Software as a service (SaaS) is the largest market segment and is estimated to reach $122.6 billion in 2021. As per to recent analysis, SaaS businesses that have implemented UBP (Usage-based pricing) are experiencing 29.9% year-on-year growth as compared to the 21.7% growth for other pricing models. Recently, many SaaS businesses got funding for growth in Europe including ValueBlue, Vitt, and more.
Many software IPOs with the strongest net dollar retention such as the likes of Snowflake and Datadog have operated usage-based pricing. Currently, usage-based companies are valued at a premium compared to other SaaS businesses.
Consequently, London-based m3ter, a metering and pricing engine for SaaS companies, has launched today from stealth mode with the announcement of $17.5 million in funding.
Backing from prominent industry angels
Kindred Capital, Union Square Ventures, and Insight Partners that recently invested in Wandelbots and Checkout.com participated in the funding round. m3ter is also backed by several angels including Paddle founder Christian Owens, Tessian founders Tim Sadler and Ed Bishop, Klaviyo founder Ed Hallen, and GoCardless co-founder and Nested founder Matt Robinson.
The investment will be used to support the startup’s early traction to expand into new markets, grow its team, and extend its product. It will meet make new hires in Europe and the US. Designed from inception for applied data science, m3ter will also use the funding to further the development of advanced analytics tooling for Sales and Finance teams. New features will allocate costs algorithmically to provide insights into unit economics; deliver pricing recommendations that improve results at the individual customer level; and provide revenue forecasts based on usage signals to improve business predictability.
Griffin Parry, co-founder and CEO of m3ter, said: “Usage-based pricing offers huge rewards for SaaS businesses, but it isn’t easy to implement. We experienced the pain ourselves when building our previous startup, but we also saw what good tooling can look like at AWS. Today, we’re proud to launch m3ter so that all SaaS businesses can intelligently deploy and manage usage-based pricing.”
Chrysanthos Chrysanthou, who led the investment from Kindred Capital, said: “The m3ter co-founders are repeat entrepreneurs with a deep, first-hand understanding of the struggles associated with usage-based pricing. With their technical ability and commercial track record, they’re uniquely placed to carve out a position of leadership in a market that’s fast taking shape as SaaS businesses look for a solution to their pricing woes.”
Rebecca Kaden, partner at Union Square Ventures, said: “m3ter has the potential to supercharge the SaaS industry as more software businesses capture their true value through frictionless usage-based pricing. 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.”
Zack Kanter, who also invested in m3ter, is founder and CEO of Stedi, an early customer. He said: “We chose m3ter because they were the only provider that treated the problem of billing for metered pricing as a data problem, not a billing problem – which is the only way to solve it with any degree of scale and complexity. Combine that with their ability to execute based on their own roadmap and feedback, and we see this as a solution that will continue to compound for many years.”
Christian Owen is founder and CEO of Paddle, a m3ter partner. He said: “At Paddle, we believe that deploying UBP will drive the next phase of acceleration and growth in SaaS businesses. That’s why we partnered with m3ter to integrate their best-in-class usage-based pricing, metering and rating engine together with our platform.”
Switching to usage-based pricing
m3ter’s early traction corresponds with a rapid increase in the number of SaaS businesses switching to UBP. The pricing model is becoming popular because charging customers for what they consume allows for easier adoption, costless upsell, better margin control, and greater customer satisfaction.
Despite its benefits, UBP is difficult to implement. Billing operations are challenging because usage data needs to be brought together with commercial terms, something that businesses too often manage in a spreadsheet, which is a time-consuming, error-prone process that struggles with complexity and change.
Delivering a good product experience necessarily involves providing customers with up-to-date information about usage and how it converts to spend, and that’s hard to do. At the same time, Sales and Customer Success teams struggle to do their jobs without easy access to customer usage data, and revenues are near-impossible to predict without reliable forecasts of future usage and spend.
m3ter addresses these common issues and makes usage-based pricing easy for any software business. It provides data infrastructure that captures granular usage and cost data at scale, enables complex pricing configuration, and calculates bill amounts in near real-time. This feeds systems throughout the stack, including the billing and finance system (to automate billing operations), SaaS platform (to deliver billing dashboards to end customers), and Sales CRM and Customer Success platforms (to allow smart, well-informed and timely conversations with customers). Implementation is straightforward, with a flexible API-based architecture and easy bi-directional integrations with common tooling.
Founded during pandemic
m3ter was founded in late 2020 in London by Griffin Parry and John Griffin, repeat entrepreneurs who previously built and sold a back-end-as-a-service business, GameSparks, to AWS. Its Chief Data Scientist, Rob Franolić, brings twenty years’ advanced analytics experience to the team, and the company’s engineers are led by AWS and GameSparks alumni. While in stealth, m3ter has already attracted customers including Sift, Stedi and Redcentric, as well as kicking off a partnership with revenue delivery platform, Paddle.