Contract Rules

We get it, nobody likes rules. As we scale the Sales and CS teams we need to be consistent in how we approach contracts to ensure that we are setting ourselves up for future success. If you have a customer situation where you'd like to vary the rules below, get approval from Dana, Simon or Charles first. You should also have them note the approval on the Salesforce opportunity record.

Discounts

We don't offer discounts to customers paying monthly with no commitment aside from non-profit orgs (see below).

Although our standard monthly pricing has volume discounts built in, it's common practice when negotiating software contracts for the customer (and their procurement team) to ask for a discount. We can be super transparent about the levers we have in discounting PostHog:

1. In our consumption-based pricing model, the easiest way to reduce spend is to ensure that the customer is only sending data to us which is valuable to them. There is different guidance here depending on which product(s) they are looking at.
2. Annual Plan: We offer a 20% discount on an annual paid-up-front plan, because it's beneficial to PostHog to have a customer committed for a year.
3. Higher Spend: We offer an additional 5% and then 15% on top of the annual plans when the customer spends above $60k and $100k respectively.
4. Multi-year: We offer an additional 5% for each additional year of commitment, as longer commitments are beneficial to PostHog (see table below). Credits rollover in-between for multi-year contracts.
5. Up-front payment: We offer an additional 3% where a multi-year contract is all paid up-front, as it's better for PostHog to have the money in the bank.

We don't offer a discount for signing a contract by some fixed date (e.g so the deal closes in a specific quarter).

You shouldn't offer discounts above the levels outlined here. If a customer is asking for more and you feel like a genuine exception is justified then speak to Dana, Simon or Charles about it as we may be able to offer additional credit for the first year of a contract. If you go outside of these rules without clearing it with one of us, the deal may not count toward your quota.

The below table summarizes the discount levels contained in points 2-4:

For customers contracting for less than $100k annually if they don't pay the whole year up front, we usually halve the discount. Our general principle is that a customer should get a discount because the cash up front is beneficial to PostHog, as it allows us to invest more in building more products, faster.

For customers contracting for $100k or more we can accept quarterly payments without the need to reduce the discount.

It's worth being aware that fast-growing startups, even if they have the budget to pay annually, will probably prefer to pay quarterly or even monthly as flexibility may be a priority for them over saving 20%.

Self-serve discounts

We also offer a way for customers to receive discounts on their usage without talking to sales or being on an Enterprise plan. In PostHog, if a customer meets certain criteria, they will see a banner on their billing page with a call-to-action (CTA) to "buy credits". The form they fill out will be auto-populated with an estimated number of credits based on their last 3 months of usage, but they can adjust this value as needed. They will have the option to pay with the card on file or to receive an invoice. Credits will be applied to their account once the invoice is paid.

Requirements for self-serve discounts:

• 3 or more paid invoices
• Average of $500 or more across the last three invoices
• No open invoices
• Not currently on the startup plan, a legacy plan, or having existing credits

Additional notes on self-serve discounts:

• The minimum purchase is $500/month, which equates to $6,000 upfront for the year.
• For credit purchases between $6,000 and $20,000, the discount is 10% off. Above $20,000 follows the standard volume discount structure above.
• Instead of providing all credits upfront, we apply 1/12 of the credits each month for the next 12 months. These credits do not expire for 1 year after they've been applied.
• If a customer uses all credits in a month, they will be billed for extra usage at the standard rate.

Nonprofit discounts

We do offer additional discounts to nonprofits - these are entirely at your discretion, depending on the margin of the particular product(s) you are selling. We no longer offer a straight X% across all products, as they all have slightly different pricing. Instead the discount depends on factors such as the contract size and the customer’s anticipated volume. There is no set minimum spend or mandatory annual term. When evaluating a discount, it’s important to review our margin calculations (available in this sheet) to ensure we remain margin positive, especially for larger accounts. We use tax law in the country of origin to determine what is a not for profit entity. If a customer can provide proof they fit their country's definition, the discount is applicable subject to the guidance above.

Nonprofit discounts don't stack with annual discounts. It's either/or, not both.

Legacy discounts

You might see some customers with a 30% discount on their monthly Stripe subscription. These were added when the only way we billed for PostHog was through event pricing. This was originally designed to offset the cost versus competitors who had unbundled Group Analytics or Data Pipelines. These customers will typically be on a higher per-event price plan, so we should look to get them migrated to standard pricing as soon as possible.

Additional credit purchase

As it's often difficult to right-size the credit needed for the term of the annual plan as a standard we offer to honor the discount provided in the original purchase for any additional credit purchased in the first half of a contract term (e.g. 6 months for an annual plan). Within the first 6 months given our billing usage reports we should be able to predict whether the customer is going to run out of credit or not. There are also alerts set up in #sales-alerts to help notify account owners about this.

Multi-year credit allocation

Paid up-front

We will allocate all the credit purchased to the Stripe account when the contract is signed. As above, they can purchase additional credit in the first half of the contract term and take advantage of the same discount as specified in the original contract.

Paid yearly

We will allocate the credit for that year to the Stripe account when the contract is signed, and then again when subsequent annual invoices are raised.

