Video

Startup Pricing 101

Kevin Hale · Y Combinator (Startup School) Free Beginner

Startup Pricing 101

Kevin Hale from Y Combinator lays out the acquisition-cost and lifetime-value math in plain language, framed around how much you can afford to spend to win a customer. It is aimed at first-time founders, so there is no jargon wall, just the reasoning you need to set a target CAC. He is also refreshingly blunt that leaning only on paid acquisition is a weak growth story, which is worth hearing early.

  • How much you can spend to acquire a customer falls out of your pricing and how long that customer stays, so pricing and CAC are the same conversation.
  • You can estimate a target CAC before any sales by working backward from margin and expected customer lifetime.
  • Treat paid channels with suspicion: if ads are the only way you grow, your unit economics have to be tight to survive.
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It answers 2 questions

  1. Should I charge my very first customers or give it away free to get traction?
  2. How do I calculate my target CAC before I've made a single sale?

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