Do consumption-based pricing models fundamentally change how software must be sold?

Scott Belsky · Dec 20, 2023

Selling software seats function by function is an antiquated business model because business functions are now collapsing into each other

The functions of so many businesses are collapsing, so pricing that maps to discrete functions no longer matches how companies work

0:29 20VC Roundtable: Spotify, Adobe & Linkedin CPOs on How AI Changes The Future of Product, Why AI is Now the Product, How TikTok Changed Product, Why Cost is the Biggest Barrier to LLM Usage & Why Incumbents Can Adopt AI Faster Than Any Prior Innovation Cyc

Tomer Cohen · Dec 20, 2023

Per-seat SaaS pricing breaks down when the product makes an organization more efficient, because the vendor ends up cannibalizing its own seat volume

If the technology makes the organization more successful with fewer people, seat volume shrinks and raising price is the only lever left

Scope: applies to seat-based SaaS business models

34:38 20VC Roundtable: Spotify, Adobe & Linkedin CPOs on How AI Changes The Future of Product, Why AI is Now the Product, How TikTok Changed Product, Why Cost is the Biggest Barrier to LLM Usage & Why Incumbents Can Adopt AI Faster Than Any Prior Innovation Cyc

Scott Belsky · Dec 20, 2023 · hedged

Buying software seats function by function will evolve away as organizations accumulate many AI tools doing many different things

Once there are more tools in the organization doing many different things, the per-function seat logic stops fitting

Scope: timing and manifestation unclear; we are early in the days of AI

36:34 20VC Roundtable: Spotify, Adobe & Linkedin CPOs on How AI Changes The Future of Product, Why AI is Now the Product, How TikTok Changed Product, Why Cost is the Biggest Barrier to LLM Usage & Why Incumbents Can Adopt AI Faster Than Any Prior Innovation Cyc

Alexandr Wang · Jun 12, 2024

Per-seat pricing will give way to consumption-based pricing

As more productive work is done by AI agents rather than employees, software providers need to capture the value their AI systems produce, not just per-person value

30:05 20VC: Scale's Alex Wang on Why Data Not Compute is the Bottleneck to Foundation Model Performance, Why AI is the Greatest Military Asset Ever, Is China Really Two Years Behind the US in AI and Why the CCPs Industrial Approach is Better than Anyone Else's

Harry Stebbings · Oct 13, 2025

Salesforce's growth today is essentially just seat expansion, which makes per-seat pricing a major threat to it in an AI world

41:50 20VC: Atlassian CEO on Why Everything is Overvalued & Are We in an AI Bubble | Do Margins Matter & Does Defensibility Exist in an AI World | Is Per Seat Pricing Dead & The Future of Vibe Coding with Mike Cannon-Brookes

Saam Motamedi · Jul 15, 2024

Per-seat pricing isn't dying outright; hybrid models that layer work-based monetization on top of seats will emerge

It depends on how the product drives value, and hybrid pricing lets companies keep growing inside accounts even when seat counts don't expand

Scope: depends on how a given product drives value

17:33 20VC: Why We Are in a Bubble & Now is Frothier Than 2021 | Why $1M ARR is a BS Milestone for Series A | Why Seed Pricing is Rational & Large Seed Rounds Have Less Risk | Why Many AI Apps Have BS Revenue & Are Not Sustainable with Saam Motamedi @ Greylock

Jake Saper · Mar 10, 2025

Most forward-leaning AI providers are currently experimenting with usage-based pricing, sitting between classic per-seat and true outcomes-based models.

Usage can be metered on tokens or, for agents, on interactions — as Assembled does by charging per support-bot conversation.

50:13 20VC: Lessons from Investing $2BN and Returning $8BN in Cash | Why Most Venture Partnerships are Broken | We Sold Salesforce Early and Lost Out on Billions | Are The Best Deals Always Expensive and Competitive with Jake Saper @ Emergence Capital

Eran Zinman · Mar 2, 2026

SaaS pricing will move to hybrid seat-plus-consumption models and eventually to 100% consumption

Scope: transition will be gradual, hybrid first

29:36 20VC: Monday.com CEO on Is SaaS Dead: Will Everything Be Vibe Coded | Will Systems of Record Become Valueless Databases in an Agentic World | Will LLMs Own the Value in the Application Layer with Eran Zinman

Des Traynor · Nov 15, 2023

Consumption pricing will ultimately take the place of seat pricing, and the right way to price AI is against the work completed rather than seats or incremental tasks

A lot of work will be handed over to LLMs over the next five years, so pricing should reflect what it's worth to get the work done — dynamic asset creation, sub-second customer replies — not headcount

Scope: over the next five years

31:15 20VC: How to Survive and Thrive in a World of OpenAI, Are LLMs Being Commoditised, Where Does the Value Lie; Infrastructure or Application Layer, How Apple Could Win in a World of AI, How Amazon Could Threaten OpenAI and Why Google Struggle with Des Trayn

Max Junestrand · Jan 26, 2026

Per-seat pricing is optimal for the buyer but not for the vendor; consumption-based pricing is the correct model for legal AI

