Octane Secures $2M Funding for Flexible Billing Software

Octane Secures $2 Million to Expand Pay-As-You-Go Billing Capabilities

Octane, a software billing startup, recently announced the completion of a $2 million funding round. This investment, resulting in a post-money valuation of $10 million, will be utilized to further develop its pay-as-you-go billing software.

Founding and Market Observation

Akash Khanolkar, alongside his co-founders, initially connected a decade ago while studying at Carnegie Mellon University. Following divergent career paths, Khanolkar observed the rapid growth of companies like Datadog and Snowflake, and their interactions with Amazon Web Services while operating a cloud consulting firm.

He noted a common thread among these quickly expanding businesses: the implementation of pay-as-you-go billing models, contrasting with traditional flat-rate pricing structures, as Khanolkar explained to TechCrunch.

The Complexity of Consumption-Based Billing

Monitoring actual consumption introduces complexities to the billing process. Companies must now meticulously track software usage on a per-second basis to ensure accurate monthly invoicing.

Recognizing this industry shift towards consumption-based billing, the founding team reconvened in June 2020 to establish Octane. The company provides a metered billing system designed to assist vendors in creating plans, monitoring usage, and charging customers in a manner similar to Snowflake and AWS, according to Khanolkar.

Octane’s API-Driven Approach

“Our system is API-driven; vendors transmit usage data to us, which we then store and aggregate in real-time,” Khanolkar stated. “This allows for accurate customer billing at the end of each month.”

Octane addresses the potential for friction between engineering and product teams. While engineers focus on core plan development, a no-code experience empowers product teams to independently create new pricing plans and implement modifications, such as applying coupons.

Competitive Landscape and Market Potential

The global cloud billing market is projected to reach $6.5 billion by 2025. Within this market, Octane faces competition from established players like Chargebee and Zuora, who currently excel in subscription management.

However, Khanolkar believes a new wave of software businesses, including Octane, are poised for success in the emerging world of usage and consumption-based billing.

Investment Details

The funding round was spearheaded by Basis Set Ventures and included participation from Dropbox co-founder Arash Ferdowsi, Github CTO Jason Warner, Fortress CTO Assunta Gaglione, Scale AI CRO Chetan Chaudhary, former Twilio executive Evan Cummack, Esteban Reyes, Abstraction Capital, and Script Capital.

Investor Perspective

Chang Xu, a partner at Basis Set Ventures, commented via email: “The increasing prevalence of product-led growth and usage-based pricing necessitates a robust usage-based billing infrastructure, which has been notably absent.”

“Furthermore, billing impacts every department as it directly affects revenue. Many established companies that have developed in-house solutions are now considering outsourcing this function to a specialized vendor.”

Xu added, “We are highly impressed with the Octane team’s commitment to building a best-in-class, robust solution. Their thorough validation process, involving extensive discussions with engineering teams, ensures they address all critical edge cases. We are confident that Octane will become an essential component of the tech infrastructure.”

Future Plans and Expansion

The newly acquired funds will be primarily allocated to expanding the engineering team, as well as bolstering the product, marketing, and sales departments. Octane currently employs seven individuals, with plans to reach ten by year-end.

The company currently serves a diverse range of clients, with a primary focus on infrastructure and the depth gauge industries. Unexpected use cases are also emerging, such as a construction company utilizing the meter to track employee work hours and electric charging companies employing it for usage metering.

“We hadn’t anticipated construction companies using our platform, but it theoretically applies to any organization tracking time – even legal firms,” Khanolkar noted.

While declining to disclose specific revenue figures, Khanolkar indicated the company has secured two to three years of operational runway.

Upcoming Features

Octane intends to introduce new features, including price experimentation based on usage data, to assist customers in optimizing their pricing strategies. This will involve enabling customers to test different plans against actual usage data to determine the most effective approach.

“We are still in the early stages of consumption-based models, but we are observing a growing preference among end-users for enterprises that offer trial periods and pay-as-you-go options,” Khanolkar concluded.