennie's podcast listeners get 1,000 dollars off Vanta just go to vanta.com slash Lennie that's V-A-N T-A dot com slash Lennie to learn more and to claim your discount get started today there's a question I wanted to ask you and maybe it's too big of a question answer simply but it's this question you just raised of trading off revenue versus growth that's one of the most common trade-offs founders have to make the image is general thoughts advice there's there when you should generally index on what have you seen works best which kind of direction should you lead growth or revenue for let's say be to be company like early stage yeah if you know that you have a bridge to move up market then giving up the long tail of individual users can be very worthwhile so I think figma is a great example of that this is a company that took a while to monetize and you know even having free usage at the individual level that was the way to drive in same community and love for this product you know designers around the world were just just fell for this product overnight but this idea that once they were using it a more corporate setting once they were collaborating with more people across the business they were tripping a wire to pay and so what happened there was you had this massive top of funnel of individual users but knowing that design isn't inherently collaborative you're interfacing with engineers you're interfacing with pms with marketers with researchers with execs you know more than half a figma users weren't even designers once it was embedded in the enterprise and so this idea of these compounded growth loops that you got by interfacing with so many different parts of the company and making design truly collaborative and in the browser they were able to just have this exponential curve on monetization once they shifted into more of a team or enterprise-based package so that's a good example of saying like they were willing to trade off on monetizing the individual because they knew that it would be so sticky and would go so waterwall within a company. Got it so your feeling is if it's a multiplayer plgish product you probably want to optimize for growth they'll let it just take over and not go charge as much as you can immediately versus say like a sales lead be to be enterprisey product maybe there focus on revenue immediately versus making it feel cheap. Yeah and I think if you do have a few free users crafting it is more of a sweetheart discount like more of a year one discount but you know getting paid over time. I mean again I may have a big believer in having some some early users being your design partners and really giving you that tight feedback lips to make sure you're building the right product so it's not that you should really optimize for revenue on day one. I mean it is a journey but I just oftentimes see companies just take too long or in everno it's case I mean the free version was just too good so that's just something to consider where to put the paywall and be really really strategic about that. Just don't don't optimize for a guilt pay driver. So you're talking about pricing testing and I was going to ask what tools you found that are useful for testing pricing and that's probably a good segue to talking about the modern growth stack with that fit into this concept of modern growth stack testing your pricing. Yeah let's do it. Okay let's do it so just to set it up there's this term modern data stack that I think it'd be useful for you to explain because not everyone is aware of that and you've kind of been thinking more about this adjacent idea of a modern growth stack so can you just talk about these two things and then we'll lead to some questions there. Yeah so the modern data stack is basically collection of cloud native tools to more easily move and manage data. It consists of a fully managed ELT data pipeline, a destination for that data. So cloud-based data warehouse like a snowflake a red shift, a data transformation tool like DBT and then finally a platform for visualization on top so people can access the data. This is the play on modern data stack was very intentional. I think of the modern growth stack or my core thesis area right now at Menlow as the evolution of what you do with the data. So these are the workflows that the data enables to drive the business forward for product growth and revenue teams like I used to run. It's the modern replacement for infrastructure that you know teams like mine built or bought and when you're responsible for driving things like activation or monetization or retention there tends to be a lot of these internal tools that are built because you're really powering cross-functional teams to to do this work. It's not sort of easily into legacy departments. Awesome and the general idea here it is there's so many more tools now to help you grow with the data stack that there's just all these tools now that make it so much easier to collect data, use data, make decisions off data and you're finding the same things happening up growth, what are some of the tools that you found to be super helpful. I know you're investor and some you're not investor and others. Yeah. You think it's just talking about here's just like a bunch of cool tools and how they fit together as much as possible to help you you grow your startup. Yeah, and I want to reinforce some different themes before I get into some layers