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Launch HN: Lago (YC S21) – Open-source usage-based billing

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Re: Launch HN: Lago (YC S21) – Open-source usage-based billing

#111

Post by AnhTho_FR »

superzamp wrote: post #109
epberry wrote: post #79

Earlier quoted context omitted.

I don't necessarily think that billing which is hard to estimate is good for anyone. For large deals I've seen this be a real turn off. Same with surprise bills. Ultimately if the service can scale billing in a way that their value scales to the customer (Datadog and Snowflake come close to this) then both the provider and the customer will be happy.

Side story, and that might not be true as of today, but Datadog was a nightmare billing-wise for me. Probably precisely because they didn't use a tool like the one launched in this post. Anything ranging from seeing your live usage to getting a rough idea of what your bill at the end of the month would be was impossible, not to mention the absence of any kind of alert even after reaching $30x our previous month usage…

I heard they only fully automated it post IPO, and have a full team of senior engineers + PM on this topic now!

Re: Launch HN: Lago (YC S21) – Open-source usage-based billing

#112

Post by abbm »

This looks great, well done. At a previous company we had a relatively simple billing structure, but it was unusual in that it was usage based + an honesty system (clients could elect to not pay in any given instance if the product didn't add value in that instance). Add to that, the client often wouldn't know whether the product added value until weeks or months after the usage. We ended up writing our own billing stack, and would have loved something like this to just build our little quirks on top of.

And as you say, everyone kept telling us "Can't you just use Stripe or Chargebee?" but the answer was always no.

I will definitely check this out next time I'm setting up a billing system!

Re: Launch HN: Lago (YC S21) – Open-source usage-based billing

#113

Post by telecuda »

nojs wrote: post #93
telecuda wrote: post #61

Congrats! We built a usage-based telephony (voice & sms) billing system for our customers and appreciate the pain. Not to take anything away from your launch, but founders / product managers should carefully consider if usage-billing (even with a tool like Lago) is best for your business and customers. We started as usage-based then learned a few years in (once we understood customer usage trends - key) that customer…

I'm interested how you handle suppliers that have usage-based pricing (which I imagine are the norm in the telephony space) if you can't pass this on to the customer. Do you offer your customers an unlimited plan, price it high and just hope they don't use so much that you go backwards?

Great question. So yes, while our suppliers charge us for usage (and that made us initially think we should too!), our customers didn’t use the product any more or less once it became unlimited.

If you’re solving a problem that a typical customer experiences let’s say 3x per week (perhaps routing an inbound sales lead to a CRM), you could charge per use, or ask “If we made it unlimited, would they use it 5x per day? 10x per day?”

With many SaaS products, usage is self-limited by the customer’s actual need, not by a transaction cost. Same goes with most telephony use cases - a typical user will only make so many calls per day, making it relatively easy to arrive at an unlimited monthly price.

Re: Launch HN: Lago (YC S21) – Open-source usage-based billing

#114

Post by telecuda »

TheJoeMan wrote: post #89
telecuda wrote: post #61

Congrats! We built a usage-based telephony (voice & sms) billing system for our customers and appreciate the pain. Not to take anything away from your launch, but founders / product managers should carefully consider if usage-billing (even with a tool like Lago) is best for your business and customers. We started as usage-based then learned a few years in (once we understood customer usage trends - key) that customer…

> It's easier to show "up and to the right" I think it's funny how MBA's at the end of the day base their decisions on glancing at a chart. So now, the engineers are catching on to optimizing for that pretty chart. I made a mistake by spitballing sales figures for a product and someone incorporated it into an ROI calc that was being judged to the decimal place.

Agree. I never paid attention to it while building the business, but then later saw how much weight potential investors gave to predictability and how much customers wanted it too. Even my electric company gives me the option to pay a fixed monthly amount that grows by x% per month versus having to budget for variability.

Re: Launch HN: Lago (YC S21) – Open-source usage-based billing

#115

Post by telecuda »

truetraveller wrote: post #94
telecuda wrote: post #61

Congrats! We built a usage-based telephony (voice & sms) billing system for our customers and appreciate the pain. Not to take anything away from your launch, but founders / product managers should carefully consider if usage-billing (even with a tool like Lago) is best for your business and customers. We started as usage-based then learned a few years in (once we understood customer usage trends - key) that customer…

Providing "unlimited" is a major competitive advantage. The hard part is predicting the average cost per customer. One can use historical metrics to help. The final price would then be set according to the average cost, taking into account profit + padding for outliers.