Individual users can rack up LLM costs so large that per-user pricing becomes unsustainable; seat pricing persists only because buyers who can't manage consumption models need it to be easy

Scope: timing of the shift depends on when clients are ready, not when the vendor is

29:32 20VC: From Only OpenAI to Die-Hard Anthropic: The Downfall of OpenAI in Enterprise | Harvey vs Legora: Legal AI is a Winner Take All | $7M ARR in a Single Day and Raising $200M Across 3 Rounds with No Deck with Max Junestrand, CEO @ Legora

Max Junestrand · Jan 26, 2026

Legora will not have seat-based pricing in three years' time

Cursor and many other enterprise tools are already consumption-priced; legal just takes a bit longer, and three years is a very long time relative to how long he has been CEO

Scope: the change happens when clients are ready to buy on consumption

32:04 20VC: From Only OpenAI to Die-Hard Anthropic: The Downfall of OpenAI in Enterprise | Harvey vs Legora: Legal AI is a Winner Take All | $7M ARR in a Single Day and Raising $200M Across 3 Rounds with No Deck with Max Junestrand, CEO @ Legora

Harry Stebbings · Sep 12, 2025

If AI makes reps dramatically more efficient, companies will need far fewer of them, so seat-based pricing becomes untenable and software must move to usage-based models

Fewer seats means a per-seat model cannot capture the value delivered

20:21 20VC: Why AI SDRs are BS and Do Not Work | How to Use AI in Your Sales Team and Process to Win Today | What Skills Do All New Reps Need to Have in an AI First World with Amit Bendov, CEO @ Gong

Chris Degnan · May 23, 2026

Every per-seat SaaS company is now being forced to introduce some form of consumption pricing, and CFO preference for predictable seat pricing won't stop it

Customers will have fewer employees, so a per-seat vendor can gain logos while losing revenue; Snowflake used consumption because its own cost of goods was consumption-based and refused CFO pressure to move to traditional licensing

49:59 20Sales: The $100M CRO Bubble: Why Anthropic Are Causing a Comp Crisis | Why You Should Never Hire From Salesforce or Service Now | How to Hire, Train and Forecase in a World of AI with Chad Peets and Chris Degnan

George Sivulka · Jan 22, 2025

Multiple agent pricing models will coexist — consumption, per seat, salary-style, and flat — and the right one depends on how a given product drives value

Because Hebbia builds human-centric AI where value traces back to the human orchestrating agents, per-seat is the right fit for them

Scope: 'rent a salary' pricing seems ridiculous today but will become less so

52:57 20VC: Why All AI Companies Are Under-Valued | The Future of Foundation Models: Scaling Laws, Generalised vs Specialised, Commoditised? | From Unable to Afford Rent to Raising $130M From Index and Peter Thiel with George Sivulka @ Hebbia

Gokul Rajaram · Mar 16, 2026

Seat-based pricing does not die — access products stay seat-priced while work products move to outcome-based pricing.

Seats give enterprise buyers predictability but don't drive expansion revenue alone, so vendors bundle more into tiered seats; seat pricing only breaks when the product's value is work done on your behalf rather than access, because then the user isn't the constraint, the work output is.

32:20 20VC: The 8 Moats of Enduring Software Companies: How to Analyse for Durability and Defensibility in a World of AI | Why Dropouts are "AI Maxing" the World & Remote Early-Stage Companies are Dying with Gokul Rajaram

John McMahon · Nov 28, 2025

The shift from perpetual licenses to subscriptions to consumption software has collapsed the time a vendor has to deliver value — from years, to six-to-nine months, to as little as a week

With consumption and PLG, a customer can turn the product on and churn within a week if they don't see value, whereas perpetual licenses gave the vendor a long window to fix problems

6:16 Time to value window collapses

John McMahon · Nov 28, 2025

Consumption models do change the sales org: initial deal sizes are much smaller and the business depends on renewals and large upsells, which is why net dollar retention has become a critical evaluation metric

If you land small, the economics only work by going back for the renewal and a bigger upsell, so new logos alone don't tell you whether the business works

7:46 Land small and net retention becomes the metric

Jeff Seibert · Nov 22, 2023 · hedged

AI is a tool rather than a product, so it will be commoditized and will not change pricing models: industries that price per seat will keep per-seat pricing and consumption-priced businesses will keep consumption pricing

AI is a technology layer like a database or memcache, which never changed how products were priced

35:12 Ai is a commoditized tool not a product so existing pricing models persist unchanged

Chris Degnan · Oct 10, 2025

Consumption pricing forces sales teams to manage against use-case wins and go-lives rather than purchase orders, which is much harder to run

Snowflake had one SKU — a credit — so after a $200M deal there was nothing left to sell for two years; reps had to project-manage use cases and beat Databricks in them to pull renewals forward

48:47 Consumption pricing forces reps to manage against use case go lives not purchase orders

Christian Lanng · Sep 27, 2023

Enterprise software is miserable to use because it is bought by people who don't use it and priced per user license

