Why Infrastructure Pricing is Harder Than Building

I've reviewed pricing models for 30+ infrastructure companies. Payment APIs, developer tools, data platforms, authentication services. The pattern is consistent: founders who can architect distributed systems struggle to price them.

This isn't surprising. Pricing infrastructure is fundamentally different from pricing consumer products. There's no reference point. Your customers are technical. Your costs are variable. Your value is invisible until something breaks.

The Common Mistake

Most founders price based on what competitors charge. This is backwards. Real example: A payment API founder told me he was charging 2.5% plus $0.25 per transaction to undercut Stripe's 2.9% plus $0.30.

We calculated it together. Infrastructure costs were $0.18 per transaction. Payment processing fees added another $0.04. Total cost: $0.22 per transaction. His pricing was $0.25 per transaction for small volumes, which meant a gross margin of just 12%. At 100,000 transactions per month, that's $3,000 in gross profit, not enough to cover a single engineer's salary.

The Right Framework

Infrastructure pricing should start with unit economics, not competitor analysis. Here's the framework that actually works.

Step 1: Calculate your fully-loaded cost per unit

For a payment API, this includes payment processing fees from Stripe or card networks, infrastructure costs for compute and databases, support costs for customer success and technical help, and fraud prevention including KYC monitoring and chargebacks. Most founders only count the first two. The last two can double your actual cost.

Step 2: Determine your target margin

Infrastructure companies should target different margins based on their category. SaaS businesses should aim for 70-85% gross margins. Platform-as-a-service companies should target 60-75%. Infrastructure-as-a-service should be 50-65%. Fintech and payment companies, given their higher operational costs, should target 40-60%. If you're below these ranges, you have a structural problem. Either your costs are too high, or your pricing is too low.

Step 3: Price for value, not cost

Once you know your floor (cost plus margin), price based on value delivered. For infrastructure, value is often invisible because you're preventing problems, not creating features. This makes pricing harder. The solution is to anchor to what failure costs. An authentication API should anchor to the cost of a security breach. A payment API should anchor to the cost of failed transactions. An observability platform should anchor to the cost of downtime.

The Payment API Case Study

Back to the payment API founder. We rebuilt his pricing model from the ground up.

Same customers. Same product. Better unit economics. The key insight was that small customers were willing to pay more for simplicity, while large customers expected volume discounts. The old flat pricing subsidized large customers at the expense of small ones, which is exactly backwards for a growing infrastructure business.

Why This Matters

Bad pricing doesn't just hurt margins. It kills companies.

I've seen infrastructure startups with great technology, strong teams, and real traction fail because they couldn't fix their unit economics. Growth made the problem worse, not better.

The irony: These founders could architect systems that handle millions of requests per second. But they couldn't architect a pricing model that made money.

Pricing is infrastructure too. It needs the same rigor, the same testing, the same iteration.

The difference: Bad code crashes your system. Bad pricing crashes your company.