of the stack, because I think it's important to frame the benefits of the modern growth stack. So one is data to his workflow and three is impact. So starting with data, the modern growth stack companies really are powered by these smart integrations and automation that you get as a result. So with this proliferation of SaaS, it's created this need for more data access and interoperability. We've all felt that pain of silo data. Modern growth stack companies leverage a versatile companies like high-tech or census to break down these silos and help companies or employees across the company access data and be more productive. So that's this big data theme with modern growth stack companies. The other theme that they unlock is around workflow. Here it's really the enablement of people and process. So rather than employees sitting in their departmental silos, modern growth stack companies build bridges between them. So by unlocking data access, the business side can often self-ser and be more self-sufficient without relying on an engineer or a data scientist to run queries or stitch together, data sets for them. The other thing here is lots of growth work is inherently cross-functional. So the efforts to drive growth requires new tools and collaborative workflows like we're discussing without purpose-built software. Many teams like mine felt no choice but to build in-house. So we spent sacred hours building and maintaining tooling for experimentation, personalization, billing, monetization. These were resources that could have been reallocated to building proprietary features for the business had we've been able to buy something purpose-built. And finally, these products really drive impact. So the idea here is driving hard ROI in the form of cost reduction. So automation means time savings and often times that can be mapped directly to cost reduction for a company. But they also help product and growth and good market teams better engage in monetized customers. So they're driving hard ROI in the form of revenue impact you. Then really compelled by companies that can drive hard ROI both across cost saving and revenue generation. And I think that ROI story is even more compelling now in a software macroeconomic climate. You just have to be able to continue to retain sales and pricing power. And I think that's derived from a strong ROI story, like I just read. So those are general themes and sort of consistencies across the companies that I get particularly excited about. So happy to talk about a few layers in the stack. And I think you might be familiar with a few of these as well, especially based on your feedback around it, Airbnb. And you probably will be yourself. Yeah, exactly. That's what I was going to say that so many things are just coming out of startups that have built these in house. And then they're just like, hey, I could start a company doing this and provide it to all these other companies. And so I just love that there's all these tools coming out that just make it easier to build startups and grow startups and do less work and have less people. It just reminds me the number one happen to have started at this point, I don't know if it's still as gas, which is just like four people. And it's like higher than TikTok and YouTube and all the things in Facebook and it's four people. And so it just shows you the power of what tools can do for you to build new startups and disrupt people that in companies that have been around for a long time. And you have to help companies do more with less now. There's a lot of frozen budgets and that's a good way to breakthrough. So I love that these companies can do that for the buyer. So one that's come up a bit and gotten a lot of airtime recently is product-led sales, this idea of companies that serve PLG businesses and harness the power of all that product usage data to inform the customer facing team around which accounts are most upgradable. It's really free money when you shine a light on an account that nobody was paying attention to. And some inside sales team can drive a large account expansion. So I don't know a bit of our why she kept in that. And there's a bunch of companies that are doing this. And game happens to be one that I work with. They have customers like Figma, Lume, Calenley. There's other players too. I think Pocus has done a phenomenal job of building content and community to help inform the market around the power of product-led sales. So there's just a lot of goodness about all the players in this space really waking everyone up to this opportunity of layering on sales to a product-led motion and how to maximize revenue along the way. I'm in Vestern both of those actually. And I'm going to just in the show notes note the one I'm in Vestern because I invest in a lot of these companies that turns out and we've invested in a few. So I'm just going to keep it simple and I'll write in the show notes. Here's one's I'm in Vestern just in a voyage. I love that double dipping. I mean, Sierra Believer in the category as well. Yeah, I love it. There's so much cool stuff happening there and I'm really excited, yeah. Yeah. Cool. I think another layer in the stack is experimentation. So this is really critical infrastructure in my opinion for these cross-functional product data growth teams to AB test hypotheses and understand their impact on the business. How do you know if you make a change