SC
Pricing in the AI Era: From Inputs to Outcomes, with Paid CEO Manny Medina
@ Sequoia Capital
04/22/25
Takeaways
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Manny Medina
04/22/25
@ Sequoia Capital
Focusing on specific AI applications that target particular workflows will be more successful than broad platforms.
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Manny Medina
04/22/25
@ Sequoia Capital
I rely on Anthropic's Claude for writing assistance, as it has become an integral part of my workflow.
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Manny Medina
04/22/25
@ Sequoia Capital
Perplexity is an essential tool for me, as it assists in various aspects of life, from finding driving instructors to everyday tasks.
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Manny Medina
04/22/25
@ Sequoia Capital
Every AI founder should read Rich Manning's book on statistical natural language processing to understand the foundational concepts that still apply today.
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Manny Medina
04/22/25
@ Sequoia Capital
AI is a scaffold for human imagination, enabling us to see further and come up with ideas that were previously impossible.
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Manny Medina
04/22/25
@ Sequoia Capital
The ability to quickly prototype and iterate on ideas has accelerated the development process in AI, allowing for faster conversations and decision-making.
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Manny Medina
04/22/25
@ Sequoia Capital
The culture at Paid is centered around fun, as we serve an industry where people are excited about their work and the innovations they are creating.
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Manny Medina
04/22/25
@ Sequoia Capital
Paid serves as the business engine for AI companies, handling billing, invoicing, monetization, and margin management to help them understand their unit economics.
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Manny Medina
04/22/25
@ Sequoia Capital
It's essential for AI founders to focus on a narrow set of customers and not get distracted by total addressable market (TAM) size; delivering a superb experience will lead to growth.
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Manny Medina
04/22/25
@ Sequoia Capital
Building a company today involves a smarter approach, as founders are more informed and make better decisions based on past experiences in the SaaS industry.
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Manny Medina
04/22/25
@ Sequoia Capital
The inspiration behind my new company, Paid, was the realization that existing software for managing pricing and margins was inadequate for the evolving needs of AI businesses.
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Manny Medina
04/22/25
@ Sequoia Capital
AI companies need better tools to understand their unit economics and capture more value from their offerings.
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Manny Medina
04/22/25
@ Sequoia Capital
AI companies should align their pricing with what matters to their customers after demonstrating value, rather than relying solely on fixed or consumption-based pricing models.
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Manny Medina
04/22/25
@ Sequoia Capital
Paid provides infrastructure that helps AI companies transition from simple activity-based pricing to more sophisticated value-based approaches, enabling them to capture their fair share of the value they create.
MM
Manny Medina
04/22/25
@ Sequoia Capital
Focusing on narrow problems and becoming the best at solving them is currently a successful strategy for AI companies, as seen with examples like Quandry and Expo.
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Manny Medina
04/22/25
@ Sequoia Capital
AI is likely to replace roles that are undesirable or hard to fill, such as insurance adjusters, rather than targeting high-paying jobs that people are reluctant to give up.
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Manny Medina
04/22/25
@ Sequoia Capital
The companies thriving in the AI space are addressing labor pools that are disappearing due to retirement or are difficult to fill, leading to strong demand and good economics.
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Manny Medina
04/22/25
@ Sequoia Capital
Charging by activity and changing pricing based on workflows are effective strategies for AI companies, moving towards value-based pricing rather than cost-based pricing.
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Manny Medina
04/22/25
@ Sequoia Capital
AI can facilitate bespoke contracts that align with customer value, moving away from rigid pricing models and allowing for more tailored agreements, which are essential for AI companies to effectively manage pricing and value delivery.
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Manny Medina
04/22/25
@ Sequoia Capital
There are four pricing models for AI: activity-based, workflow-based, outcome-based, and agent-based pricing.
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Manny Medina
04/22/25
@ Sequoia Capital
Agent-based pricing allows companies to charge based on the work done by AI agents, which can replace a significant portion of traditional sales development roles.
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Manny Medina
04/22/25
@ Sequoia Capital
Instead of paying a full salary for a sales development representative, companies can pay a lower fee per AI agent based on the work they deliver.
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Manny Medina
04/22/25
@ Sequoia Capital
AI companies should avoid charging as a tool, as it limits their budget and potential for growth; instead, they should focus on the value delivered by their agents.
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Manny Medina
04/22/25
@ Sequoia Capital
The pricing maturity curve suggests that companies must evolve from activity-based pricing to value-based pricing to avoid competition based solely on cost.
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Manny Medina
04/22/25
@ Sequoia Capital
To succeed, AI companies need to understand their unit economics and how to price their services effectively based on the value they provide.
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Manny Medina
04/22/25
@ Sequoia Capital
The mission behind Paid is to provide AI companies with the tools they need to manage pricing and understand their business fundamentals better, as traditional SaaS pricing models don't work for AI businesses, which require new approaches like outcome-based and agent-based pricing.