Revenue is the number everyone leads with, and it’s the number I trust least in an early conversation, because revenue can be bought — through discounting, through generous terms, through simply not charging enough to see what the market would actually bear. Pricing power, on the other hand, is nearly impossible to fake. It’s one of the cleanest signals I know for whether a business has a real moat or a temporary advantage that happens to look like one.
When I ask founders how they arrived at their pricing, I get one of two categories of answer almost every time. The first category is some version of “we looked at competitors and priced slightly below them” — a completely reasonable-sounding answer that actually reveals the company has no independent theory of the value it creates. It’s pricing by reference, not pricing by conviction, and it caps the business at whatever the least confident competitor in the category has decided the market will tolerate. The second category is a founder who can walk me through the actual economic value their product creates for a customer, and explain why they’re capturing some deliberate fraction of that value rather than an arbitrary number pulled from a competitor’s website. That second founder has almost always thought harder about their business than the first, and it usually shows up everywhere else too — in how they think about their roadmap, their customer segmentation, their expansion strategy.
Pricing power compounds in a way that’s easy to underestimate from the outside. A company that can raise prices 10% a year without losing customers is building a fundamentally different long-term outcome than a company growing the same headline revenue number entirely through new logo acquisition, even if the two look identical on a top-line chart today. One of those businesses gets more valuable per customer over time. The other has to keep running faster just to stay in place, because every dollar of growth is coming from an increasingly expensive and increasingly competitive acquisition motion rather than from deepening the value of relationships it already has.
I’ve come to think pricing conversations are one of the most underrated diligence tools available, precisely because founders don’t expect to be pushed on it and haven’t rehearsed a polished answer the way they have for growth metrics or market size. Push on pricing, and you find out fast whether you’re looking at a business with genuine, defensible value creation, or a business that’s been growing by being the cheapest option in a category that hasn’t yet figured out what it’s actually worth.