If a customer wishes to use subsequent year's credit early they must agree to pay the invoice for that year early before the credit is transferred.

The additional credit purchase applies to each year separately, e.g. they can purchase additional credits at the same discount level in the first 6 months of each year.

You can see a signed multi-year contract set up in this way here.

Uptime SLA

Customers only get an uptime SLA if:

1. They have subscribed to the Enterprise add-on; or
2. You agree it with them as a special term as part of their annual contract if they are spending $100k+

An uptime SLA are not available to customers outside of these cases. You should certainly not agree to an SLA for customers on regular monthly contracts, and even for annual contracts it is not a given - it's one of multiple pieces you may have in play as you negotiate terms (much like a case study).

More details on how exactly the uptime SLA works can be found in our terms.

Payment method

Our strong preference is for customers to pay by credit card, as this is easier to manage in Stripe and has a lower risk of the customer forgetting to make the payment (which means we have to spend more time chasing).

If a customer wants to pay by ACH or bank transfer, we will usually only consider this if they are paying for 1 year or more up front. This is more likely to be the case for very large customers.

For customers in an annual contract but paying monthly we require them to pay via credit card for monthly payments.

We absolutely do not allow payment by check.

Contract buyouts

Sometimes customers will be locked into a contract with a competitor, but want to switch to PostHog when their contract is up. In this case, we are willing to let them use PostHog for free for up to 6 months. This is beneficial to PostHog as well, as we can get them set up and using PostHog sooner, capitalizing on the momentum of their interest today, and giving them more time to get comfortable with the platform.

Some rules:

• They need to share a copy of their current contract/pricing/bank statement as proof.
• They sign up to an annual contract worth $20k+/year, paid up front. Their PostHog contract starts when their current one expires.
• Their usage in the overlap period needs to be proportionate to the contract they've signed, ie. if they sign a $50k contract and have 6 months to run, they get $25k of PostHog credit for free.
• The competitor they're using has to be 'real', ie. not some random side project. As a general rule, anyone we have written a comparison article about counts.
• We have final discretion on deciding who gets the deal.
• We can still provide a standard free trial period of 2-4 weeks before they sign the contract, as they will likely need to figure out whether PostHog is right for them before committing.

Normal commission rules apply here - commission is paid in the quarter in which the customer pay their annual invoice.

Credit over/under usage for annual contracts

When they don't have enough credit to cover their term

We have CreditBot alerts set up in #sales-alerts when a customer is going to run out of credit before their contract term ends, with the estimated runway remaining. The Vitally account owner (AE or CSM) will be tagged in this message. It's best to be proactive here so that the customer is right-sized well before the credit runs out:

• If they will run out of credit or wish to buy more within the first 6 months of the contract term, they can still take advantage of their initial discount. You'll need to have them sign a new order form which adds the additional credit, and it should expire on the date of the original order form.
  • Example: Their original order form was signed on 1st January with a 12-month term. Their expansion order form could be signed on 1st June with a 7-month term. Make sure the end date lines up with the end date of the original contract to avoid any issues with the billing server and ARR calculation.
• If they will run out of credit with less than 2 months remaining on their initial term, as long as they sign a renewal order form to start at the end of the original contract term we will cover their usage for free until the renewal date, assuming the renewal order form is signed before they run out of credit.
• If they fall in between the two cases above (running out of credit with <6 months and >2 months to go) then we need them to sign a new 12 month (or longer) order form lined up with their monthly billing date. This makes ARR calculation slightly trickier as there are two overlapping contracts in play at the same time.
  • Example: Their original order form was signed on 1st January with a 12-month term and they run out of credits in September. We need a new 12-month order form in place with a Contract Start Date of September 1st.

For any of the above scenarios you should use our discounting principles which apply to the annual spend. In scenario one above if their expansion contract spend takes them over the threshold for additional discounts we should include this discount tier for them in the expansion contract.

When they will end the contract term with credit remaining

We can roll up to half the amount of credit from the original order form to a new contract term, provided that the customer signs a renewal contract of equal or higher spend than the original contract.

Varying terms

If a customer wants to vary either our DPA, BAA, or MSA terms, it is a substantial effort for our legal team to review these changes. At a minimum, we should only do this for contracts above $20k a year, and even higher if they are asking for big changes (e.g. adding a Service Level Agreements). The minimum is $100k to bring your own contract instead of our template - see 'Non PostHog Contracts' below. A customer needs to either be spending this amount at present, or agree to commit to this spend via an annual contract, in order to initiate legal review of potential changes.

The typical approach here is for them to redline a .docx format of the contract. Once you have that ask for a review in the #legal channel with any context you have about the customer and opportunity.

Non-PostHog contracts

If a customer requests to use a non-PostHog drafted contract for DPA, MSA, Order Form, or BAA generally we avoid doing this as it adds too much risk for us. We usually would not even consider this for deals not above $100k or for extremely blue chip companies. It is best to manage this expectation early and just avoid entertaining the idea with customers as soon as possible. An exception to this rule is for NDAs - these are usually fine.