ucsf life sciences week 5 digital health: revenue streams
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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
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
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