I’m not suggesting it’s easy, but the trick is to play with pricing a lot in your early days while learning what those costs are. Start a little higher than you think you need - it’s easier to adjust down later than go up. Outliers can be caught with a small amount of code (hey, Slack me if a customer who I thought would use this thing once a day uses it 20 times so I can reach out to them to learn more about how they’re using my product).

Re: Launch HN: Lago (YC S21) – Open-source usage-based billing

#116

Post by mikaeln »

nylonstrung wrote: post #31

How do you guys differ from Lotus, the other YC open-source usage based billing company?

I'm a cofounder at Lotus (https://github.com/uselotus/lotus).

First, congrats on the launch Lago. I've been very impressed with your ability to educate devs about the intricacies of billing and you are certainly pushing the entire space forward.

While you offer coupons and credit notes, there are features you don't have that we have prioritized and built, including, usage alerts, plan versioning, gauge metrics, custom sql etc. etc. Point being I think its unfair to say we are a subset of your product.

In addition, we have a 25+ year billing expert on our team who has been CTO of a startup processing $300 million a year.

Lastly, I don't think it's fair to make statements about our customers just because we haven't "announced" them yet.

Happy to chat more with anyone about our differences.

Re: Launch HN: Lago (YC S21) – Open-source usage-based billing

#117

Post by truetraveller »

telecuda wrote: post #115
truetraveller wrote: post #94

Earlier quoted context omitted.

Providing "unlimited" is a major competitive advantage. The hard part is predicting the average cost per customer. One can use historical metrics to help. The final price would then be set according to the average cost, taking into account profit + padding for outliers.

I’m not suggesting it’s easy, but the trick is to play with pricing a lot in your early days while learning what those costs are. Start a little higher than you think you need - it’s easier to adjust down later than go up. Outliers can be caught with a small amount of code (hey, Slack me if a customer who I thought would use this thing once a day uses it 20 times so I can reach out to them to learn more about how the…

Question: would you then put Unlimited* with an asterisk: "unlimited within reasonable bounds"? I would feel it unethical to claim unlimited as a blanket statement.

Re: Launch HN: Lago (YC S21) – Open-source usage-based billing

#118

Post by swyx »

jrockway wrote: post #11
candiddevmike wrote: post #5

I think this is going to be/already is a crowded space. SaaS companies are feeling the burn of layoffs due to per-seat pricing, so metered billing seems like a good alternative. Unfortunately, as a SaaS consumer, I despise it, as it's meant to be obtuse and hard to estimate, plus I have yet to see any SaaS/IaaS offer real spend controls like stopping the service.

I'm a big fan of usage based billing. It lets small users have small bills. Per-seat pricing has always felt annoying to me. Ideally you want everyone at your company to be able to access the tools that everyone else uses (you don't want to create a bunch of second class citizens), but that gets really expensive really quickly. So per-user-per-month has never felt great to me. That said, usage-based billing is confus…

> And when customers are confused, they simply chargeback the credit card charge.

this is not good faith B2B behavior. i'd be surprised if 1% of B2B usage based billing customers behave like this.

Re: Launch HN: Lago (YC S21) – Open-source usage-based billing

#119

Post by AnhTho_FR »

truetraveller wrote: post #117
telecuda wrote: post #115

Earlier quoted context omitted.

I’m not suggesting it’s easy, but the trick is to play with pricing a lot in your early days while learning what those costs are. Start a little higher than you think you need - it’s easier to adjust down later than go up. Outliers can be caught with a small amount of code (hey, Slack me if a customer who I thought would use this thing once a day uses it 20 times so I can reach out to them to learn more about how the…

Question: would you then put Unlimited* with an asterisk: "unlimited within reasonable bounds"? I would feel it unethical to claim unlimited as a blanket statement.

We have seen it into the form of « fair usage ». Although I understand it from a merchant’s perceptive, I have not seen it well received by end users… yet.

Re: Launch HN: Lago (YC S21) – Open-source usage-based billing

#120

Post by AnhTho_FR »

swyx wrote: post #118
jrockway wrote: post #11

Earlier quoted context omitted.

I'm a big fan of usage based billing. It lets small users have small bills. Per-seat pricing has always felt annoying to me. Ideally you want everyone at your company to be able to access the tools that everyone else uses (you don't want to create a bunch of second class citizens), but that gets really expensive really quickly. So per-user-per-month has never felt great to me. That said, usage-based billing is confus…

> And when customers are confused, they simply chargeback the credit card charge. this is not good faith B2B behavior. i'd be surprised if 1% of B2B usage based billing customers behave like this.

I think B2B users would rather dispute the invoice with their account manager and might get a discount.
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