A Paris startup that started life building marketing tools has raised $22 million after making a successful spin on pricing — a space it discovered was even more fractured among potential customers. Lakedeveloper of an open source payment platform, received funding in two rounds of funding that it reveals coincide with its official launch.
It launches today, but has been running in closed beta for quite some time, during which time it has taken on a number of notable startups such as Mistral.ai, Together.ai and Juni as early customers. The company’s focus on open source is very intentional, said CEO Anh-Tho Chuong: It targets developers looking for solutions to adjust their fees to fit whatever new, creative cutting-edge services they’re cooking up, a gap in the market that The Lago believes it’s not being addressed well enough by the incumbents, and that Lago bets could be better addressed through an open source approach.
“We’re a developer partner,” she said in an interview. “We honor [their] abstraction, and we use usage measurement data to help companies manage subscriptions [or other] pricing plans made easy.”
A strong roster of investors has taken note: The latest $15 million Series A was led by FirstMark. The previous $7 million seed round was led by SignalFire, Chuong said. Other backers include Y Combinator, New Wave, Addition (Lee Fixel fund) and Script, as well as a number of individuals whose involvement highlights the market segment Lago is targeting. They include MongoDB’s chief monetization officer, Meghan Gill; Romain Huet (formerly of Stripe, now in developer relations at OpenAI). and Hugging Face CEO Clément Delangue.
We understand from sources that his valuation is now around $100 million.
Lago, which operates today as a billing platform, started in a very classic startup way: It had no idea that it would be a billing platform.
Chuong and her co-founder Raffi Sarkissian were both working at business banking startup Qonto when they decided to strike out on their own and create a new startup. They applied to Y Combinator and got into the summer 2021 cohort based on their background. “But we went to YC with no product,” he said.
They settled on marketing while there, specifically around the idea of building a “Zapier for marketing teams”.
“We honestly thought this was going to be big,” he recalls. “It was okay.” Okay I just wasn’t going to cut it though. Marketing technology is very crowded, the company had almost no traction for its product.
At a time when he was trying to increase their way to the public, Sarkissian decided to write a post for Hacker News in which he lamented about billing issues for developers.
It had a catchy title: “Invoicing systems are a nightmare for engineers” and was written with the freedom you could only capture as a creator when you truly write from the heart. This was because it was something he and Chuong were well aware of, as their time at Qonto was spent building a product to address this very issue.
Chuong said that wasn’t really the point. The impetus for posting on this was to pick something they knew well so they could track engagement and possibly use it to bring attention to Lago, the “Zapier for marketing teams.”
But the post hit a nerve and, to their surprise, many people started talking about their own billing issues. Lago had their “a-ha” moment: If what they really wanted to do was create something to solve a problem for developers, here was a problem they could actually solve, and they knew they could do it well. Put the shaft in charge and take off the boot.
Taking off not only with users, but also investors.
“We first spotted Lago through HackerNews in early 2023: They had so much traction, for a seemingly unsolved or trivial issue, that it seemed obvious that people were waiting for an open source solution like theirs. We then reached out to their astrologers on GitHub and the feedback has been nothing but impressive,” Oana Olteanu, partner at SignalFire, said in a statement.
If you think marketing is a competitive market, the bill is busier than Billingsgate Fish Market on a Friday morning. Major technology companies like Stripe, Adyen, Salesforce, Zoho, Paddle and many others offer billing solutions. There are even several providers that already take an open source approach, including FOSSBilling, ChargeBee, Kill Bill, AppDirect’s jBilling, and the imaginatively named “Open Source Billing.” (Why beat around the bush?)
However, Chuong believes there is still great opportunity to focus on scalability and custom solutions for startups trying to push the boundaries in their own competitive spaces.
The field of artificial intelligence is a strong example of this, in her view. Companies building AI-based products are still working out what sustainable business models will be, and meanwhile we’re seeing many examples of companies looking at hybrid approaches, combining flat-rate subscriptions with consumption-based pricing. All of these are difficult to manage and rely on tools that can be integrated with any developer they build, with the ability to discern and apply their usage data.
“If you have very simple billing and invoicing, there are a lot of these solutions around it, but for complex pricing, there hasn’t been a solution,” he said. This leads many companies (like Qonto did) to build their own solutions. “But engineers hate it. And it’s very expensive to hire engineers for that, obviously. So it remains an unsolved problem.” In Lago’s view, offering open source tools is the best solution to meet a variety of needs and ideas.
For some of these users, the open source ethos is in line with what they hope to adopt as businesses.
“We chose Lago as our billing provider because we believe in the open source ecosystem,” said Timothée Lacroix, co-founder and CTO at Mistral.ai, in a statement. “They were able to keep up with the pace of our releases and allowed us to focus on what we do best.” Yes, some will argue that open source may be overstretched as a concept right now, and may well be the exact opposite of what many so-called open source companies are creating.
The company’s aim is to continue to develop its existing operations but also to start looking at what else it can add next. An obvious area is to deepen Lago’s original thinking around marketing and provide more data analytics to clients about what people are consuming and paying for and their payment patterns. Another is to explore the other side of the billing coin: payments.
Lago is unlikely to build a pay stack. However, he added: The focus will almost certainly be on orchestrating payments, giving users control over what they use, but making sure it integrates well with their billing platform (one that, ideally, will be covered by Lago of course).
