This document discusses revenue strategies and pricing tactics for digital health startups. It explains that the revenue strategy and pricing tactics should work together to form a coherent revenue model. Common revenue strategies discussed include advertising, intermediation fees, licensing, and subscriptions. Pricing tactics can be fixed or dynamic. Value-based pricing is generally better than cost-based pricing. When projecting revenue, factors like market type, competition, customer share, and customer lifetime value should be considered. Key milestones and their impact on fundraising are also important to track.

1. Revenue Streams
Lean Launchpad: Digital Health
UCSF Entrepreneurship Center
October 29, 2013
Abhas Gupta, MD
Mohr Davidow Ventures
@abhasguptamd
v2

2. Revenue and Costs
In 2 Weeks
This Week
With product/market fit and customer growth established,
how does your company make money from each customer
segment?

3. 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

4. BIG IDEA:
Strategy + Tactics
Revenue Strategy
Pricing Tactics
Each is distinct, and only together do
they make a coherent revenue model

5. Revenue Strategy
Considerations
What value is the
customer paying for?
What aligns with your
long-term success?
What fits with customers’
habits?
When is it the right time
to monetize?
“Innovative” revenue
models are not easy!

6. Common Revenue Strategies
Advertising
Intermediation Fee
Licensing
Subscriptions
Usage
Physical asset sales tend to be less relevant (obviously),
and shared savings are rare!

7. Pricing Considerations
Market Type
Affects Pricing
Ability to Pay
Monopoly vs.
Reimbursed
Oligopoly vs.
vs.
Pure Competition
Out-of-pocket
Know Your
Competition
Pricing should be explored in the context of
a specific revenue strategy

8. Common Pricing Tactics
Fixed
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 pricing
Dynamic
Negotiated (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

9. BIG IDEA:
Value-based > Cost-based
Value-based
Pricing
Cost-based
Pricing
Most common pricing mistake for startups!

10. Projecting Revenue
Key Considerations: Market type, competitor
entrenchment/feasible growth rates, % share, sales spend,
channel mix, cohort LTVs

11. Cash Management Implications
Ca
ure
pt
are
Sh
Hoard Cash

12. Key Milestones
Product: 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

13. For Next Week
Revenue Model
and Pricing
Diagram of
Payment Flows
3-Year Income
Statement

14. Revenue Streams
Lean Launchpad: Digital Health
UCSF Entrepreneurship Center
October 29, 2013
Abhas Gupta, MD
Mohr Davidow Ventures
@abhasguptamd