in the product or you're pricing whether you succeeded or failed without having infrastructure like this along the way? Category creators like Optimizely really paved the way. I was an early buyer of Optimizely and they targeted marketing personas and it was just game-changing to be able to start to AB test things and bring hypotheses to life. I'm also biased as an investor but some of the modern tools here like Epo which offers experimentation for the modern data stack. So unlike Optimizely which focused on more kind of click-through metrics, Epo ties directly to the metrics in your data warehouse. So tying an experiment result to things like subscriptions or revenue or margins really like board level metrics that you're trying to move, they make that full trip really convenient and understand the impact on those business KPIs directly. So it's a lot of automation around the experimentation results and analysis that used to live up to the side and Excel are no books. Now it's automated away with Epo. I think you're following it with them. Yeah, I definitely didn't plan this but Epo's both a happy sponsor of this podcast. I'm also an investor in Epo. Go Epo, but this was not planned. Well, this is Airbnb rules. Love it. It is, yeah, it's my college. It was an early data scientist at Airbnb. So I'm working with him at Airbnb and he was amazing. And I had to adjust anything that he built. He built an awesome thing. Yeah, exactly. He described, I love these founders that have deep authenticity around the problem because they built it internally and now they're commercializing it for the masses. And so the story of Che and Epo is a good one on that dimension. And there's other players too. I'm also a big fan of Amplitude. I'm going to buy her of that tool as well. And I love a lot of the team there. So if you do not have a data team or a data warehouse and you still want to leverage being able to do behavioral kind of ad hoc analysis or experimentation, that's a great tool for you as well. So a lot of different ways to solve this problem in the market. Also, a happy sponsor, go Amplitude. Cool. I love it. This is great. Hitting it on all my favorites. OK, he's going with us, but also we got. Well, I talked a lot about Billy and monetization. So I'd have to talk about that one. I think platforms for managing billing and iterating on your pricing and packaging. This is just such a big need. I think these look transform business models for SaaS in particular. Most companies have been seat-based, like we described. So the historical incumbents, like a charge beer, Zora, really serve that model. But I'm in the shift to more usage based, there's new entrants that are servicing companies and that dimension. And there's also lots of clunky workloads and we think of bridging from engineering to product and growth to finance or revops. So there's a lot of just, like, streamlined workflow that these new tools can offer. Some early breakout players in the world of them. These would be spilling our metronome and orb. There's also more room to handle the full monetization in for later. So for example, I like how orb mirries the billing component with the data infrastructure to actually inform what you're pricing and packaging iteration should be and help you forecast and optimize revenue. So there's other players that are doing different components from the journey of the metronome piece, all the way through to the experimentation piece. And it's been really, really fun to get to no players in that space. And I wish I could have been a buyer of them many moons ago. Not an investor in the easy hit, so that's cool. Quick tangent, give a strong opinion on pricing models, usage based versus seed based, or something else. What's your guidance to founders? Like, is this the way to go? Usually, one of them, or is it super dependent? What do you recommend? Yes, this is a similar answer I had before. I don't think that they're mutually exclusive. And so if you look at all the companies that, in different pricing models in SaaS, a small flavor, less than 10%, or roughly 5%, have just pure natural escalator, kind of usage based model. The vast majority have a hybrid approach. And so what I mean by that is they're typically some good, better, best subscription model, where there's some consumption component across each tier, like some quota limit for your given value metric. So in Slack, they might have been number of messages sent, or Dropbox, number of terabytes of storage, invoice to go might be number of invoices. There's some dimension that's been sort of packaged in with a given pricing plan. And once you reach that limit, it is a trigger to get you top grade to the next plan over, sometimes there's overges that you can pay for. So I don't believe that you should just be see-based or just be usage-based. I think when challenged with purely usage-based models is that's not always how CFOs want to buy. I think fire sometimes want predictability. They want to be able to budget for your tool. And I've lived that. I remember using tools like Mix, Panel, and segment, and even Girotsin Extend, where, you know, I was paying a cheap amount to get going. And all of a sudden, I realized we'd grown quickly. And I looked at all of our SaaS spend. And I was blown away by how much more we were paying. So the other side of this, you know, I'm advocating for people getting paid and compensated