- REUTERS/Fred Prouser
Marc Andreessen has two words of advice for startups: Raise prices.
In a recent interview, “The 4-Hour Workweek” author and tech investor Tim Ferriss asked Andreessen what words he would put on a billboard to reach the greatest number of people.
The legendary investor said that he’s actually considered hiring a skywriter to write “raise prices” so startups across San Francisco would see it.
The No. 1 thing – just the theme and we see it everywhere – the No. 1 theme with our companies have when they get really struggling is they are not charging enough for their product. It has become absolutely conventional wisdom in Silicon Valley that the way to succeed is to price your product as low as possible under the theory that if it’s low-priced everybody can buy it and that’s how you get the volume.
It’s a problem called “too hungry to eat.”
“They don’t charge enough for their product to be able to afford the sales and marketing required to actually get anybody to buy it. And so they can’t afford to hire the sales rep to go sell the product,” he said.
If startups can’t sell anything, then they again start lowering prices to bring in more volume. But at that point, Andreessen cautions that it becomes only a race to the bottom.
“It just makes the problem worse. And so, probably the single number one thing we try to get our companies to do is raise prices,” Andreessen said. “By the way, it’s like, ‘Is your product any good if people won’t pay more for it?'”