All posts by Mukund Mohan

My discipline will beat your intellect

Top 5 things you should A/B test (except for price) on your pricing page

May 19, 2015 Mukund Mohan 4 Comments

When I looked at 89 SaaS companies to determine their conversion from freemium to paid options for their customers, I also had a chance to talk to 13 folks about their approaches to continually optimizing their pricing pages for good conversion. Time spent on the page was the most important criteria associated with freemium conversions.

Why keep A/B testing if you have the industry leading conversion rates though? Three reasons:

1. Customers change, their preferences changes, or their perception of value changes.

2. You bring out new features or new product offerings.

3. The market or competition changes.

What I did hear clearly from all the 13 folks is that they tested price changes a lot less frequently than other changes they made on their product page. So what are the top 3 things that marketers changed? It all boiled down to a clear understanding of their customer and their (better) understanding of their own product (or features).

1. Position of the lowest and highest prices: Some folks like the usual left to right increasing price format and others like the opposite.

What is the difference? Not so much on the desktop in terms of conversions, but when viewed on the mobile phone with top to bottom view, most people tend to understand the value a lot better and tend to go for “any plan, even the cheapest”, than not sign up at all.

2. Same colors for all plans versus different colors showing the different plans available with the premium plans having “premium colors associated with them”.

3. Total number of plans shown – over 70% of the companies have 3 plans, the second most popular is 2 plans followed by 5 plans. One plan or four pricing plans are rare.

4. Listing all the features on your pricing plan versus a list of features with check boxes to indicate which plans support which features.

5. Using one Call to action (CTA) button (what should the customer do) versus providing options for the call to action associated with each plan.

Learning, Marketing

Time spent on pricing page is the #1 early indicator of your SaaS freemium conversion rate

May 18, 2015 Mukund Mohan 5 Comments

When I looked at 89 companies to learn how to convert freemium customers to paid, I also reached out to 13 of them to understand what drives the conversion.

Any early indicator to better conversion from viewing the pricing page to signing up for a plan was time spent on the pricing page.

If customers spent very little time (less than any other page) on your pricing page, then they would either not sign up or sign up for the “free plan”.

If customers spent too much time (more than any other page) then they would not sign up at all.

If customers spent time in the “middle zone” of your other pages, they conversion rate to a paid plan was most likely.

This was even if you had a free option prominently featured on your pricing page.

So how do you figure that out. I am assuming most people start out using Google analytics.

On your Google analytics page you can navigate to All pages and look at the average time spent on page. (see below).

Navigating to Time spent on page in Google Analytics

So why is this the case? There are 3 major reasons I learned:

1. More time spent usually meant more options and more confusion for customers. When customers were given 3 pricing options (one of them being free) the conversions were higher, than when there were 5 pricing options. Not surprisingly even when the “free plan” was displayed “under the fold”, the conversions were the same. See below for what “Below the Fold” means.

2. More time spent on the page also indicated customers were reviewing other competitive options on other tabs. While less time meant customers had already made up their mind, so they were more likely to just “sign up and try”, it also meant the customer liked the options enough to try.

3. If the pricing option was the place where customers spent the least amount of time, than other pages, that was an indication that the customers were not ready to sign up and were “window shopping” alone. Either they did not have the pain point that your product addressed, or they were not in as much pain to even try the solution.

There were 2 exceptions that I found consistently among all the marketers I spoke with.

Not surprisingly, if the “referral source” of the customer was a search marketing campaign, and the time spent was the least, then the conversion rates were much higher than the referral sources.

If the referral source, was social and the time spent was more than other pages, then the conversion rates were much higher as well.

You can find referral source on Google analytics and correlate that to the time spent on pages.

Entrepreneurship

What I learned from looking at 89 SaaS companies on how to convert freemium customers to paid

May 17, 2015 Mukund Mohan 6 Comments

The most frequent question I get asked about a SaaS busines is pricing and sales growth. With pricing the biggest question is how to covert more free customers to paying customers.

While there is no average, I have seen companies focusing on consumers having as low as 1% conversion to a max of 10%. Companies focused on pro-sumers (professional consumers like freelancers, etc) have a slightly higher rate of conversion at 2% minimum and those that focus on SMB (Small medium business) have some of the highest at close to 5%. Finally 10% converted customers is not unheard of for companies selling to enterprises.

