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MBA Mondays: Revenue Models - Subscriptions - AVC

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When I got into the venture capital business in the mid 80s, software was sold. You would pay a large sum to acquire a license to the software and then a much smaller annual fee for maintenance and support. Today, most software is sold in a subscription model. You pay a monthly fee for the right to use the software. If you stop paying the monthly fee, your right to use the software goes away. Maintenance and support is bundled in. The emergence of the subscription model has made the software business better. In the old upfront license fee model, software companies would trade at 2-4x revenues. Now they trade at 6-8x revenues. That reflects the recurring, almost annuity nature of the subscription model. Software is not the only technology oriented business that utilizes a subscription revenue model. Content has also moved from an upfront fee (buy an song or a movie on iTunes) to a subscription model (a monthly fee for Spotify, Rdio, Netflix, or Hulu). And infrastructure is now also sold

MBA Mondays: Revenue Models - Subscriptions - AVC Search Submit Jan 7, 2013 MBA Mondays: Revenue Models - Subscriptions When I got into the venture capital business in the mid 80s, software was sold. You would pay a large sum to acquire a license to the software and then a much smaller annual fee for maintenance and support. Today, most software is sold in a subscription model. You pay a monthly fee for the right to use the software. If you stop paying the monthly fee, your right to use the software goes away. Maintenance and support is bundled in. The emergence of the subscription model has m

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