A Paris-based startup that set out to develop a marketing tool has raised $22 million after successfully pivoting to billing. The field turns out to be even more divided among potential customers. Lago, an open source billing platform developer, has raised money in his two funding rounds, which he announced in conjunction with its official launch.
It launches today, but has been operating in closed beta for some time, during which time it has welcomed a number of notable startups as early customers, including Mistral.ai, Together.ai, and Juni. CEO Anh-Tho Chuong said the company's focus on open source is very intentional, offering solutions that align billing with cutting-edge and creative new services the company is creating. He said he is targeting developers who are looking for it. Lago believes this problem has not been adequately addressed by incumbent companies, and he bets that the problem is best addressed through an open source approach.
“We are partners with developers,” she said in an interview. “We pay our respects to [their] We create abstractions and use data to measure usage and enable businesses to process subscriptions. [or other] You can easily set up your pricing plan. ”
A list of influential investors is paying attention. The most recent $15 million Series A was led by FirstMark. And the previous $7 million seed was led by SignalFire, Chuong said. Other backers include Y Combinator, New Wave, Addition (Lee Fixel's fund), Script, and a number of other individuals highlighting the market segments Lago is targeting. That includes his girlfriend Meghan Gill, Head of MongoDB Monetization. Romain Huet (formerly a developer at Stripe and currently a developer at OpenAI), and Hugging Face CEO Clément Delangue.
Lago, which currently does business as a billing platform, started in a very classic startup way. I had no idea it would become a billing platform.
Chuong and co-founder Raffi Sarkissian were working at business banking startup Qonto before deciding to strike out on their own and launch a new startup. They applied to Y Combinator and joined the 2021 summer group on the strength of his background. “But we went to YC without a product,” she said.
During their stay, they settled on the idea of building marketing, specifically “Zapier for marketing teams.”
“We honestly thought this was going to be a big deal,” she recalled. “That was okay.” Well, I wasn't going to cut it though. The marketing technology industry was very crowded, and the company was gaining little traction for its products.
At a moment when Sarkissian was trying to popularize his growth hacks with his audience, he decided to write a post on Hacker News in which he bemoaned the issue of charging developers.
The book has a catchy title: “Billing Systems are an Engineer's Nightmare” and is written with a kind of freedom that you might only gain if you truly put your heart and soul into writing as a creator. Ta. That's because it was something he and his Chuong knew well, as the time he spent at Qonto was spent building a product to address that very problem.
Chuong said this isn't really important. The impetus for posting this was to choose something they were familiar with so they could monitor engagement and use it to draw attention to Lago, “his Zapier of the marketing team.” did.
But the post struck a nerve, and surprisingly many people started speaking out about their billing issues. Lago had an “aha” moment. If what they really wanted to do was build something to solve a problem for developers, here was a problem they could actually solve, and they were confident they could do it well. is. Focus on billing and startup takeoff.
Not only users but also investors are starting to accept it.
“We first discovered Lago in early 2023 via HackerNews. They were getting so much attention for a seemingly solved or trivial topic that people It was obvious that we were waiting for an open source solution like this. Then we reached out to these stargazers on Github and the feedback was great,” said Oana Olteanu, Partner at SignalFire. said in a statement.
If you think marketing is a competitive market, billing is busier than Billingsgate Fish Market on a Friday morning. Big tech companies like Stripe, Adyen, Salesforce, Zoho, and Paddle offer billing solutions. A number of providers are already pursuing open source approaches, including FossBilling, ChargeBee, Kill Bill, AppDirect's jBilling, and the imaginatively named “open source billing.” (Why do you do illegal things?)
However, Chuong believes there are still plenty of opportunities for startups looking to push the boundaries in their competitive space by focusing on scalability and customized solutions.
In her view, the AI sector is a great example. Companies building AI-based products are still figuring out what a viable business model might look like, but in the meantime, a hybrid approach that combines elements of flat-rate subscriptions with pay-as-you-go pricing There are many examples of companies considering . All of this is difficult to manage and relies on tools that can integrate with what developers are building and that can identify and apply usage data.
“When pricing and billing is very simple, there are a lot of solutions for that, but when it comes to complex billing, there are no solutions,” she said. This leads many companies to build their own solutions (like Qonto did). “But engineers don't like that. And it's obviously very expensive to hire engineers for that. So it's still an open question.” In Lago's view, providing open source tools is the best solution to meet different needs and ideas.
For some of these users, the open source ethos also aligns with what they want to stand for as a business.
“We chose Lago as our billing provider because we believe in the open source ecosystem,” Timothée Lacroix, co-founder and CTO of Mistral.ai, said in a statement. “They were able to follow our release pace and allowed us to focus on what we do best.” Indeed, open source is currently being expanded significantly as a concept, and many Some would argue that it could be the exact opposite of what the so-called open source companies in the world are building. Lago's central focus is to maintain that state.
The company's goal is not only to continue building its existing business, but also to start thinking about what to add next. One obvious area is going back to Lago's original ideas about marketing and providing customers with more data analysis about what people are consuming, what they're paying for, and their payment patterns. . The other is to explore the other side of the billing coin: payments.
Lago is unlikely to build a payments stack, she added. “The focus will almost certainly be on payment orchestration, giving users control over what they use, but making sure it integrates well with the billing platform (ideally). will be covered by Lago, of course).