Founder Fridays No. 153
Pricing Psychology Breakthrough -- The Story of Enron -- Pay Per Crawl
Happy Friday.
Pricing Psychology Breakthrough
Charging too little can actually kill conversions because buyers don't trust cheap tools for important tasks. When DocSend jumped from $15/month to $250/month, conversion rates went up because investment bankers and fundraising founders needed confidence that their sensitive documents were secure — a $15 tool felt too cheap to be trustworthy. The breakthrough came from understanding that different user segments compared them to vastly different alternatives: Some saw them as a Dropbox competitor (low price expectations), while others compared them to expensive data room solutions like Intralinks (high price tolerance). Rather than finding a middle ground, they created three tiers but discovered that 80% of revenue came from the highest-priced plan, proving that when the stakes are high, buyers will pay premium prices for peace of mind. NFX (66 minutes)
The Story of Enron
How did Enron look so good to Wall Street while being fundamentally rotten? The company convinced regulators to let them book 20 years of future cash flows as immediate revenue, transforming a pipeline company into a $100 billion "trading giant" that existed mostly on paper. The scheme relied on off-balance-sheet partnerships requiring only 3% outside capital to hide $34 billion in actual debt, while executives like Ken Lay and Jeff Skilling extracted $500 million in personal stock sales. When their stock price collapsed post-9/11, the correlated risk unraveled everything — the same shares used as collateral for their hidden debt structures were suddenly worthless, triggering margin calls that exposed the fraud. The real tragedy wasn't just the $63 billion bankruptcy but that most of this wealth extraction happened through perfectly legal accounting loopholes that Sarbanes-Oxley later closed, proving that regulatory capture often enables the biggest frauds in plain sight. Acquired Briefing (11 minutes)
Pay Per Crawl
Why should AI companies get to scrape the entire internet for free while content creators watch their work fuel billion-dollar models without compensation? Cloudflare just resurrected the long-dormant HTTP 402 "Payment Required" status code to create the first programmatic marketplace for AI training data. Their "pay per crawl" system lets publishers set flat rates across their domains — when an AI crawler requests content, it either pays the price or gets blocked with a 402 response showing what access would cost. The genius is in the authentication: Crawlers must register cryptographic signatures to prevent spoofing, while publishers retain full control to allow some crawlers free access, charge others or block entirely. This could fundamentally shift the AI training economy from "take everything for free" to actual content licensing at internet scale. Cloudflare (8 minutes)
Founder FAQ: What’s the Deal with Intellectual Property Ownership?
Most startup founders think they automatically own their company's intellectual property, but this assumption can destroy millions in valuation overnight. The harsh reality is that IP ownership defaults to whoever created it — meaning if you don't have proper Confidential Information and Invention Assignment Agreements in place, your co-founder, early employees or contractors could legally own the core technology that makes your business valuable. Investors will refuse to fund companies with unclear IP ownership because much of a startup's value lives in these intangible assets. Getting this paperwork right from day one isn't just legal housekeeping — it's existential protection that prevents costly litigation and ensures you actually own what you think you've built. The CIIAA is an underrated but essential agreement that every founder and employee must sign before creating anything of value. Westaway (6 minutes)
Startup Funding Guides
I’ve put together a series of guides to equip founders to excel at fundraising. These guides break down the deal term-by-term and give you negotiation tips so that you can speak to investors with confidence.
Convertible Note: Guide / Video
Saving Time and Money on Legal
When we met this Series B startup, they were frustrated with their law firm's slow turnaround and high fees. Contract reviews took four to six weeks, and they charged $250,000 annually for basic work. The startup wanted to reduce sales cycle times and legal spend. They switched to General Counsel at Westaway. In year one, we 1) saved them about $200,000 in legal fees; 2) shortened their sales cycle by about four weeks; and 3) our streamlined processes saved their ops team eight to ten hours per month previously spent managing legal. By switching to Westaway, they expedited deal closures, saved hundreds of thousands in legal bills and regained one day per month in productivity. If you’re curious if we could save you time and money, let’s talk.
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