The time taken to convert when a customer is free to paid also varies from days to months or never.

What determines when a customer moves from premium or your paid version?

I look at 89 companies in the Microsoft Ventures accelerator programs from the 370+ alumni to understand the techniques used by companies to convince customers to pay. While not comprehensive, here are the 10 most frequently used levers that companies have used to encourage their customers to a paid version.

1. Advertising: In this version, the paid version has no ads. (e.g. WordPress hosted has am option for non ad based and advertising supported blogs).

2. Time: These companies allow for a free version for a period of time (e.g. HighRise, or Trigger.IO) – a week, 15 days, 30 days, etc. This is the most frequently used model.

3. Features: The most widely used model has basic features for free (e.g. Buffer, LaunchRock) and some premium features locked unless you pay. This is the third most used model to convert.

4.Collaboration: Individual usage is free in this version (e.g. Slack) and you will pay if you wish to collaborate with others in your team. Obviously the team usage gets your more benefit.

5. Control and Security: In this version, if the IT administrator (e.g. Yammer) wants to control the usage and wants security features (e.g. Yammer, GitHub), then you will pay for it.

6. User or seat (Fresh desk): In this type of pricing, (e.g. Freshdesk) the company provides a certain number of users free (3 agents or 2 users) and charges if you have more users.

7. Analytics and Insight: The usage of the app is free, but if you wish to obtain analytics (e.g. Feedly) or insights into your usage and data, you will have to pay.

8. Integration: In this version, if you wish to integrate the SaaS app into other enterprise apps in your company (e.g. CircleCi) or internal apps you will have to pay for that.

9. Data access: In this version, you can use the app for free, but if you wish to get your data (e.g. Capricity) out of the SaaS system you will have to pay for it.

10. Usage: In this version the more you use of the product (e.g. Dropbox, MixPanel) you will pay more. You will get a free version for 2GB, but for more than that you will pay per month. This is the second most popular conversion technique.

There are many more models that you can use, but the most frequent are a) Time bound, b) Usage based and c) Feature based.

Marketing

Startups as a target market – a framework for thinking about #entrepreneurs as customers

May 16, 2015 Mukund Mohan 3 Comments

In the last 5 years, I had the chance to look at many products which are targeted at others startups. Unless your product is an absolute utility (MailChimp, AWS, Google Analytics, Launch Rock or Survey Monkey), I’d say avoid this market with products that cost money.

1. Startups ~~tend not to have a lot of~~ have no money.

2. Startup founders believe they can “build your product themselves” and it will cost them much less and only need 10% of your features.

3. If they end up paying your churn rate (number of customers who wont renew) will be large since many will shut down.

That said, if you still believe you want to do this, then I put a framework together for you to think about your pricing and business model.

Business models for targeting Startups as a customer

The two main criteria for thinking about this is time and money.

Your customers either have lots of them or none at all.

What I have found is that if your customer has no time and no money (typical of engineering teams or hackers at startups), then the only solution that works will be a “free” or open source. Some times you might want collaboration features (Slack) for which people might pay, but it is rare.

When your customer has money, but not time (Customer acquisition and User Growth hacking teams) they will tend to pay, and freemium models work very well here. E.g. Mailchimp or Intercom.

When your customer has lots of time but not money, they will likely do it themselves, so only ad supported models work. Most products aimed at founders end up in this bracket. The sales cycle is very unpredictable and it is likely the customer is not going to pay.

Finally when the customer has both time and money (I dont know any startup that does), the sales cycles are extremely long. The deals will be large, but you will be expected to hand hold the customer and hire a sales person to “sell” them the product.

Another way to think about the model is the type of sales model you want to adopt.

If your customer has no time or money, expect to only get customer via word of mouth, otherwise, your model wont support the LTV since there’s no value in the LTV. You CAC (Customer Acquisition Costs) need to be as close to zero.

If your customer has time, but no money, you should still not hire sales people but put social features into the product to help enable virality and word of mouth.

If your customer has money, but not the time, you can actually spend money on advertising, using Facebook, SEM and other techniques to acquire customers and have an inside sales team to help close.

If your customer has time and money, you will need to hire a field sales team and expect the deals to be much larger in size. You will likely have to create a lot of collateral and sales tools to support them through the sales cycle.

