Founder Friday: Akash Khanolkar of Octane

Akash

Yeah, Stripe's an awesome tool. Right since the beginning I've been using Stripe, I'm a huge fan and I continue to be. So, Stripe does a really good job of payments. Their de facto mission is really helping empower payments across the world, across the globe and actually doing consumption-based billing, it's a much deeper problem. It requires three core pillars. One is actually doing the metering, tracking consumption of usage, doing the aggregation of that consumption and rating pretty much the price per meter, and then ultimately putting it into a bill. So, the ultimate bill stage is where we actually integrate directly with Stripe, but we're Octane really good at being able to handle accepting measurements, doing the aggregation, so we have a really good end to end. Typically, what we see with customers is a homegrown implementation, where they have a large time series database, where they're tracking all their usage, different dimensions, different meters, and they do the aggregations on their homegrown system and they ship it off to Stripe for payments. So, that's a pretty typical use case that we see.

Ben

So, take me through a prototypical customer. What's an example of a type of business where they would have metered billing, and then how do they use Octane to simplify that metered billing?

Akash

Sure, let's take a database company, for example. Any hosted database offering, let's say manage Postgres. The way they're selling their customers is likely based on a few set of metrics. Maybe they're charging based on storage, maybe they're charging based on number of replicas. They could be charging based on a large set of different meters. Now, what they need to do as an end provider, is for all of their customers that use the managed Postgres database, for example, their service. They need to now track the usage across all of their customers. They need to then make sure to constantly do the calculations to understand, how much does it cost our end customers to be using this service? And ultimately they have to do the billing.

So, the way that you would use Octane is the manage Postgres company would send Octane, as they happen, measurements, to say, "Okay, this customer A has this much storage. Customer B has this many replicas. Customer C has this usage." And Octane's job is to, step one, accept those measurements very easily at a high throughput, and to store it, aggregate it, and ensure that we're continually running calculations based on the price plans that you've set for those customers. What's great about Octane is we actually have a no-code experience where you can create metered price plans, so you can create, okay, I want to charge based on storage. Once you hit this storage limit, charge a new amount, and we do all of that. We track all the usage, we track all the different price plans that they're on, different limits. If, for example, we're saying above three replicas, you're charged 250 bucks, we would automatically do all of those calculations for you. All you need to do as an engineer is send usage for all your customers and create the price plans in our UI. Does that make sense?

Ben

Yeah, definitely because that was going to be my next question. It sounds like for every different product that has metered billing, there could be very customized logic around the different billing tiers and how customers are charged. I was going to be curious of how you define that in Octane, but it sounds like there's a visual tool, without writing any code, to define the pricing rules and how usage is turned into at the end of the day, a price.

Akash

Yeah, exactly. The friction point that we typically see in the current homegrown implementation, is that most of it is homegrown plus Stripe, and what ends up happening is all the price plan deployments. Pretty much the entire monetization experience becomes purely an engineering task, so anyone that wants to facilitate or help with the monetization bit, so let's say product, non-technical head of finance, anyone that wants to be connected to the monetization experience, rolling out price plans, determining different price cards, how much we want to charge, they're really uninvolved from the product, then they have to keep going to the engineering team to make changes. So with Octane, we have a no-code experience where anyone that owns monetization, typically a head of product, can go in, create price plans, add meters, deploy them to customers, and all the engineering side that needs to be done, is just send usage for customers. That's all we have to do. So there's a really nice handoff.

Ben

And do you guys handle the way that pricing is presented to the end user in terms of when they get their invoice at the end of the month, does Octane map out what they're being charged for and why, or is that something that just get sent to Stripe and then the Stripe invoice has that data?

Akash

Yeah, so we do. Currently the invoicing solution, again, they're not really built to be able to deal with usage based billing because it's just a much harder thing to itemize. So we actually do the invoicing for that reason as well, because there's just a lot of granularity that needs to be shared, especially with an invoice. Something that we are also working with customers on is being able to share a very detailed breakdown of usage to end customers. So being able to actually graphically show customers usage, being able to graphically show customer spend, that's also really helpful from an Octane perspective when companies are selling based on consumption.

Ben

Got it. So basically, you generate that invoice and Stripe is just used to process a credit card or ACH payment to pay the invoice.

Akash

Correct.

Ben

So I'm curious, how do you charge for the product? I know Stripe takes a percentage of money that comes in from payments. Is it similar with you or is there a different model?

Akash

Yeah, we like to collaborate with each customer individually to make sure that we get a price that works for them, but what typically works best is we do a percentage on the invoice. So we do a percentage point on the invoice. It scales fairly well with most of our customers and as they scale up, we increasingly become useful to them, so, that's how we price.

Ben

Roughly what percentage? I think Stripe-

Akash

1%.

Ben

1%. Got it. Makes sense. So, certainly less than Stripe charges for credit card and maybe, what they charge for the billing product.

Akash

Yeah, the Stripe billing plus invoicing is 1.5%, roughly 1.5% collectively.

Ben

So you're quite competitive with the way they charge.

Akash

Yeah.

Ben

And tell me a bit about where the business is. I believe you raised a seed round recently. So, can you share some stats about your progress?

Akash

Yeah. We did a public product hunt launch where we hit the top of product on roughly two months ago, since then we've onboarded a ton of self-service, that alongside a bunch of other marketing efforts. We signed up a ton of self-service customers, which has been really exciting. We're continuing to add on customers and seeing tons of different use cases, which is really cool everywhere from the classic, the obviously developer tool cloud-based focus, but also we're seeing use cases like construction companies wanting to track construction worker hours to do internal billing and UV companies wanting to do meter billing for their products, so we're seeing a really wide range of use cases, which has been super exciting.

