With his co-founders, Krish Subramanian left his corporate technology job and has turned Chargebee from a small startup in Chennai into a booming SaaS player with funding from top-tier VCs. His crisp thinking and dedication demonstrate that it’s possible to build a formidable high-growth startup outside of Silicon Valley.
Elliott Adams: I’m wondering if you could explain when you guys saw that there was something valuable you could offer customers with Chargebee?
Krish Subramanian: Sure. We started with this in late 2011 when Braintree was in existence but Stripe hadn’t launched yet. That's when the four of us came together to start building a company. The three other guys had been part of the AdventNet company's transformation into Zoho as a cloud-based company from mid-2005 to 2006. They spent over a decade building products there, and one of them was my college classmate during my engineering days. Through these ten years, I had been, from the sidelines, watching this global company built out of Chennai, and transforming into the cloud.
We just wanted to build a company together. It was not about one particular idea. We didn't really say, “Okay, this is the problem I faced earlier,” and so on, even though we had faced this particular challenge at some point.
We could see that there were two or three problems, which are repetitive for most products, the convergence of three things. One, the cloud was taking off in a big way by 2010-2011. Number two, people were building either cloud first or mobile first. The third was that the revenue model was definitely subscription, so there was some kind of a recurring revenue relationship with the customer.
Then more and more companies were global, and interestingly, with the convergence of these ideas, we could see that the infrastructure of products that they used to run your operations needed to change. It could be a monitoring system, it could be operations, and so on.
EA: You were right on top of that wave.
KS: And existing systems like Quickbooks or Xero are not built for collecting payments from ten thousand customers without throwing people at that problem, right? If you have a SaaS product—you have too many changes coming in throughout the day, not just in a month, where your customers are being prorated, it's either you go to a self-service model, or the inherent nature of the pricing model that allows the prices to vary on a regular basis. Now, this is not a problem where you can throw people at the problem, where we can all can hire a bunch of accountants to solve.
When it comes to how these companies collect payments, operating with customers in probably 150-200 countries, all that needs to be done even at a very small scale. Now, they have two choices. One is to say, “I can build all my billing systems on top of a payment gateway,” because Stripe gives you some confidence for subscriptions to charge a little bit, but not confidence of building an invoicing system that you can keep on building with the available resources internally. Or you can say, "I need a billing system that will enable me to scale." It could be when you go global: do you want to be able to co-collect payments with customers with a credit card? It could be bank transfers, wire transfers, paying with PayPal, etc., because your customers have varied preferences in which they like to be charged.
KS: Then, when you're more upstream, you want to be able to collect payments from customers who say, “I want to be able to pay you with net 30 or net 45. You need to send me an invoice in advance. Issue me a credit.” For pretty much every one of these exceptions, when you're giving a discount, all these things now get in the way of customer experience if you are not able to do it immediately. It could be that you go back to your CTO team or a developer, or you need to have a couple of developers who are available for your sales guys to say, “I want to issue this coupon to the customer, how do I do it?” Now they need to hand them the exception and tell them how to do it: “Go into Stripe, and since you don't have admin access, so here is a common ID to use. You create a coupon for February 10, and you can set limitations as to when the coupon will apply.”
EA: That’s a heavy burden for one customer.
KS: They're all small things, but hundreds of small exceptions add up to make it so that it becomes a dedicated product within your core product. Where you are spending that product management time to take care of customer experience, right? Your customer experience with billing comes from how well they are able to interact with your product and how well you can enable them to do things as and when they want it. That is what Chargebee offers as a plug-in-and-play solution, where you plug in the Chargebee and you straight away are able to deliver a global experience to your customers with a superior billing module that you don't have to keep up based on exceptions.
You don't have to build your billing after you experience an exception. The developer team has been documenting all the exceptions over the last four years and trying to capture as many scenarios as possible so that you are able to deliver your support, sales, marketing and finance. So, the exception becomes the norm, right?
EA: It sounds like you’ve gotten to a compelling product, but can you share more about the early days?
KS: We decided to just build a company together. Initially, we didn't plan or even know whether we could build with other people's money, meaning you could take venture or something, right? So, any actual work experience gives you the buffer of savings.
For a decade, I'd been thinking about wanting a startup. We had already planned in a frugal way, we actually just kept away, saving money for starting up later. So, it helped that for two years, we were able to bootstrap the company. Our ten years of savings were put aside, and we decided to bootstrap the company.
EA: Wow, that's incredible. I haven’t heard of many teams putting aside that kind of cash beforehand from their salaries.
KS: We never planned for actually raising capital at all, but after one or two years, you realize that the nature of the product is such that the category we picked, which is vertical SaaS, where the solution has to go really deep to make a solid case for every vertical, right? It's not like where you build one helpdesk or one CRM, which serves most markets. It those cases, universities can use it, car-sharing services can use it, and even SaaS companies can use it. A helpdesk or a CRM can be that way, but a billing system needs to be very specific to every vertical. I need to make a solid case that says, “Here is the best billing system for SaaS,” “Here is the best billing system for e-commerce.”
That makes it very challenging for you to actually go across horizontally. By the nature of the service now, you are going deep into one niche and then solving it very well, which means that it takes longer and is harder for you to solve the problems, and that requires upfront capital. We realized that after a year, plus the idea where nobody likes to trust four guys building a new product out of somewhere random in Chennai, or the U.S., with their mission critical processes.
So, bringing on somebody like Accel Partners as an investor backing us adds more credibility, right?
EA: Yeah, of course.
KS: So, we found that Accel US had partners here in India, and some of our customers were backed by Accel. Through that network, they vouched for us, and then that in turn became a long conversation. We got to know them very well, and we found that they were challenging our product and market assumptions very interestingly. They were also investors in Braintree, and so they were actually wondering if we were a feature and not a product. They were asking the questions of Braintree about our service, and by asking if this is a feature on top of a payment gateway, because Braintree also offers subscriptions: "Why do I need this?"
They kept asking the same question to our customers who had Braintree plus Chargebee. They also asked the Braintree management teams if they would actually double down and go on to build a billing system themselves. That's when the clarity emerged that we had something unique to build a business that wouldn’t be easily challenged.
We took money from Accel, we raised two rounds of funding. The angel round was immediately followed by what we—Series A. We raised $1.2 million in total, followed by a Series B with Accel and Tiger Global a year after that, and another $5 million. But most importantly, access to capital is available pretty much anywhere in the world. However, the best way to actually get them is through customers, if you are able to win customers anywhere in the world, and those customers are actually backed by some of these investors. There is no better way for you to get the word out.
EA: That's so interesting. It's a customer acquisition channel for you at some level.
KS: I've always viewed investor conversations as also a way to get customers. If you don't get money ideas, get some customers.