Tiger Global and Accel Partners-backed ChargeBee has identified a clear product roadmap to grow into a preferred SaaS player in the global billing and subscriptions space. Here’s how…
Ask any sane entrepreneur what was the thought behind starting a venture and they would talk of anything but scale, global domination and building a billion dollar company. In almost every case, the early days is about identifying a need gap and finding enough people to pay for it, so that a sustainable business can be built. For ChargeBee, the story was no different. “Each of us carried extensive experience in building B2B solutions and it was something we knew well. We wanted to build a product that would be relevant to growing market needs, something the customer would pay for,” cites Krish Subramanian.
And, what caught their attention was the payments space. “The industry was going through rapid innovation. The software business model began shifting to a subscriptions model and, SaaS as a delivery model became more prevalent,” he indicates. To explain this better, traditionally, payments were synonymous with software wherein the vendors and customers shared a one-time buying relationship, and the vendor held an upper hand in the equation because for them it was about product ROI. “For example, let us say a customer purchased software for U.S. $1,000 as a one-time license. After a point, due to lack of bandwidth to move the latest software, the customer may complain of glitches in the product or want more sophisticated features. In such a circumstance, he can neither shift brands nor upgrade as he has invested a significant amount in the product and is faced with a vendor lock-in,” cites Subramanian. But, as the SaaS model forayed into the industry, the focus shifted to maintaining one version of a software and improving on it week-on-week. Additionally, the customers had to pay month-on-month which meant, if they were not satisfied with the product, they could always shift service providers. “While it made a vendor’s life a lot easier, it also made one pay greater attention to building a good relationship with the customer,” he points out.
Along with this came the need for vendors to collect thousands of payments every month. In other words, there was an opportunity to manage payments and billing in an as efficient manner as possible. This is where ChargeBee identified its business idea. “The vendor had to ensure that his billing service is as seamless as his products and he also needed to know which customer is on which plan (freemium, premium or any other),” shares Subramanian. As a result, ChargeBee was born in 2011, co-founded by Subramanian, Thiyagarajan, Saravanan and Rajaraman.
“Subscriptions and billing is one of the most underappreciated aspects of a business in terms of complexity, because as long as the process is smooth, the billing experience is good. The moment the customer wants a change, like a change of address or card details, lack of immediate support can cause a glitch in customer relationship,” opines Subramanian. Moreover, building any of these components is not the focus area of the vendor, because they have a bigger product to develop and market to tackle. This is where ChargeBee’s solutions, consultations and thought leadership come into use. “We started off as a payment solutions company only to realise later that there is an entire spectrum of solutions we can build around it,” he adds.
From the early days, the founders were clear that they wanted to build a product that would suit the global SaaS market, and target SMEs and startups. Moreover, its pricing is designed to grow with the customer and their needs as they scale their business. For example, the solutions start at US $79 per month for a startup, and as the number of paying customers (for the startup) grows, the charges rise proportionately. “At higher volumes we arrive at a pricing that aligns with their overall goals including choice of payment gateway, and we charge a percentage of the overall transaction,” indicates Subramanian. When it comes to value added services such as custom reporting and facilitating billing data migrations, ChargeBee partners with other firms to get the job done. “Offering additional services will distract us from building our core product. Instead, we hand it over to global partner firms, which specialise in integrating ChargeBee into our customers platforms,” he says. However, the company goes the extra mile to consult customers because it believes it helps them understand issues better and define a better product roadmap.
Acquiring the early adopters
One of the key decisions the founding team made right at the early stage was to get the right early adopters who can scale with the company globally. To achieve this, from the prototype stage, the team began interacting with its customers and building a solution around their needs. This is where it experienced a turning point; six months into having several conversations in the Indian ecosystem, the company realised that providing an India-specific solution was something it had to do later, and not at the first phase because it may face several regulatory and technological setbacks. This strategy ensured that the product was built for a global market and was designed for use in 50 countries.
A second aspect it focussed on was to provide seamless customer service. The team engages with the customers as they evaluate the product, so that it can better understand their goals and see if the product fits right. “We’ve built a number of tools and techniques to address specific use cases and ensure that our product offering is well documented and API is elegant and easy to use,” points out Subramanian. What ChargeBee offers is essentially a DIY solution, which allows customers to be on-boarded within five days and migrated within 15 days.
Charting a marketing roadmap
Billing being a critical function, Subramanian claims that the decision is usually not influenced by pricing, especially when the business is growing. Because, when the value proposition is focussed on lesser pricing, it may attract customers who chose a company’s solution as an alternative and push it to deliver additional features aside from what already exists. “Each product and its roadmap is defined by the existing customers. So it’s important to continuously define our value proposition in the words of our customers, so that we can find more similar customers,” he opines.
The company engages in several interesting marketing and sales activities to achieve this. Its primary efforts are centred around content driven marketing, wherein its conversion rates have been known to be highest when prospects have read at least a few blogs before signing up for a free trial. A second strategy is to use paid channels such as Google PPC, Display Ads and more, which are targeted at specific customers in specific geographies.
Talking about competition in this space, Subramanian makes an interesting point. While its customers have an alternative in companies such as Zuora, Recurly or Chargify, it sees its primary competition coming from the vendor’s internal engineering teams, which develop tools within the company to solve a payment-related issue. “We are focused on providing a clear alternative to internally built infrastructure, by providing a service they can trust. Most importantly we allow our customers to focus on their core and build a better product and leave the boring stuff that doesn’t differentiate them to us,” explains Subramanian.
Since 2012, ChargeBee has raised three rounds of funding (angel round, Series A and Series B) totalling US $6.2 million from Tiger Global and Accel Partners. While the first two rounds were channelised towards accelerating product roadmap and leveraging content marketing efforts, the recent round is being directed towards building teams across all functions. “Right now, we serve customers in 48 countries (across 2,000 cities). With fresh investments, we are looking at building local support as we scale our customer base,” shares Subramanian.
With a current team size of 45 members, the Delaware-headquartered company processes U.S. $125 million worth of annual transactions, with its key customers operating in the SaaS applications and e-commerce space.
“With more and more businesses moving towards the subscription business model, we see ourselves in the forefront of being the preferred online billing platform for subscription businesses. Our goal is to offer a full suite of services around billing, invoicing and analytics, most of which we already do in parts and it is a question of solution maturity as we work closer with our growing customers,” shares Subramanian, on a parting note.
FIVE KEY DECISIONS THAT LED CHARGEBEE TO THE SCALE UP PHASE
IDENTIFYING A CLEAR TARGET AUDIENCE
From the early days, the founders were clear that they wanted to build a product that would suit the global SaaS market, and target SMEs and startups.
GROWING WITH EARLY ADOPTERS
The company got the right early adopters who can scale with it globally. To achieve this, from the prototype stage, the team began interacting with its customers and building a solution around their needs.
CLARITY ON UNDERSTANDING COMPETITION
While its customers have an alternative in companies such as Zuora, Recurly or Chargify, it sees its primary competition coming from the vendor’s internal engineering teams, which develop tools within the company to solve a payment-related issue.
OFFERING SEAMLESS CUSTOMER SERVICE
The team engages with the customers as they evaluate the product, so that it can better understand their goals and see if its product fits their needs. It essentially offers DIY solution which allows customers to be on-boarded within five days and migrated within 15 days.
ADOPTING THE RIGHT MARKETING TOOLS
Its primary efforts are centred around content driven marketing, wherein its conversion rates have been known to be highest when prospects have read at least a few blogs before signing up for a free trial. Thanks to its learning from anchor customers, the content is shaped in such a way that a prospective customer relates to it.