Funding, Marketing

The ultimate list of questions about “market research” for a #startup asked by 30+ Venture capitalists

May 15, 2015 Mukund Mohan 3 Comments

I had a chance over the last 3 weeks to talk to many colleagues and associates in the Venture industry. Most were smaller, seed funds, with the largest fund size at $35 Million and the smallest at $8 Million.

They have between them about 210 companies they have invested seed capital in, with the average check size being about $315K. Over 70% were in the Silicon Valley.

The most important insight I gathered from my discussions was that if an entrepreneur was not looking to raise a follow on round after raising a seed round from a Micro VC, they were likely to be a much smaller company and hence not interesting enough for the seed investors.

If you are going after a small market, or slow growth one, your chances of getting funded by a Micro VC were negligible.

Which makes sense, but I think most entrepreneurs I speak to have the incorrect perception that Micro VC’s or seed funds as those that invest in smaller opportunities.

That cannot be further from the truth.

Micro VC’s or seed funds write earlier stage, smaller checks, but they are looking for the large, unicorns, as well, only earlier.

The number one question then that all the seed investors had was about the market.

It was not a simple question about market size alone.

So I set out to ask them about all the questions they had about a “startup’s market” and have documented them below.

As an entrepreneur, you need to review as many of these questions, but dont expect to be asked all these questions. It is likely a subset of these that your investor will likely ask you. It serves you best to review all these questions though.

Some of them may be redundant, but the fact that you can get the same question asked multiple times in different ways indicates that your potential investors will want to triage and understand the market a lot better before they make the bet.

Is the market clearly identifiable (e.g. are there users who are willing to pay)?
What is the size of the market (bottom up and top down)?
How fast is the market growing (current growth trends)?
How quickly will the market grow (potential for growth)?
By what methods will the startup be able to reach it (are there high costs to get capture the market)?
Can the market be segmented (are there lower hanging fruits to be had)?
What types of people (demographic profile of buyers) buy this product/service in this market?
Does the product/service have appeal based on geography (is this a first world solution)?
What do potential or existing customers like about curren products/services?
How quickly are other products (competitive growth) in the market growing?
What makes the product/service unique relative to others in the marketplace (is there a chance the startup can grow quicker)?
Do we have expertise (knowledge, expertise, etc.) in this market to help?
Do we have connections in this market so make a difference?
What are current buyers paying for comparable products/services?
What is required to succeed in this market?
How many competitors will the startup be competing against?
Are there big incumbents in this market?
How quickly are the incumbents growing?
Has there been innovation in this market over the last few years / decades?
Can the market support another player?
How do competitors reach the market?
What does the competitive landscape look like?
Can this company achieve more than their fair share of market?
Is the industry growing in size?
What are other current trends within the industry?
Who are the existing market leaders within the industry, and why are they successful?
What type of marketing strategies are prevalent (Is the cost of acquiring customers high) within the industry?
Is the industry seasonal (e.g. more food is catered during holidays)?
Are there regulations (e.g. Uber and local taxi medallions) that affect the industry?
Is there customer loyalty (e.g. it is hard to unseat ADP from payroll) within the industry?
Is the industry sensitive to economic fluctuations (e.g. Match.com decreases matching during recessions)?
Are there technological changes happening (e.g. Obamacare and patient records) or required in the industry?
What are the financial characteristics (average selling price of products, average inventory turn, etc) of the industry?

Focus, Tips

When do you know that it is time to fold your #startup?

May 14, 2015 Mukund Mohan

Honestly you never will know. There is always a “what if”.

There are many times during your startup journey, when you get a sense that things are not worth it. When your cofounder leaves. When your customer bails. When you cannot articulate success.

The simplest situation is when you run out of money.

The biggest challenge is knowing when way before your run out of money if something’s not working out quite right.

You get a nagging feeling that the same time and energy you have can be spent on other things to get a better return – whether it is on the next startup or another job.

The constraints that most entrepreneurs face tend to be masked by their bravado.

I hypothesize that the only time you know when it is time to shutdown and move on is when you no longer have a desire for the end state.

When you lose your passion.

That’s it.

If you still have the desire for the space you are in, and the problem you have chosen to solve, then overcoming all other odds is easier, because you still believe there is a wrong to be righted.

