Metronome raises $30M to help software companies shift to usage-based pricing models
As more software companies shift to more flexible pricing models based on consumption, many are choosing to charge customers on a per-use, or usage, basis.
While this is easier for customers, it has created headaches for many software, or SaaS, businesses that are not equipped with billing systems that can easily charge customers on a usage basis.
Enter Metronome. The startup claims to have developed a billing and data infrastructure platform that is capable of “reliably” processing data at scale so that usage-based companies can iterate on business models without code changes. It does this by providing businesses with real-time APIs for their customers’ usage and billing data.
Two former Dropbox employees — Kevin Liu and Scott Woody — who met at the company after selling their own respective startups founded Metronome in 2020. They came up with the concept after speaking with hundreds of companies that they say “shared the common pain of making usage-based billing work at scale.”
“This change we’re seeing in the software market is mapped to the value of what a customer is getting out of the product,” said Liu. “And that has all been accelerated by the market success of the likes of Twilio, Snowflake and AWS, who have proven just how successful those models can be.”
Metronome claims that its offering allows companies to “quickly and effortlessly launch, iterate and scale new business models with billing infrastructure that works at any size and stage,” according to Liu. The key, the company claims, is that companies are able to avoid designing around billing limitations. Customers include Cockroach Labs, Starburst and Truework.
Metronome’s model has attracted some high-profile names in the investment world. Today, the San Francisco-based startup is announcing that it has raised $30 million in a Series A round led by Andreessen Horowitz (a16z). Seed investor General Catalyst also participated in the round in addition to a long list of angel investors, such as Elad Gil, Lachy Groom, Databricks co-founders Reynold Xin and Ion Stoica, Confluent co-founder Neha Narkhede, Snowflake SVP of Product Christian Kleinerman, Plaid co-founders William Hockey and Zach Perret and Armon Dadgar, co-founder/CTO of HashiCorp, among others. The company previously raised a $5 million seed round led by General Catalyst.
A16z General Partner Martin Casado believes that the entire software industry is moving toward “more granular and expressive pricing models, starting with usage-based pricing.”
“Building a system to support that is an incredibly difficult technical challenge,” he told TechCrunch via email. “Kevin and Scott have the background and appreciation for the problem, and have built the only system that can support the scale, correctness, and uptimes required to handle billing for leading software companies.”
Casado also noted that he has seen firsthand how the problem can impact software companies.
“As a board member, I’ve seen everything from product releases to crucial GTM (go-to-market) changes slip because of billing complexity, even at deeply technical companies with excellent engineers. As a founder, I’ve also experienced these problems myself,” he said. The investor co-founded Nicira Networks, which was acquired by VMware for $1.26 billion in 2012.
The evolution of businesses seeking more flexibility was bound to happen, said Liu.
“When the first subscription management billing systems emerged 10 to 15 years ago, usage-based models were much more complex,” he told TechCrunch. “Today, software companies need systems that can work with data at scale and in real time, which are pretty important attributes of Metronome’s product.”
The legacy subscription management systems, Liu added, were built “for a totally different problem.”
Woody agrees, adding that Metronome can help companies that have built a new product that they want to get out into the market as quickly as possible. The startup, he said, has developed an integration model that is “as low effort as possible” for engineering teams and can get them up and running “very quickly, some in as little as a day.”
“The billing system we’ve designed is equally capable of working with a bottoms-up, self-serve, go to market motion, as well as with a bespoke highly specific enterprise contract model,” Woody told TechCrunch. “And we’ve really tried to design Metronome to just service both use cases at the same time.”
The offering, he added, is also designed around scale.
“As a company grows, you’re going to have more customers and those customers are going to use your service more and more,” Woody said. “And we have designed our architecture for scaling up with that…We’ve designed around resilience and security. What we’re building for our clients is a real-time data source of truth that can help power their product and client dashboards and while also directly integrating with other business systems.”
Presently, Metronome has 20 employees and plans to spend the bulk of its new capital toward hiring, particularly across its R&D and go to market teams.