Thursday, 14 March 2024, Bengaluru, India
Lago, a Paris-based business that started creating marketing tools has successfully pivoted into billing, an area it found even more undeveloped among potential clients, and banks $22M. In two investment rounds, it was released with its formal launch. Lago, the creator of an open-source billing platform, has secured the funds.
(Image Source: www.getlago.com)
Though it is debuting today, it has been operating in closed beta for some time and has acquired several prominent businesses as early clients, including Together.ai, Juni, and Mistral.ai. According to CEO Anh-Tho Chuong, the company purposefully chose to focus on open source. It aims to fill a market gap that it feels incumbents aren’t filling sufficiently, one that it believes can be best filled by using an open-source approach: developers looking for ways to customize their billing to fit whatever innovative, creative new services they are coming up with.
Notable investors have noticed: Chuong stated that FirstMark led the most recent $15 million Series A and SignalFire led the preceding $7 million seed. In addition, Y Combinator, New Wave, Addition (Lee Fixel’s fund), Script, and several other funders whose involvement highlights the market niche Lago is aiming for are among them. Chief monetization officer of MongoDB Meghan Gill, former Stripe employee Romain Huet (currently in developer relations at OpenAI), and CEO of Hugging Face Clément Delangue are among them.
The Lago, which operates as a billing platform today, began as a traditional firm; it had no notion that it would develop into one.
When Chuong decided to go solo and launch a new venture, she and her co-founder, Raffi Sarkissian, were employed at business banking startup Qonto. Based primarily on their resumes, they applied to Y Combinator and were accepted into the Summer 2021 cohort. She remarked, “But we didn’t have a product when we went to YC.”
They decided to focus on marketing while there, especially creating a “Zapier for marketing teams.”
Writing a post for Hacker News, Sarkissian bemoaned the issues with developer billing during a moment of trying to grow and hack their way into an audience.
The headline was attention-grabbing: “Billing systems are a nightmare for engineers.” The writing style was one that a writer could only achieve when writing truly from the heart. This was because he and Chuong had experience with it, having worked on developing a solution at Qonto to solve that exact problem.
According to Chuong, this truly wasn’t the point. To track interaction and maybe use that information to refocus attention on Lago, the “Zapier for marketing teams,” they posted on this topic because they understood it well.
However, the post touched a nerve, and much to their surprise, many people started talking about their personal billing problems. Lago had its “a-ha” moment when it realized that if creating a solution to an issue for developers was its true goal, it could address this particular problem and was confident in its ability to do so. With that, the startup took off and pivoted to billing; They grew in popularity among investors and users.
For entrepreneurs looking to push the envelope in their competitive arenas, Chuong thinks there is still much room for an emphasis on extensibility and customized solutions.
From her perspective, the AI industry is a prime example. Meanwhile, many businesses are exploring hybrid approaches that combine components of consumption-based pricing with flat-rate subscriptions. AI-based product developers are still figuring out feasible business models. Managing this is challenging and depends on technologies that can detect and apply usage data while integrating with whatever developers are constructing.
Numerous options are available for fundamental pricing and invoicing; however, complex charging has yet to find a solution, according to the speaker. Many businesses then develop their solutions, just like Qonto did. But it irritates engineers. Hiring engineers for such is quite expensive. Accordingly, the issue remains unresolved. According to Lago, providing open-source tools is the best way to satisfy various wants and ideas.
Moreover, the open source philosophy aligns with the values some users hope to promote as companies.
The company wants to keep expanding its current business while considering what else it could add. Recalling Lago’s initial ideas about marketing is one prominent place to start, as it gives clients more data analytics on what they are consuming and paying for and the payment patterns of those individuals. Investigating payments, the opposite side of the billing equation is another.
She did add, though, that Lago is unlikely to develop a payments stack and that the main emphasis will most likely be on payments orchestration. This will give users control over what they use while ensuring that it seamlessly integrates with their billing platform—which, ideally, will be handled by Lago.
(Information Source: Techcrunch.com)