Most founders, though dont realize they have lost the desire for the space or the problem until much later. They are taught that persistence is the key to success, so the slog through the early warning signals.

How do you find out if you have lost passion for the space, earlier?

“Going through the motions” is one way to find out.

“Not getting excited to get up and go at it” is another way.

“Inability to acknowledge the small wins” is a third.

I can list many more.

The next part of the question is how do you know if this is “temporary loss of passion” or “permanent lack of desire” for your startup.

It is a permanent problem when your opportunity cost of doing something else is more than your current situation.

Entrepreneurship, Funding, Learning, Tips

A framework for how to take advice – for #entrepreneurs

May 13, 2015 Mukund Mohan 1 Comment

There is no shortage of advice or number of advisers and the time you are given advice as an entrepreneur.

It can be overwhelming for an entrepreneur, especially when they hear from conflicting advice from trusted sources.

The 3 most important factors that should go into the decision making process for taking advice is a) Who should you take advice from b) What advice should you take and c) When should you seek that advice.

There are 2 kinds of people you take advice from – those you consider as “experts” in the field and those who have “experience” with the specific problem you set are seeking the advice from. Everyone else is rather a big waste of time. So, if you are an entrepreneur and seek advice from someone at a much larger company on what you should do with your product direction, when they are not an expert in the field, then be prepared to be given useless advice. Well, you asked for it so there.

Expertise is easy to ascertain since, it has a factual basis. If someone is a certified legal professional, then they know the aspect of law they practice. They won’t necessarily be the best at litigation or immigration if they are a corporate attorney, but they would be the best at company legalese.

Experience is best couched with situational awareness. If the person giving the advice is smart, they will tell you the specific conditions, background and environment that the course of action worked. From that, you can at least determine if it might work for you in your specific situation.

The worst people to take advice from are those that pattern match. In my experience, most investors, general practitioners and enthusiasts understand a situation by talking to many people and offering their generic opinion couched as “experience”.

If you seek advice from those whose experiences don’t match your current situation, then you will get suboptimal advice. People who are confident may tell you they don’t know, but it is more likely you will get opinions from 3^rd party reading couched as experience.

You need actually both expertise and experiential advice for most situations, which is why understanding the contours of the problem will help you explain it to the person you are seeking advice from.

What you need advice on falls into 2 buckets as well. Easy questions and hard questions. Easy questions have a binary outcome. These are fairly rare. Most difficult questions tend to have a range of answers, with complicated if-then-else statements around the answer.

Easy questions are those that can be answered by experts alone. Can you hire someone from your ex-employer is fairly easy to answer if you look at your exit interview or contract and have a legal person review it.

Hard questions typically will give you multiple choices, not just two. Should I raise money is an easy question to answer if you are running out of cash, but the harder question of who to raise money from and how much to raise are harder questions that can run the gamut based on your situation.

Finally, when you seek advice is also fairly binary. You can either seek advice when you need it, or way before you encounter your specific situation. Seeking it after is just a waste of time – it reaffirms your position and makes your feel nice, or it will make you regret the decision since the advice you get is contrary to the decision you already took.

If you seek advice just when you need it, prepare to be rushed and expect to miss out on key details that tend to be nuances and shades of grey. For example, trying to decide what type of company (C corp or S corp) you should incorporate is best done when you don’t need it done yesterday. It will give you time to think about the options if you learn about the options way before you need them and keep the notes handy.

Seeking advice way before you need it is useful in situations when the impact is longer term. When the decision to be made cannot be reversed very easily (for example who you want as a cofounder), you are better off getting advice on the type of cofounder you need.

The biggest challenge is always the conflicting nature of the advice. What do you do when two people, both of who you trust, offer very different advice or in fact the exact opposite advice.

The relative scale of their expertise and experience does not count, so most people go with what they feel “more comfortable” with. Or they get more opinions and do a “vote count”. Either way it tends to be sub-optimal only in hindsight.

Research

What has changed for developers in the last 20 years

May 12, 2015 Mukund Mohan 4 Comments

I asked this question on Hacker News last week to understand the shifts in software development over the last 20 years. From 1995 to 2015, there has been a dramatic change in the developer ecosystem. I thought I’d summarize all the changes and try to make sense of the trends. In this post I am only going to focus on the identification of the trends, as opposed to the analysis. I would love your thoughts on trends I may have missed.

