Many SaaS products are sold on flat-rate subscriptions. But there’s a growing trend, especially among more price-conscious customers, to demand more granular pricing, and we now live in a world where a mix of data science, predictive analytics, and cloud computing can make this possible. Now, one of the companies building tools to meet that demand – a startup called m3ter – is coming out of hiding and, in a sign of the state of the market, it already has customers and a tidy sum of funding.
The London-based startup has secured $17.5 million in funding from Kindred Capital, Union Square Ventures and Insight Partners, money it will use to further develop its product and attract more customers. This list already includes companies like Sift, Stedi, Redcentricand Paddlea thriving billing startup that effectively sells technology to its own customers in partnership with m3ter.
m3ter is coming out of hiding today, but it’s not coming out of nowhere. The company’s two founders, Griffin Parry and John Griffin, previously founded GameSparks – a game-as-a-service backend engine based on usage-based pricing – which he quietly sold to Amazon’s AWS for l integrate with the cloud giant. ambitious strategy to build tools for the game world. (Sidenote: I picked up the acquisition when it happened, and at the time it might have been easier for me to try to talk to Queen Elizabeth I than to those two, so it was great to finally be able to catch up now.)
This gaming strategy has been, perhaps in its most charitable form, a very long-term game for AWS (although it appears there were plans to release a Gamesparks-based product that didn’t have not yet seen the light of day, five years later). But being there, Parry tells me, gave him and Griffin the inspiration for how to apply the concept of usage-based services elsewhere.
“Reassuringly, Amazon ran into the same issues we did with usage-based pricing,” he said. But with much of what Amazon already offers based on the concept – it’s at the heart of how it sells cloud instances, for example – “we got to see the custom tools they were building”, he continued. “We’ve seen what good looks like.”
Their conclusion: SaaS services were booming, and all of these businesses deserved the same measure of tooling that Amazon was building for itself.
The company’s first pull was in the enterprise: fast-moving SaaS companies that in turn offer metered, usage-based pricing tiers to their business customers. Parry believes that this in itself is a large enough market with enough permutations of services to be worth focusing on just that. However, there are clear opportunities both in older areas like telecommunications and other utilities – old pillars of the usage-based pricing system – who are upgrading their systems and need to upgrade their billing method. Similarly, consumers today seem happy to pay flat fees for streaming, broadband, cloud storage, e-commerce loyalty clubs (eg Prime) and more; but it’s only a matter of time before the disruptors come along and offer another, potentially cheaper and fairer way for people to consume what they want and only pay for what they use Actually. They too could become potential customers of m3ter’s.
Or, in fact, others. It was only last week that another usage-based pricing company, Metronome, announced its own round of funding. Parry is more than happy to see them on the market, he claimed.
“They’re validating us and the competition is good,” he said, noting that there’s likely room for multiple players to address the many use cases. “We are focused on our ability to support high levels of complexity and scale. There’s a gap in the stack, and a bunch of great established tools just don’t work for usage-based pricing. It means we have a lot of potential.
“The co-founders of m3ter are regular entrepreneurs with a deep, first-hand understanding of the difficulties associated with usage-based pricing,” Chrysanthos Chrysanthou, who led the Kindred Capital investment, said in a statement. . “With their technical capabilities and business background, they are uniquely positioned to carve out a leadership position in a market that is rapidly taking shape as SaaS companies seek a solution to their pricing challenges.”
“m3ter has the potential to energize the SaaS industry as more software companies capture their true value through frictionless usage-based pricing,” added Rebecca Kaden, Partner at Union Square Ventures. “Griffin and John have built a great team, and we’re excited to work with them to redefine pricing for SaaS companies around the world.”