for the value that they're delivering, but there can be a breaking point. And so how do you think about packaging of fixed and variable components so that people can more predictably fire software? Any other layers of the stack? They want to touch on slash, which would you be most excited about in the future? Do you think people should be paying more attention to that maybe they're not paying attention to? I mean, I wouldn't be doing my job as a VC if I didn't mention generative AI right now. It's really having a moment. So there's a bunch of breakout applications there that sit within the theme of the modern growth stack. When you think of using AI to create images or text or code or audio or video, these capabilities change the way teams work. So writing a blog or writing copy for an ad. STR is doing their work and can outbound sales efforts. There's just a lot of these touch points where it's humans kind of tinkering and iterating and laboring over every word. And if the machine, if AI, can tell you what's going to be a more performant version of something, that's a very, very hard ROI exercise there. You'd save time and hopefully you've improved your performance across a various marketing or sales campaign. Where do you think AI will be the most help on growth? In terms of growth, you have an idea there? I think what I described around marketing and sales is because they really touch the dollars. It can be this ROI story around saving time, but also driving revenue. There'll be plenty of really effective examples within things like customer support. I mean, the cost savings potential there's going to be massive. We'll see what happens in engineering, which generating code. I think there's a lot of areas where it's going to touch the enterprise. But from the modern growth stack standpoint, I think something that's really revenue generating and can point to attributable ROI on that dimension is going to be pretty relevant to right spending time right now. I'm excited. Any last thoughts before we get to a very exciting lightning round? I'm happy to hand it over to the lightning round here. Well, we've reached a very exciting lightning round round. I'm only going to have four questions for you. I'm going to ask them pretty quick. We'll go through them fast. Whatever comes to mind, no pressure, question one. What are a couple books that you recommend and most to other people? My buddy, Monivan, from Simon Kutcher's wrote a book on monetizing innovation. This is a great read. He and others there have done pricing engagements with hundreds of tech companies. So there's a lot of stories and practical tips there. I often gift that one to founders. So I would, I can't do this whole talk without giving a nod to my friend, Monivan, and his Bible. Awesome. I just recorded an episode with Monivan. And so that's a great pick. Question number two, favorite, recent movie or TV show that you really enjoy. I have little kids, so I don't know if this is going to be as interesting for folks but we like story box on Netflix. There are these little cartoon characters that answered kids questions. So people sort of call in and ask questions and they do a whole episode on why is the sky blue? How do airplanes fly? How do I see? And I inevitably learned something from watching those. So there's a very kind of playful and educational shows. I, I clearly need a new. No, I don't know the answer to any of those questions. I need to watch this. OK, so question three, I'm looking at my notes and I've never asked this question before. So I don't know where this came from, but I love it. Who's been a biggest inspiration to you in your life? Oh, I mean, this one's pretty easy for me. It's my parents. They're from South America, originally and lived on three different continents before immigrating to the US for graduate school. It's a pretty cliche American dream, but they came here with nothing. Just this idea of building a family and taking advantage of the educational and professional opportunities in America. They progress through school and building their career in three different languages with no financial support, no entrenched kind of resources or networks to lean on. And I just can't imagine doing that, because the stress or cognitive load of kind of restarting your life in whole new geographies and cultures and languages and just betting on yourself and figuring it all out along the way. So my drive has always been rooted in their story and I'm forever indebted to them. I need to ask this question more often. That was an amazing answer on the spot. Naomi, we have reached the end of our chat. Two final questions. Work and folks find you online if they want to learn more. Maybe pitch you start up ideas, contact you if they want to ask you questions. And then finally, how can folks be useful to you? I'm a partner at Menlo Ventures. So you can find more about me in the firm at MenloVC.com. Or I'll sound LinkedIn or Twitter. My DMs are open. Amazing. Naomi, thank you so much for being here. My pleasure. I look forward to talking to more folks who are building things across work automation, data, AI, and the modern growth stack. So thank you. It's always a pleasure. All right, DMs are coming in as we speak. Thanks, Lenny. 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 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 Lenny's Podcast.com. See you in the next episode.