MBA Mondays: Revenue Models - Subscriptions

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.


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Fred Wilson 

Fred Wilson has been a venture capitalist since 1987. He currently is a managing partner at Union Square Ventures and also founded Flatiron Partners. Fred has a Bachelors degree in Mechanical Engineering from MIT and an MBA from The Wharton School of Business at the University of Pennsylvania. Fred is married with three kids and lives in New York City.

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Filed Under:
Collection: Strategy & Starting Up
Category: Revenue Model Types