Is Subscription Revenue the Holy Grail for All Startups?
by Amit Jain In the startup world, subscription revenue is sexy. Entrepreneurs and investors love subscription revenue (also referred to as recurring revenue) because of its predictable nature. Startups with such revenue models essentially are striving to be annuity businesses: each customer signed up is an incremental lifetime monthly cash flow (with the caveat that churn rates are zero and renewal rates are 100% in this perfect world). David Skok’s series of blogs on SaaS economics (Software-as-a-Service companies are inherently subscription businesses) contain several analyses on the high profit potential of startups with recurring monthly revenues. Apple/Google recently announced subscription-pricing capabilities for app developers as an alternative to ads-based or one-time transaction-based pricing models. In our LTV class, we saw Rentjuice as an example of a startup that pivoted away from per-transaction pricing to subscription pricing. It seems t...