Our products are Open Source, but I think we're still more "old enterprise" than "new enterprise" by the model presented early in the article. Yes, a single individual can download and install the product for free, and yes we want to try and eventually convert (some|most) of those users to purchases of subscription - but that's not the main way we anticipate selling our stuff. Why? Because the products are complex and will require a measure of top-down support and adoption to provide the most value anyway (at least in most organizations).

So even though we're Open Source (and I mean real Open Source, as in "ALv2 license, open bug tracker, code on GitHub, open mailing lists, the whole bit"), we still expect that direct sales through sales-people will be our primary avenue to gain paying customers.

We're Fogbeam Labs - we provide software that helps people make better and faster decisions by putting relevant knowledge at their fingertips. http://www.fogbeam.com

Fantastic post. Just saw an interview on TC talking about the two types of sales. I'll reach out to you to chat. We're definitely top down, but we're hoping to find ways to get our product in people's hands. We do the free trial and super easy sign-up, but we know that a sale always comes down to shaking hands in-person.

We're SimpleLegal. We developed software that reads legal bills and figures out what lawyers are actually doing. Simplelegal.com

I'm the OP, happy to answer any questions or chat with any B2B startup founders out there!

Interesting perspective on the enterprise space. Where do you think we are positioned? Our product can be installed by anyone in the company, but ultimately we end up talking to IT decision makers. www.synergyse.com

The way the site is written, it definitely looks like New Enterprise. But to figure out what the right model is, I'd want to understand how your customers prefer to buy the software. So far, are most of your customers coming from individual employees who sign up, and then you talk to the IT decision-makers? Or from trainings organized by IT?

I'm tempted to say the Yammer model might work if there's a viral component. I.e., can an individual employee who uses Synergyse invite others, have it spread through the organization, and then you can contact IT once a bunch of people are already using you?

ok - since you volunteered...

- How much of the VC funding decision (the one you quoted) is based on economic characteristics like growth potential or need for money? My impression is old enterprise requires more money to scale, and hence could have a bigger need for VCs. I could see the New model being more angel-friendly.

- Do you have any other observations on the revenue models as the driver? Old Enterprise needs bigger contracts.

I think the VC's funding decision is definitely based on growth potential, and less on need for money, but both New Enterprise and Old Enterprise startups tend to require a lot of money to scale and there are VCs that invest in either.

What I found is that individual VCs are very polarized -- some only invest in Old Enterprise, some only invest in New Enterprise, and a few invest in both models. It's quite confusing since the feedback you get is very bimodal, and generally, while you can convince a VC that your startup is a good fit for one model or the other, you can't convince them to do the New Enterprise model if they invest in Old Enterprise, or vice versa. But once you understand the distinction, then it's pretty easy to figure out who to pitch -- look at their portfolio companies.

Thanks! What I meant is that certain entrepreneurs will choose to go for money, while others won't.

Again - thanks for the reply!

In your experience, how have you tested your pricing? Are you just pitching and throwing numbers out there to see what sticks?

Pricing is such a black art! Unfortunately it's not something you can easily A/B test.

My general advice on pricing is to try to make it a "no-brainer."

One way to do that is quantify how much value you add, and then charge a percentage. For example, if you make conversion optimization software, you can charge a percentage of "lift" (revenue from extra conversions). Say your customer's revenue is $10m/year, your product improved their conversions by 10%, and your pricing model is 10% of lift. Then your customer earned an extra $1m in revenue, and you only charged them $100k for it. So it's a complete "no-brainer" for them to buy your product, regardless of the actual increase in lift. They're always making way more from you than they're spending.

It's not always easy to quantify the extra revenue or savings you bring to the customer, but I think effective sales often boils down to showing the customer the ROI. So I'd try to figure out some way to quantify that -- in terms of time saved, extra revenue, direct cost savings, etc.

If you're not sure, the other thing you can try is having a freemium product with a generous free tier. That will ensure pricing isn't a barrier for 90% of your customers; the rest may be a small enough subset that you can make the ROI case directly. But that's playing with fire!

Thanks. There are the enterprise companies who will only pay for the plan in the hundreds, and there are the enterprise companies that will pay for the plan in the thousands. This might be a more general sales question, but what re some ways you went about to find the higher demographics? I'm assuming it's all networking and intros.