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Due Diligence Pricing Review for Software Investors

A high-level pricing model assessment for institutional investors—as they evaluate a potential software investment—to understand the company’s revenue drivers, its fully optimized revenue potential and the changes necessary to achieve it.

How it Works

We’ll connect LevelSetter to the target company’s internal systems to pull deal data, such as transactions, lost deals, capability usage patterns and more. This enables us to evaluate the software company’s licensing and packaging structures, identify its true discounting behavior and assess how the company’s pricing model supports or hinders customer scalability. Armed with that insight, investors gain a deeper understanding of the company’s revenue drivers and costs, and identify opportunities to improve monetization performance.

The Value of Pricing Data Expertise When Investing in Software

Experienced software investors know how to gauge the quality of a solution, calculate its market potential, assess the competitive environment and judge the skills of the management team.  But new pricing data expertise has enabled some investors to capture significantly more value by including a review of the software company’s pricing data in their due diligence process. These investors can better evaluate the company’s potential and more accurately identify its market value. 

During due diligence, it is highly useful for investors to get answers to questions like these:

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    How well does the metric(s) that pricing is based upon (e.g., number of users or contacts, amount of transactions used, etc.) align with the customer’s perception of value?
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    Are discounting practices thoughtful, formalized and beneficial, or are they discretionary, inconsistent and counterproductive?
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    Does the pricing model scale effectively, aligning with the value the customer derives as they increase their use?
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    Does the pricing model work for all customer use cases?
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    How would potential pricing changes sway revenue and impact customer acquisition, retention and growth?

The emergence of pricing data expertise has become a tool for sophisticated software investors to gain a competitive advantage when trying to close investments, and capture and grow value for their portfolio companies.

Ideal for:

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    Venture capital
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    Private equity
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    Family offices
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    And other institutional investors

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