1. The rise of open source options: In 1995, there were about 5 open source languages for the web including Perl. Now there are over 100 languages including Ruby, PhP and Javascript.

2. Plethora of libraries and frameworks: From < 10 libraries and frameworks to over 200 (Bootstrap, Javascript frameworks, etc.) The only libraries available in 1995 were those for Javascript. Today, there are over 100 libraries and frameworks for Php alone.

3. From waterfall approach to development to Agile: Most early software development was based on Requirements -> Design -> Architecture -> Development -> Testing -> Release. Now with agile methodologies being followed by many development teams, we are seeing a rise of faster release and in many cases daily releases.

4. Client-server application development to Web apps to Mobile apps: The overall changes are from PC (dekstop / laptop) client software to web applications and now to mobile applications. We have gone from native clients to browser based apps back to native mobile apps all over again.

5. Phenomenal rise of consumer apps, thanks to mobile : Personal finance (Intuit), to 1+ Million consumer apps thanks to mobile. PC’s were largely (90%) used for “work” with few consumers having home PC’s. The home PC’s rose thanks to the web, but now everyone has a mobile phone. Which has led to a phenomenal increase in # of consumer apps, not just business or productivity apps.

6. Increased availability of application level API’s: From providers such as Facebook, Twitter, and others on programmable web. The abstraction of core API’s from just Operating system SDK’s to application level API’s has made the move for apps to be built on the next level of the application stack.

7. Ease of looking up coding examples, tutorials and sample code: Thanks to Stack Overflow and Github, there are many more samples, code snippets and examples that developers can use to be more productive quicker.

8. Rise of coding / hacking schools: From no programming skills to employed developer in less than 6 months. Most developers, 20 years ago, needed to have an education in Computer science, before they could code. With the rise of frameworks and libraries, along with higher level languages, there has been a significant rise in number of coding schools and bootcamps to get anyone with any degree be a developer in less than 6 months.

9. Increase in the number of indie developer (solo): With the rise of consumer mobile apps and mobile games, there has been a significant rise in # of solo developers who are able to make a living based on building applications for niche audiences.

10. The change in market share of complied versus interpreted languages: 20 years ago, most programs and applications were compiled (C, C++) and the share of interpreted languages was small. Now, with Javascript Ruby and Php taking the forefront, most applications are interpreted not compiled. The only exception is mobile apps – which are still compiled.

11. The rise of DevOps: Developers are now being asked to not just build and architect, but also release and push their apps to production. Roles that were previously performed by specialized system administrators and release engineers are now performed by the software developers themselves.

12. The fall of software testing: More developers are also being asked to test their own code and software applications, instead of handing off the testing to a separate team.

13. The changes in app distribution – App Stores: Discovering, installing and using apps is a much more smoother and easier process now than before thanks to App stores.

14. The availability of Cloud infrastructure for app development: The biggest change for developers over the last 10 years has been the rise of AWS and other cloud services, which allow developers to provision, build and deploy instances and machines much faster than 20 years ago.

I’d love your feedback on the relative ranking of these trends and if I have missed any trends I’d love your feedback on those as well.

Entrepreneurship, Learning, Management

Top 5 tips on how to come up with milestones that are measurable for your startup

May 11, 2015 Mukund Mohan

Most founders will come up with following variations of milestones when they get started with their company.

1. Ship beta version of the product by Dec

2. Raise $XXXK in funding

3. Get to $YY in revenue.

Unless there is a team that’s large enough to have each person take on ownership for each of the milestones, the founders are the ones that are responsible for them.

This means that there is little else you can do other than focus on these milestones.

Lets assume you have a cofounder and you split the roles into technical and business.

The technical person takes responsibility for the beta version and the business person for the funding and revenues.

Now a few months in, a new set of responsibilities come forward including managing your board, your mentors, talking to potential partners and others.

Your team has not expanded to take on the executive level challenges, so you still have the 2 cofounders taking on more.

Some of these new tasks are enjoyable – having conversations with partners or mentors for example, so you get “distracted” and the top 3 goals no longer get enough time. That’s when you realize you need a to-dont list.