HR systems are bought by the head of HR, not the daily worker; a forester picks his own chainsaw but nobody ever made the tools platform for the worker in the middle

50:12 Seat pricing and non user buyers degrade the product

Zach Lloyd · Oct 17, 2025

Consumer/prosumer AI product pricing is fundamentally broken: users expect SaaS-like $20–50 per month while costs scale with usage, so better product-market fit makes the business worse

Consumers anchor on SaaS price points and compare above $50 to a gym membership, yet the more they use the product the more it costs you

22:38 Flat consumer pricing breaks as usage scales with pmf

Jerry Murdock · Feb 28, 2026 · hedged

Selling to agents will push pricing toward consumption-based models, where access is opened up free and payment accrues with usage until the agent flags that a limit has been reached

For things like sandboxes you're really just buying memory or compute, and Docker has been moving dramatically toward consumption pricing as it moves into AI

23:00 Agent purchasing drives the shift to consumption pricing

Ron Gabrisko · Aug 4, 2025

Consumption-based pricing was one of the smartest decisions Databricks made and is the right model for data and AI companies

Data volumes and query counts keep growing, so a consumption unit lets accounts start tiny and scale without further selling — 'you scale while you're sleeping'

15:22 Consumption pricing fits data ai because usage scales structurally so accounts grow without further selling

Shaunt Voskanian · Mar 21, 2026 · hedged

There is no evidence in Figma's business that seat-based pricing is dead

Figma is almost exclusively seat-based and just added five points of net retention (131% to 136%), and one factor may be that more builders are entering software

13:19 Seat pricing still works rising net retention is the evidence

Aaron Levie · May 22, 2024 · hedged

AI pricing will converge on some agreed consumption unit of volume (tickets, leads, emails), and the market will reveal which within six to twelve months

Everybody is currently experimenting with every pricing variety, so the winning unit will shake out

21:20 Market will converge on an agreed consumption unit within months

George Sivulka · Jan 22, 2025

Consumption or API pricing disincentivizes AI adoption by penalizing every use, while per-seat pricing encourages the usage that change management requires

The hardest part of AI transformation is people actually using the software, not the technology, so pricing should incentivize rather than tax usage

53:33 Per seat pricing drives adoption while consumption pricing penalizes usage

Craig Courtemanche · Dec 4, 2023

Procore could not have succeeded with a per-seat licensing model; construction volume is the correct pricing yardstick

Construction is a team sport requiring everyone to have access, and per-seat pricing forces customers to make value decisions about who gets a seat; construction volume is how customers already buy things like insurance and it scales with customer size

30:46 Construction volume not per seat is the correct pricing yardstick for team collaboration products

Craig Courtemanche · Dec 4, 2023

An unpopular pricing model can be sustained if the product's success and network effects drive adoption, plus education on the flexibility it gives customers

Customers who adopted it realised they could buy more or less of Procore while including all team members and collaborators for free, and those free collaborators evangelised the product to other general contractors

32:01 Network effects and customer education sustain an unpopular pricing model

Winston Weinberg · Jan 19, 2026

Legal customers would be fine moving to consumption-based pricing; the claim that enterprise buyers only want seat-based pricing doesn't hold in this vertical

38:47 Enterprise seat preference is a myth buyers accept consumption pricing

Tomer Cohen · Dec 20, 2023

Blanket per-employee software deployments will no longer be accepted; buyers will demand evidence of productivity and output, and that scrutiny is itself an innovation catalyst

Buyers are now asking what output they'll get — questions nobody asked a year and a half ago

37:07 Buyers demand productivity evidence forcing away from blanket per employee deployment

Amit Bendov · Sep 12, 2025

Pricing must reflect value, and usage-based is only one way to get there — raising price per seat as productivity per seat rises can work equally well

If a customer needs one tenth of the sellers but each is far more productive, a 10x per-seat price still tracks the value created

20:21 Raise price per seat as productivity rises achieves same value capture

Amit Bendov · Sep 12, 2025 · hedged

Software can already be sold against headcount budget by framing it as the cost of the bottom-performing reps, and genuine usage-based pricing arrives around next year

A CFO with no budget for a $100k tool has 100 reps, two of whom will miss quota badly — cut to 98 and fund the technology for the rest

23:56 Sell against headcount budget now usage based pricing arrives later

Scott Farquhar · Oct 9, 2023

High-priced-per-seat vendors face a far bigger pricing-model disruption from AI than low-priced ones like Atlassian

At $150-200 a seat the model breaks if seat counts fall, whereas at $10 a seat you can serve half as many seats with AI and charge twice as much for the same value

36:58 High priced per seat vendors face bigger ai driven pricing disruption than low priced ones

Yamini Rangan · Mar 18, 2025

Software pricing will settle into a hybrid of seat-based and usage-based pricing, with a credit-based mechanism rather than outcome-based pricing

Outcomes are extremely hard to validate, especially on a platform where one action resolves a ticket, another books a meeting, and another writes a blog post — the outcomes are too different to validate; results measured as usage of credits are simpler

9:40 Settles into hybrid seat and usage based pricing with credits not outcomes