Ben

And in terms of the team, how big is your team now and what are some of the plans around hiring and growth?

Akash

Yeah. So we have eight people right now. We're continuing to hire for growth. Right now we're actively looking for a product designer to add onto the team, largely because we see that again, our no-code experiences is really important. We've at this point, made it super frictionless for engineering, but now we want to continue to empower anyone that's managing monitorization. And that's mainly in our no code tool. So having a strong product designer would be really helpful there.

Ben

Yeah. I think fortunately, and unfortunately, a lot of companies that are looking for product designers now, so definitely best of luck to you there, but I know certainly we are also hiring product designers, a lot of companies I know are. It's a really important, in demand role.

Akash

Yeah, absolutely.

Ben

Taking a step back, what led you to build Octane?

Akash

Great question. So in a previous life, when I say previous life, before I started Octane, I was running a cloud consulting business and in that business, I worked with a wide range of different customer types, so I worked with hedge funds, fast growing mobile app companies, well-funded startups, and though a very disparate set of customers, doing cloud consulting, I always had one of the same set of requirements being, creating a monitoring system to help them ensure system uptime and health. I guess it's worth pointing out this is cloud infrastructure monitoring.

And that was really interesting to me. I was building this really awesome analytics experience for people to see how their infrastructure health works, but what I noticed was, it was mainly going in the SRE's hands. It was mainly going in the hands of people, purely for the purpose of ensuring system health, and I thought there was a way bigger business value in that infrastructure metric data. There's a lot more there. And that was when I had the thesis. I think there's something really exciting in converting infrastructure metrics to business value. That was a bit of a "aha moment" for me, and I started to just probe and talk to users about, what does it mean? What are the possibilities here?

And that's when I stumbled upon meter billing. So the context of taking metrics and converting it to a bill, and as I started talking to users, I saw that it was one, a super significant engineering problem. If we project forward to when you're a developer tool and the size of a company like Twilio, where you have several hundred billing engineers maintaining and supporting that homegrown billing system, it's pretty typical if you've seen a lot of the larger developer tool shops.

That's when we realized, well, this is a significant problem, and actually, even moving back down to startups, like series A series B's, that also spend several months, four to eight months just working on their homegrown billing system, when they really should be working on their core product. The fact that we're in such a competitive market today, it's essential that you're focused on building what you're really good at, not these tangential things. That's why there's a lot of really awesome security products out there, and that's why we built Octane. There needs to be a better support in this meter billing.

Ben

Do you have any plans or current functionality around billing analytics?

Akash

Yeah. That's a hotly requested feature and something we're about to roll out. One tool I'm really excited to talk about, on the topic of billing analytics, is we just went into early access on this new price experimentation tool. So, that's amazing analytics for primarily product people. Can I tell you a little bit how the tool works?

Ben

Yeah, would love to hear about it.

Akash

In usage based billing, one of the really big challenges is since you're tracking consumption and billing on a pretty much real-time basis, on a per second basis, in some situations, it becomes really hard to figure out how to price your different meters that you're charging on. If you're to say, "Okay, I'm going to charge based on number of API requests." How do you know what dollar amount to charge on those requests? How do you know how many to charge at what different tier bands the price points are? How does it look across your large set of customers and cohorts? As you can imagine, you can potentially really mess up your billing if you charge the wrong dollar amount for a specific meter. So with our price experimentation tool, we've created a way to rapidly experiment with different meter price plans against historical usage to see how much money you would make, if you had deployed a specific price plan. Additionally, we've built out a way to actually project usage into the future, so you can see if for a given price plan, how much money I'd make. So that's a hotly requested analytics tool that we actually are now in early access.

Ben

Yeah. That seems super valuable and even with a more basic SaaS billing model where you're just charging a fixed amount per month and your different plans, there's a lot of needs around billing and revenue analytics, and it sounds like some of your customers may have very complicated meter based schemes, and so that analytics will be super important to how they think about setting their prices, experimenting with different prices and adding new products and stuff.

Akash

Exactly.

Ben

So I'm curious, maybe tell me a bit about, aside from building out some of that analytics functionality, anything else exciting on your roadmap for the next year or so?

Akash

Yeah. These are the two biggest ones, honestly, billing and pricing. We believe that we're really focused on two main hats, which is engineering and product. We believe that there's a significant opportunity to help a lot of companies, mainly on these two products and what's nice is they go hand in hand. Our pricing tool makes it really easy to optimize and continue to iterate on how we're billing and billing is really just a way of executing on a price point that you've decided. So, right now that's our main focus for the next several months, is continuing to work on these two tools.

Ben

So Akash, it's been awesome learning about Octane, for anyone out there who's interested in using the product, it's getoctane.io. and if anyone's interested in joining, you mentioned earlier, product designer, any other roles you actively hiring for?

Akash

Yeah, primarily right now it's product designer. Obviously always hiring awesome software engineers. Any software engineers out there, we'd love to talk. Feel free to shoot us an email at [email protected], or email me directly [email protected] I'd be happy to chat with you.

Ben

Great. Well, thanks so much for joining us.

Akash

Yeah. Thank you so much, man. Appreciate it.

Brian

Thanks for listening to PodRocket. Find us at PodRocketPod on Twitter, or you could always email me, even though that's not a popular option. It's Brian@LogRocket.