October 2022 Summaries

Banking-as-a-service providers often rely on complex, usage-based pricing for transactions, cards, transfers, and other services, creating billing challenges that conventional platforms such as Chargebee and Stripe may not fully address. Lago presents its billing API as an alternative designed for BaaS businesses, combining event metering, automatic usage aggregation, invoicing, credits, coupons, and other billing functions so companies can process high volumes of raw transaction events without building separate metering infrastructure. Its features include unrestricted usage recording, real-time calculation of billable metrics, idempotent event handling through transaction IDs, percentage-based transaction fee models with fixed fees or exemptions, and persistent metrics for recurring items such as active physical cards, with prorated charges based on activity duration.

Selecting a pricing model is a significant startup decision because it affects revenue scalability, customer adoption, billing complexity, and the cost of future changes. Subscription pricing provides fixed, predictable plans and simple customer choices but can limit personalization, upselling, and revenue growth from heavy users. Usage-based pricing, popularized by cloud providers such as AWS, charges customers only for consumption, lowering adoption barriers and improving perceived fairness, although it can produce unpredictable costs and weaker customer retention. Max-usage pricing combines a minimum platform fee with charges based on peak usage, supporting customer growth but requiring reliable measurement and making bills harder to forecast. Hybrid models combine subscriptions with usage-based add-ons, creating more predictable revenue while potentially introducing lengthy price lists and complicated billing logic. Per-seat pricing is easy to understand but may encourage credential sharing, while fair per-seat pricing charges only for active users and prorates changes, improving transparency at the expense of technical implementation and invoice clarity.

Anh-Tho Chuong, co-founder of Lago, discusses common pitfalls for technical founders when addressing business topics, emphasizing the need for caution with certain strategies. PR agencies, often costly, may not be effective for startups earlier than Series B due to their general lack of proactive approach and the need for internal management. Attribution modeling, while appealing to some with a consulting background, can lead to extensive debates and resource allocation without necessarily driving company growth; instead, maintaining a manageable cost of acquisition and focusing on straightforward actions can be more beneficial. A/B testing is critiqued for its often impractical requirements for startups, such as needing large sample sizes and extended timeframes, which may not be feasible for early-stage companies; alternatives like surveys and iterative improvements are suggested as more practical approaches. Overall, the advice encourages founders to focus on direct, impactful strategies that align with their company's stage and resources.