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Software-as-a-service (SaaS) is thriving — cloud end-user spending was pegged as a $332 billion market last year, with SaaS constituting the single biggest segment at $123 billion, according to Gartner. But while building a business on top of a recurring revenue model is great for the provider as it guarantees ongoing income, it might not always work out best for the customer.
Indeed, if a company is paying for software that they rarely use, then they’re wasting their budget, while if they use it more than anticipated, then they might get saddled with overage penalties for exceeding a pre-agreed usage limit. This is why consumption or “usage-based pricing” (UBP) has grown in popularity in the SaaS sphere — much like water and other utilities in our domestic lives, it makes more sense to pay for what you’re actually using, rather than a set monthly figure that may have extra “hidden” costs.
It’s against that backdrop that M3ter is officially going to market today, with a metering and pricing engine that helps SaaS companies work around the “operational headaches” that UBP can bring.
‘Data infrastructure’ for metered billing
Logistically, it’s easier to charge a set per-seat fee than it is to align billing operations, usage data, and commercial terms of a contract — and serving customers with real-time usage data in a user-friendly format to show how it translates into spend, is a challenge. That is why M3ter has built what it calls the “data infrastructure” to enable complex pricing configuration, by capturing granular usage and cost data to calculate bills in near real time.
M3ter is a “drop in” platform that integrates with existing systems and upgrades them to support usage-based pricing — it facilitates the free-flow of usage, spend, and margin data across an organization, which can be used to automate billing operations; deliver user-friendly dashboards to end user(s); and give sales and customer service teams the data to better engage with customers.
Usage data, specifically, can be ingested from existing repositories such as an analytics database or harnessed via M3ter’s API or data streaming integration. Cost data, on the other hand, is primarily ingested via pre-built integrations with the public clouds. Elsewhere, M3ter offers a library of connectors that enable two-way integrations with CRM tools, billing and finance software, and more.
All this gets to the heart of what M3ter is trying to achieve — it is treating the metered pricing conundrum as a data problem, rather than a billing problem.
“Data infrastructure is core to M3ter’s product,” M3ter cofounder and CEO Griffin Parry told VentureBeat. “This ingests usage data at scale, automatically cleans and transforms it, applies pricing to it, and then delivers the outputs — real-time spend and usage data — wherever they are needed throughout the stack.”
M3ter’s launch comes exactly a week after Metronome exited stealth with $35 million in funding for a similar proposition, highlighting the real and growing demand for tools that help any SaaS company follow the likes of AWS, Twilio, and Snowflake down a usage-based pricing path.
For context, M3ter was founded out of London by Parry and his cofounder John Griffin, who sold a previous gaming infrastructure business called GameSparks to AWS back in 2017, where they continued to work in various roles until leaving the tech giant to launch M3ter in 2020.
“Usage-based pricing offers huge rewards for SaaS businesses, but it isn’t easy to implement,” Parry explained. “We experienced the pain ourselves when building our previous startup, but we also saw what good tooling can look like at AWS.”
Show me the money
Alongside today’s official launch, M3ter announced that it has raised $17.5 million in a seed round of funding from Kindred Capital, Union Square Ventures, Insight Partners, and a slew of angel investors. The funding will be used to build on the company’s early traction, which has seen it secure customers such as Sift, Stedi and Redcentric, while it also entered a partnership with revenue delivery platform Paddle.
Parry noted that M3ter is ultimately focused on bringing more “advanced analytics” to the table, and is working on new features including forecasting and pricing recommendations.
“Because M3ter transforms and persists data in a granular form and with extreme normalization, it can forecast usage and revenues,” Parry explained. “This will enhance existing analytics tooling – for example, forecasts for a customer’s next monthly bill will appear in the Data Explorer [dashboard].”
While M3ter’s ideal customer is a “mid-market” B2B SaaS business, the company is also chasing the larger enterprise segment, with Parry noting that it has “several” such companies in its pipeline. However, the longer sales cycle makes it more difficult to target them specifically for now.
“The problems enterprises face are the same as those faced by the mid-market,” Parry added.