Octane, a software billing startup, announced Tuesday that it had raised $2 million at a $10 million post-money valuation to further its pay-as you-go billing software.
Akash Khanolkar met his co-founders a decade ago at Carnegie Mellon University. Since then, they have gone off in separate directions. Khanolkar's case was that he managed a cloud consulting company and witnessed how quickly companies like Datadog or Snowflake came to market. He also dealt with Amazon Web Services.
Khanolkar shared his findings with TechCrunch that billing software used a pay-as you-go model to bill companies rather than the flat-rate models.
He explained, however, that monitoring consumption can make billing more complicated. Companies now need to monitor how customers use the software each second to accurately bill each month.
Khanolkar stated that Octane was created by the co-founders to help vendors set up a plan, track usage, and then charge for it in accordance with the shift to consumption-based billing.
API-driven means that vendors can send us usage data. We store this and then do real time aggregations to bill customers at the end. There has been some contention between product and engineering. We know that engineers are responsible for creating core plans. Therefore, we created a non-code experience so product teams could create new price plans and make changes like adding coupons.
Khanolkar stated that there are several Octane competitors in the cloud billing market. These include Chargebee, Zuora and Zuora. Khanolkar also said that these companies have been successful in the past few years with the subscription management aspect. There is now a consumption- and usage-based world and new software businesses like Octane are emerging to compete.
Basis Set Ventures led the new round of funding. It included Dropbox cofounder Arash Ferdowsi and Github CTO Jason Warner. Fortress CTO Assunta Gaglione and Scale AI CRO Chetan Choudhary. Former Twilio executive Evan Cummack. Esteban Reyes, Abstraction Capital, and Script Capital.
According to Chang Xu (partner at Basis Set Ventures), usage-based billing has become a crucial and fundamental piece of infrastructure. It is something every department should care about, as it can affect your revenue. We speak to many companies in the later stages of their development who have this system built in-house. They are concerned about ongoing maintenance costs and wish that they could outsource it.
We are impressed by the Octane team's dedication to building a robust, usage-based billing system. They have validated this opportunity by speaking to many engineering teams in order to solve all edge cases. This is crucial for something as critical as billing. Octane is a part of the tech infrastructure and we are confident.
New funding will be used primarily to hire engineers as well as product, sales, and marketing staff. Octane currently employs seven people, but Khanolkar anticipates that there will be at least 10 employees by the end.
The company works with many companies, mostly in the infrastructure and depth gauge industries. Some unique uses of Octane are also emerging, such as a construction company using the use meter to track employee hours and electric charging companies using the meter for these purposes.
Khanolkar said that although we didn't see it being used by construction workers, it could theoretically be used by any company that keeps track of time, even legal.
Although he declined to discuss the company's revenue, he did state that it had two to three more years of runway.
Khanolkar believes that the company will soon roll out new features such as price experimentation based upon usage. This will allow customers to make better decisions about pricing their software. Customers will be able to test different plans against their usage data to determine which plan works best.
He said that while we are still in the early stages of consumption-based models and more end users choosing to use them, it is becoming increasingly common for enterprises to allow them to try the software first, then let them pay as they need.
