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A little bit about me

Hi. While this blog is a part of Seed Catalyst’s website, I realised over the initial few weeks that a lot of you are first introduced to the firm via the blog rather than our home page.

So to introduce myself - I’m a business consultant working with early stage technology firms to help streamline their strategy and go-to-market approach and support them for fund raising. 

With this blog, I aim to capture key market trends that I see in the industry, the ecosystem and cross-plays in some of the more interesting and upcoming sectors, as well as cover interesting companies that I meet. 

I will also be addressing vexing and interesting valuation and deal/term-sheet structures that would be of interest to technology start-ups at various stages of their growth.

So let’s get started...

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Its all about subscriptions PDF Print E-mail
Blog - Market trends
Monday, 29 November 2010 21:48

Now that the month is coming to an end, here's a short review of one of the sectors which saw some action and that is online billing companies. Cloud based services in all forms have been the flavour of the season and that has a catalytic effect on SAAS based subscription billing services.

Vindicia a company that provides an on-demand billing platform in a SAAS model, raised $20 million from FTV Capital, Bertelsmann Digital Media Investments, DCM and Onset Ventures. Vindicia supports SAAS providers, gaming, dating and such forms of online merchants with their billing and fraud management solutions. The firm charges its fee at 2-3% of the revenue billed for merchants on their behalf and had revenues in the range of $6-8 million in 2009. Their total funding till date has been close to $41 million including a $1 million Series A from Symantec in 2003.

Some of the firm’s competitors include Aria Systems, Zuora, Metratech, Digital River, Monexa.

Zuora, which has focused its solution on subscription based billing, has also raised $20 million in November from Redpoint Ventures, Benchmark Capital, Shasta Ventures, Marc Benioff and Tenaya Capital. The firm has been cash flow positive since earlier this year and boasts customers across media, telecom and cloud computing.

And then, there are Aria Systems offering billing and subscription management with investors such as Hummer Winblad and Venrock. Aria last raised funds in 2008 with a total investment of $14 million. Monexa provides on-demand subscription billing services to Salesforce customers among others. They have average quarterly revenues of $800-900k with EBITDA losses of over $296k in Q3 2010.

Vindicia and Zuora certainly come across as the strong, innovative players in the SAAS based subscription billing services. Zuora provides billing along with additional services such as flexible pricing, multiple rate plans, subscription changes, renewals, up sells etc which is a distinct advantage as compared to payment gateways.

The threat is newer players nibbling at the flanks. One such competitor is Recurly which charges 1-3% of transaction revenues on a monthly basis as compared to on a transaction basis. Works well for start-ups. Another player is CheddarGetter – their differentiator being the billing model which is a flat fee of $39 per month rather than percentage based fees.

The sector should soon be ready for some M&A activity. The question is would the acquirer be someone like Facebook, Zynga, Playspan, Paypal or perhaps the traditional billing vendors like Amdocs and the like making their online entry. For Zuora the bet would be on Facebook but for the other players I might actually consider Amdocs. With the QPass acquisition, the firm made its entry into billing digital goods and services. They must be ready to extend their sphere of influence from telecom to billing for gaming, online media as well as cloud based services.

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