Revenue StreamsLean Launchpad: Digital Health

UCSF Entrepreneurship CenterOctober 29, 2013

Abhas Gupta, MDMohr Davidow Ventures

@abhasguptamd

v2

Revenue and Costs

With product/market fit and customer growth established,

how does your company make money from each customer segment?

In 2 Weeks

This Week

Recommended Reading

“Pricing Strategies - Wikipedia”http://bit.ly/18ujldx

“E-Commerce is a Bear”http://bit.ly/1eZLMpk

“Pricing Experiments You Might Know, But Can Learn From”http://bit.ly/1eZLVt4

BIG IDEA:Strategy + Tactics

Revenue Strategy

Pricing Tactics

Each is distinct, and only together do

they make a coherent revenue model

Revenue Strategy Considerations

What fits with customers’ habits?

What value is the customer paying

for?

What aligns with your long-term

success?

When is it the right time to monetize?

“Innovative” revenue models

are not easy!

Common Revenue Strategies

Physical asset sales tend to be less relevant (obviously),

and shared savings are rare!

Intermediation Fee

Advertising

Licensing

Subscriptions

Usage

Pricing Considerations

Pricing should be explored in the context of

a specific revenue strategy

Monopoly vs.

Oligopoly vs.

Pure

Competition

Market Type Affects Pricing

Know Your Competition

Ability to Pay

Reimbursed

vs.

Out-of-pocket

Common Pricing Tactics

Fixed

Dynamic

Cost-plus pricing, value-based pricing, volume-based/step-pricing, market-oriented pricing, premium decoy pricing, freemium

Less common in digital health: target pricing, loss leader pricingNegotiated (often dictated by enterprise need, size, and degree of support)Less common in digital health: yield management, real-time markets, auctions

Though not a tactic, PMPM (Per Member Per Month) is an important pricing unit used

frequently by payers & employers

BIG IDEA:Value-based > Cost-

based

Value-based Pricing

Cost-based Pricing

Most common pricing mistake for startups!

Projecting Revenue

Key Considerations: Market type, competitor entrenchment/feasible growth rates, %

share, sales spend,channel mix, cohort LTVs

Cash Management Implications

Hoard Cash

Capture Share

Key MilestonesProduct: Alpha? Beta? Upsell features?

Customers: First customer in segment? First 100 customers?

10M MUVs threshold? 100K DAUs?

Revenue: $100K? $1MM? Revenue growth rate?% one-time vs. recurring?

Margin: 20% aggregate/per segment? 50%? Time to breakeven?

Fundraising Considerations

For Next Week

Revenue Model and

Pricing

3-Year Income Statement

Diagram of Payment Flows

Revenue StreamsLean Launchpad: Digital Health

UCSF Entrepreneurship CenterOctober 29, 2013

Abhas Gupta, MDMohr Davidow Ventures

@abhasguptamd