Latest / The Series A Show with Fexingo: Early-Stage Funding, Pitch Decks, and Startup Milestones / The Startup Playbook for Pricing Power in 2026
Transcript
- Lucas: Luna, I want to talk about something that keeps me up at night — and that I think keeps a lot of founders up at night too. Pricing. Luna: Oh, the thing everyone gets wrong on their first go-around. I have a scar from that. What's your angle? Lucas: Specifically, pricing power. Most early-stage startups think they have none. They assume the market sets the price, and they just have to accept it. But I've been digging into a framework from Harvard Business School's Felix Oberholzer-Gee called 'the value stick' — and it's completely changed how I think about this. Luna: Okay, I'm listening. Walk me through the value stick. Lucas: So imagine a horizontal line — that's the price. Above the line is the value the customer gets from your product. Below the line is your cost. The gap between the price and the customer's value is their 'willingness to pay.' The gap between price and your cost is your margin. Most founders focus on squeezing costs or matching competitors' prices. But the value stick says you should focus on increasing the customer's willingness to pay — and then capturing some of that as higher price, not passing it all through. Luna: Right — because if you've built something truly differentiated, the customer's value is higher, and you have room to raise price without losing them. But founders are terrified of that. Lucas: Terrified. And the data backs it up. I was looking at the ARKK Innovation ETF this morning — down about three and a half percent over the past five days. That's a reminder that growth capital isn't free forever. When funding tightens, you can't subsidize underpricing with venture dollars. You need real unit economics. Luna: So the market is punishing companies that haven't figured out pricing power. That's a strong signal for early-stage startups. Lucas: Exactly. I talked to a founder of a mental-health B2B SaaS company — I won't name them, but they sell to mid-market employers. They launched at $10 per employee per month. After six months, they ran a pricing experiment: they doubled the price to $20 for new customers, and kept existing ones grandfathered. They lost zero new customers. Zero. And their churn actually dropped because the higher price signaled quality. Luna: That's wild. But it's also a classic value stick move — they increased the perceived value by, I assume, adding features and better support, so willingness to pay went up. Lucas: Right. They didn't just raise the price — they added a clinical review of each case and a faster onboarding. So the value gap widened. And they captured a portion of that. The average contract value doubled, and their net dollar retention went from 95 percent to 115 percent. Luna: Net dollar retention above 100 percent is the holy grail. That means existing customers are spending more over time. So pricing power isn't just about the initial price — it's about the ability to increase price as value grows. Lucas: That's the second part of the framework. Another example: a fintech startup I know offers a subscription for small-business bookkeeping. They started at $49 a month. After a year, they realized their customers were saving an average of 10 hours a month on bookkeeping. So they tiered the pricing: $49 for basic, $99 for priority support and automated reports. Seventy percent of new customers chose the $99 tier. And existing customers who switched to the higher tier had a 30 percent lower churn rate. Luna: So they created a pricing ladder that captured more value from customers who needed it most. That's smart segmentation. But let me play devil's advocate: isn't this easier for B2B than B2C? Consumers are more price-sensitive. Luna: Actually, the same principle applies. Think about why Apple can charge a premium for iPhones — it's not just the hardware, it's the ecosystem, the status, the user experience. Their customers' willingness to pay is enormous. For a B2C startup, the challenge is building that perceived value before you have brand equity. But you can still test it. Lucas: Yeah, and we're seeing that play out with some of the big consumer tech names. Take a look at META — up nearly seven percent over the past five days. A lot of that is about their AI investments and the perception that they're building the next platform. They have pricing power because they control the ad exchange. For a small startup, you need a different kind of moat. Luna: So what's the practical takeaway for a founder listening right now? How do you test your pricing power without blowing up your business? Lucas: There's a simple exercise I love. It's called 'the three prices' — and I got it from a pricing consultant named Madhavan Ramanujam. You take your product and define three price points: a low one that feels like a steal, a medium one that feels fair, and a high one that feels expensive. Then you ask potential customers which they'd choose — and more importantly, why. You'll learn quickly where the willingness to pay ceiling is. Luna: And you do that before you launch, ideally with a landing page or a mock checkout. That way you're not guessing. Lucas: Exactly. And you can even run a real transaction at different prices — like the mental-health company did. Start with a small test, measure conversion, talk to the customers who didn't buy. The data is gold. Luna: I also think founders need to get over the fear of losing customers. If you lose a customer because you raised prices, they probably weren't your ideal customer anyway. Your best customers will stay if the value is there. Lucas: That's the hard truth. And honestly, if today's conversation was useful to you — whether you're building a pitch deck or setting your first price — the way these episodes stay ad-free is through listener support. If you'd like to help keep this going, you can find us at buy me a coffee dot com slash fexingo. No pressure, just a warm nod to people who find value here. Luna: Yeah, I second that. We love making this show, and it's listeners like you who make it possible. Every contribution, no matter how small, lets us keep digging into the stuff that actually helps founders. Lucas: Anyway, back to pricing. One more thing I want to highlight: the relationship between pricing power and fundraising. VCs love seeing high net dollar retention and strong unit economics. If you can show that you've successfully raised prices without losing customers, that de-risks the investment thesis. It signals that you understand your market and your value. Luna: And that's especially important in a market where capital is more selective. I was looking at some of the innovation-themed ETFs this morning — ARKG, the genomics one, is down almost five percent over five days. So the public markets are skittish about unprofitable growth. Private investors will follow. Lucas: Right. So if you're a founder, pricing power is one of the few levers you can pull that doesn't require more funding. It's a free option. And it directly improves your runway and your metrics. Luna: I want to go back to the fintech example for a second. How did they get customers to upgrade? Was it just the feature list, or was there a behavioral nudge? Lucas: They used a classic decoy effect. They had three tiers: $49, $99, and a $149 'enterprise' tier that included a dedicated account manager. The $149 tier was intentionally priced so that the $99 tier looked like a great deal. Almost nobody chose the $149 tier, but its presence made the $99 tier feel premium. That's pricing psychology — and it works. Luna: That's so smart. And it doesn't cost anything to implement — just a change in how you present the options. Lucas: Exactly. And that's the beauty of pricing power for startups. It's not about having a monopoly. It's about understanding your customers' willingness to pay and structuring your offer to capture it. The value stick framework gives you a way to think about it systematically. Luna: Alright, I'm convinced. I'm going to go reprice my cat-sitting side hustle. Lucas: Ha. Let me know if the decoy effect works for cat owners. But seriously — I hope our listeners take one thing away: you probably have more pricing power than you think. Go test it. Luna: And if you do, come tell us about it. We'd love to share your story on a future episode. Lucas: Alright, that's it for this episode of The Series A Show. I'm Lucas. Luna: And I'm Luna. Thanks for being here.