A few weeks go by and you hopefully realize you are behind and try to catch up, this time removing the new tasks on your list and replacing them with items on the top 3 milestones.

The problem is getting to the new items is tough until you have enough folks on the team who can take on the high level, cross functional priorities.

Here are the top 5 tips I have learned to come up with milestones that you can manage. You may have heard about SMART goals, so I am going to skip that portion and assume you already do that.

1.One person per milestone. You cannot have joint owners for a milestone. Even if you and your co founder are “two peas in a pod” and “complete each others sentences”, have only one person assigned to each milestone. You will achieve greater accountability that way.

2. One milestone per person. If you have more than one milestone assigned to a person, reduce the number of milestones. Obviously if you are a solo founder, that means work on one thing at a time until you have a management team to help you take tasks off the plate.

3. Milestones cannot be overloaded. Milestones need to be specific enough for one area of work. If your milestone reads “raise a seed round and ship version 1 of the product”, that’s 2 different milestones with responsibilities for 2 different people.

4. Milestones need to have a specific date, and be reviewed weekly. To track your progress, I have found that a weekly review works better than daily or monthly. During the weekly review, you need to understand the tasks and projects that make up the milestone and understand where the blockers are with an “plan B” for any blocker.

5. The owner of the milestone needs to have cross-functional authority. You may have silo functional ownership of roles but most milestones, if they are important have cross- functional impact. So if you need to ship a beta version of the product, the owner of the milestone may need to get customer access from another person and market data from a 3rd person. Even if they are peer’s for the success of the milestone, the owner needs to have full authority to help get the resources to get the milestone done on time. This ensures that even if you have to transition from a role of control to a role of influence, you still have the ability to execute on the milestone.

Entrepreneurship

Everything I learned about entrepreneurship, my mother knew already

May 10, 2015 Mukund Mohan 1 Comment

Happy mother’s day. I still miss my mom. She passed away a couple of years ago. Most everything I learned about entrepreneurship over the year’s she knew already and tried to tell me but, I had to learn it on my own, making my own mistakes. Here are the 5 things I learned from her.

1. Have a bias for action: My mom was not one who would talk too much when you needed help or if you needed to get something done. She’d lead by action and focus on “doing” not saying. Her actions truly spoke much louder than her words. When you are working on your startup, it is likely you will have advisers, board members, investors and mentors who will provide you will all the advice you need. The best advisers have a bias for action.

2. Be helpful and give generously: Before “Pay it forward” was a big deal, my mom would practice it. I follow a similar but more selfish approach to paying it forward – Dig your well before you are thirsty. My mom would help others, without expecting anything in return. Do that before you start your company and it helps you when you build your startup. Take as many chances to help others as you build your startup – if you have some time to help, dont pass up the opportunity. Whether it is to help a fellow entrepreneur recruit, critique their website or help the trouble shoot a problem with their technology. It will come back twice as fast and return you twice as much.

3. Your attitude matters more than your state of being: My mom’s attitude was “always sunny”. She would carry the weather with her. Not in a way that made you think things were not difficult, but she’d never get you down because she was in a troubled spot. Her attitude was one where she’d focus her energy, when she was down towards making others feel better. She’d remind me that most people will remember how you helped them feel when they were down.

“I've learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.” - May Angelou

4. Focus on things under your control: My mom would obsess over the salt in the sambar, the right sized cuts on the okra and the temperature of the rice before she served it. She would focus on things she felt were under her control and many times the little things. As an entrepreneur, I have found that even if you set the vision and mission, the strategy and plan right, if you dont execute the small things well, you will do poorly. If you worry more about the competition than your own product direction, you will do badly.

5. Turn your biggest challenges into opportunities: My mom’s attitude towards adversity was enlightening. Although her first instinct was to run from it, she would tell herself that it was going to be better because of her bias towards action. She could find ways to optimize the way to make the biggest challenges into her opportunity to make a difference. As an entrepreneur, you will find customer development challenges, hiring challenges, fund raising challenges, etc. The best way to overcome these is to find a way to accept the challenge and brainstorm to execute the plans you lay out toward eliminating them.

If you have a mom, you should call her ~~today~~ (as often as you can every day) and tell her how much you love her, and thank her for bringing you to this world. I did not do that enough, hopefully you can learn from my mistake.

The personal blog of Mukund Mohan