Krish Subramanian and his friends had been discussing for quite some time on starting a venture of their own. Krish had worked in software services companies, including TCS and Cognizant, while his friends – Rajaraman Santhanam, KP Saravanan and Thiyagarajan T – were in Zoho, a Chennai-based pioneering company in software-as-a-service (SaaS). A few things fell into place for the four to start Chargebee, a SaaS company that operates a subscription management and billing platform delivering a plug-and-play billing software on the cloud for its customers. Krish says for all of them Zoho was a role model and inspiration.
One of the reasons – an important one at that – for the four to start up when they did was the decreasing cost of setting up a venture. Companies no longer had to spend a lot of money upfront in network and infrastructure, as there were others that provided these facilities, hosting them in a remote location and offering the service at a fraction of the capital expenditure that would have otherwise been required. Also, says Krish, a couple of other friends, also employees at Zoho, had branched off on their own, starting a SaaS venture in Chennai.
Krish and Rajaraman were friends from college, having studied engineering together at AVC College of Engineering in Mayiladuthurai, Tamil Nadu. Krish worked in companies such as MatexNet, TCS and Cognizant, in all of which he had a customer-facing role. The other three worked in Zoho and their specialisation was in building products. All the while, says Krish, he and Rajaraman used to talk about wanting to start up at some point of time. They were not sure when and how that would happen.
Inspiration from Zoho
According to Krish, they drew inspiration from Zoho, the way they were experimenting doing different things, of trusting people to build their own products. He recalls that Rajaraman, after being in Zoho for five-six years, was entrusted with building his own product. He was given the freedom to pick his team. The only consideration being did the problem he wanted to solve fit into Zoho’s overall scheme of things. “The conviction with which they were allowing all of this to happen...as long as you understand the problem deep enough and the idea has legs, you are free to pursue that,” says Krish, of Zoho.
Some other friends, also at Zoho, had started their own venture. This was the final trigger for Krish and his co-founders to get into overdrive to start their own venture. Since they had been talking about turning entrepreneurs for quite some time, they had all squirrelled away some money. It was also then that a number of companies were making it possible for anybody to build software, hosting it at some of the best infrastructure possible remotely. At as little as $10 a month, Krish and his friends realised they could host their website in a data centre with the best of facilities in the US. “That democratisation was happening at the same time with cloud. That is a huge disruption,” says Krish. A capital expenditure model of business had suddenly become an operating expenditure driven one.
How did they hit upon the idea of subscription billing for their business? “We said more and more software is going to get created on the cloud and more and more people will have to collect payments from customers around the world. That is how we picked this problem called subscription billing,” says Krish, 37. The initial idea was to tackle the problem of recurring invoicing. The plan was to build a software that would have a global market. The other transition that was happening, says Krish, was the revenue model. Which is, from a one-time revenue model, software was increasingly being sold on a user based, licence model. All software upgrades would automatically get done.
“That is the power of cloud software, that your software is always upgraded and the system becomes more intelligent,” says Krish. And, to top it all, the software was now available to businesses at a fraction of the cost if they were to purchase it outright.
Krish says as companies grew their business, especially small and medium-size ones, they had to send out more and more invoices to collect payments. The old systems would collapse under the volume of the transactions that it had to handle. That meant a new system and that new system is what Chargebee is, he points out.
Krish and his friends started Chargebee in June 2011 and launched their first product in 2012-end. “As first time entrepreneurs, we underestimated what it takes to build something new. It took us close to a year-and-a-half before we were happy with it. A lot of testing had to be done. By 2012, we were having a ready product, a minimum viable product, in the market,” says Krish.
“The intelligence of billing is what we provide. It is available as a plug-and-play system between the new age software and the old age accounting. We plug that gap and also help you efficiently collect money,” says Krish.
According to him, all companies, right from a start-up, need a billing system, where they need to test payments, collect money from customers. Chargebee’s model is built in a way that it is a do-it-yourself system. “They can come to Chargebee website, we provide a free trial, zero touch sale. They come in, sign up, try the product themselves, get their hands dirty and say this is interesting, this will work for me and then they can try it. They want to use it, they can swipe the credit card and purchase it themselves,” says Krish.
Chargebee, according to him, started off selling to small businesses, but now has large companies such as BMW and British Petroleum buying its product. The model is the same, irrespective of the size of the company.
Chargebee has both a base product and an enterprise plan, with the price starting at $99 and going up to a few thousand dollars every month. It does hand-holding for bigger customers. It is a standardised product with a lot of configuration options that Chargebee sells.
Chargebee has raised money from friends and angel investors, including Girish Mathrubootham, founder of Freshworks, another Chennai-based SaaS company and an ex-Zoho employee.
Accel Partners invested about $800,000 in 2014 and Tiger Global invested in a $5 million round, in 2015, with Accel also participating. In March, Chargebee raised $18 million in a round led by Insight Venture Partners. The money will be used in product R&D and in building the sales and marketing teams, in the US and in Europe.
The latest round of funding is growth capital, says Krish. Chargebee now serves 7,000 customers in 53 countries.