September 2022 Summaries

Lago is an open-source billing API designed to help engineers implement billing engines quickly, particularly for companies adopting complex per-seat pricing models like those used by Notion or Slack. This model ensures customers are billed only for active members based on actual usage, with charges prorated according to the number of days members are active during a billing period. Lago simplifies this process with its persistent billable metrics feature, enabling developers to replicate such pricing systems efficiently. The setup involves configuring a billing engine, creating persistent billable metrics, and establishing a price plan using the API, with seat charges calculated monthly at €8.25 per active user. Through the API, companies can create customers, assign plans, and manage subscriptions, while events can be sent to track user additions or removals and ensure accurate prorated billing. The process culminates in comprehensive PDF invoices that detail seat usage and charges, demonstrating the ease and maintainability of Lago's solution for implementing per-seat billing systems.

Michael, the founding Designer and Product Manager at Lago, shares insights into why the company decided to implement a design system from the beginning, contrary to the common practice of waiting until after a Series B investment. He emphasizes that while a design system doesn't directly help achieve product-market fit, it significantly accelerates the iteration process by establishing a set of standards, creating visual consistency, and facilitating communication between product design and front-end engineering teams. This early investment in a design system helped Lago quickly adapt to changes, reduce time spent on designing screens, and maintain a cohesive user experience, ultimately enabling the company to pivot efficiently and onboard engineers effectively. Despite the initial time investment and uncertainty, the design system has proven valuable, allowing for rapid development and easy rebranding, with minimal drawbacks. Michael also suggests resources for those interested in learning more about design systems, including blog posts and expert recommendations.

In 2020, Raffi Sarkissian, co-founder of Lago, embarked on a polar expedition to Svalbard, drawing parallels between the challenges of Arctic exploration and building a startup. The journey underscored the importance of decision-making, as neglecting small details like gear placement or fuel usage could have dire consequences in extreme conditions, much like the critical decisions required in a startup's pivot and survival. Sarkissian emphasizes taking one step at a time, celebrating incremental successes, and learning from experts, whether it be polar guides or seasoned entrepreneurs, to foster growth and resilience. He further highlights the necessity of maintaining health through proper nutrition and rest, drawing from experiences in both polar expeditions and the demanding Y Combinator program, to sustain energy and momentum in achieving business goals.

Algolia, a leading Search-as-a-Service company, experienced significant growth following a shift to usage-based pricing and a post-pandemic increase in demand, achieving a valuation of $2.25 billion in 2021. Initially, Algolia's pricing strategy consisted of tiered plans, but over time, the company transitioned to a usage-based model to better align with customer values and simplify feature adoption. The company initially developed its own billing system, which eventually became complex and burdensome as the business scaled, leading to the realization that maintaining such a system can detract from core business activities. Algolia's co-founder, Nicolas Dessaigne, acknowledges that exploring existing solutions may be more beneficial than building in-house systems, especially as the company grows. Additionally, Dessaigne reflects on the potential of open-source billing systems, noting the advantages they offer in terms of customization and flexibility, despite requiring careful consideration of monetization strategies.

Lago is an open-source billing API designed to expedite the implementation of billing systems by engineers, supporting hybrid pricing models that combine subscription fees with usage-based charges. It provides both a self-hosted option and a cloud-hosted application for flexibility. The setup process involves installing necessary tools like Docker and Git, after which users can define billable metrics such as Monthly Tracked Users (MTUs), create subscription plans with customizable billing periods and charges, and assign these plans to customers. The API supports various charge models and allows for detailed customization of invoices for compliance. Lago's event-based architecture ensures accurate usage tracking with idempotency keys to prevent duplicate event ingestion, facilitating the creation and maintenance of usage-based billing systems efficiently. Additionally, Lago handles various billing complexities such as taxes, discounts, and upgrades or downgrades, making the system both robust and easy to manage.