The global subscription and billing management market is estimated to grow at 14% CAGR to reach $7.8 billion by 2025. India’s Unicorn club member, Chargebee, is a leading player in the market.
Founded in 2011 by KP Saravanan, Krish Subramanian, Rajaraman Santhanam, and Thiyagarajan Thiyagu, Chennai- and San Francisco-based Chargebee provides a subscription and recurring billing system for subscription-based SaaS and e-commerce businesses. Chargebee was set up in an apartment in Chennai. Its founders were inspired by listening to, and reading interviews about other founders and just wanted to set up an interesting company from scratch. They did not really have an idea, but just the skill set and confidence to build a good offering.
As they searched for business opportunities, they began to narrow down on wanting to build a SaaS company that would address the billing problems faced by companies. They realized that most businesses catered to enterprise customers and did not really look at early-stage and smaller companies for whom managing payments was a big drain on resources. There was a need to build an easy way to process transactions that could support global clients, in different currencies.
Today, Chargebee allows customers to set up and manage their billing, subscription, and revenue operations. It helps businesses plug revenue leakage, increase customer loyalty, and grow into new categories. Companies can experiment with new pricing plans to see how their end customers react. Chargebee claims that even an enterprise customer can use its platform to move to a subscription-based model within 10 days. Its platform also provides developers the ability to use custom fields and custom domain support with mobile compatible check-out pages in addition to a highly stable REST API for extended flexibility.
As of April last year, Chargebee had more than 3,000 customers globally. It supports transactions in over 100 currencies and is well integrated with several payment gateways including Stripe, Braintree, WorldPay, and PayPal. Its customers include names like Okta, Freshworks, Fujitsu, and Linux to name a few.
Recently, Chargebee announced its partnership with Worldline that will create an end-to-end payment, subscription, and revenue operations solution for merchants offering subscription models. The partnership will allow merchants to improve and expand business operations efficiently and at scale. By combining Worldline’s payment gateway with Chargebee’s subscription management solution, merchants will be able to manage subscription billing and recurring payments through a single solution that spans both the operational and payment aspects.
It also announced several new product integrations to expedite workflow. A Microsoft Dynamics GP integration will help finance teams remove the manual process of importing subscription and billing data into their system by automatically syncing data on invoices, transactions, and customers. A NetSuite SuiteTax integration will help in optimizing book closure cycles by ensuring tax and compliance information is synced and accurate. A HubSpot CRM integration will facilitate quote-to-cash capabilities through automated subscription actions within HubSpot deals, a Zoho CRM integration will help sales teams in identifying more upsell and cross-sell opportunities, and a Mollie integration for an alternative payment gateway.
Chargebee does not disclose its financials. In 2021, it revealed that its revenues had doubled over the year. Analysts peg its revenues at $50 million annually.
The company has raised $218.2 million in 7 rounds of funding led by investors including Sapphire, Tiger Global Management, Left Lane Capital, Steadview Capital, and Accel. Its most recent round was held in April 2021, where it raised $125 million and was valued at $1.4 billion. It tripled its valuation in six months to join the unicorn club.
That appears to be a fairly steep valuation considering that a company like Zuora, which offers similar services, has a market capitalization of $2 billion on revenues of over $300 million. Let us say that Chargebee would be doubling its revenue in 2022 to $100M ARR, and the $1.4 billion valuation is based on that forecast. We do not have visibility into the profitability of the company. If Chargebee is substantially more profitable than Zuora, it may be able to defend the $1.4 billion valuation. Otherwise, as in most of the Unicorns, they’d have to backfill the valuation that has, as usual, gotten ahead of itself.
Overall, this is an excellent company that should maintain a focus on its fundamentals to find a strong IPO outcome.
This segment is a part in the series : Indian Unicorns 2022