Our Investment in Metronome: Improving Business Agility
In late Fall 2019, I was still at Dropbox finishing-up transition work when I heard from Scott Woody – to share how his startup idea was going. I had been working closely with Scott until he left Dropbox to explore doing his own thing. I thought highly of Scott, not just as an engineer, but as someone who had a great mix of the pragmatic and the correct. He introduced me to his cofounder Kevin Liu and we got talking.
Their idea for Metronome resonated immediately. I had seen the pain points around SaaS monetization first-hand – not just at Dropbox but at Microsoft before that. Two things struck me immediately. First, the premise was insightful – usage-based billing models are going to grow and become more the norm for all sorts of classes of software, not just enterprise infra software where we have come to expect it, but even end-user enterprise software and consumer software. But to do this well, it requires a lot of agility in a system that marries usage and billing. Something that looks easy at first glance, but is actually quite complex to both get right and have the business agility required over time. This is what Metronome provides. And that leads to the second thing that resonated with me – Metronome’s billing infrastructure is a great example of undifferentiated heavy lifting – those things that if an engineering team does on their own, it is very hard to get right and even then there is nearly zero upside and a lot of downsides in getting it wrong. Relational databases are another obvious example of undifferentiated heavy lifting. I could see the potential value of this, having built and then needing to evolve the various business models for the data services in Azure in the early days, and working on new SKUs and pricing for Dropbox.
Most early-stage investors will tell you that for seeds, it’s largely a bet on founders. Scott and Kevin are both second-time founders with successful exits, having sold their first companies to Dropbox. They were able to assemble an impressive team of angels who shared our conviction in their leadership. Great founders – check!
The other thing early-stage investors often factor is in – is the space the team is pursuing big enough to support building an impactful company? Certainly billing in SaaS is a big enough space – so then the question is – can Metronome really be impactful?
Last year I spent some time thinking about the kinds of shifts we would see in enterprise software over time. We wrote a view on this, which we call the Stakeholder Aligned Enterprise. In building this view, one of the things we came to recognize is the disparity between what’s possible and what’s feasible for most enterprise organizations. They can have the ideas, but has the industry offered the platforms that empower organizations to express those ideas? The answer is all too often “no” – and a big part of that is because of the complexity of building cloud-scale solutions. But another big part of that is simply we have not made common patterns simple enough, accessible enough to the broadest set of developers. Usage-based monetization is one of those patterns. As we meet new companies starting out in our work as investors, we see this intent more and more – but they need the platform to do it.
This is why Metronome was so interesting to us. While I hadn’t put pen to paper on the thesis yet, what was in my mind back in 2019 was that for SaaS software to continue to make great impact, we had to find ways of making the hard aspects of building it more accessible. Great space to make impact – Check!
But perhaps more important to me as the last couple years working with the team have gone by, Metronome is empowering their customers to bill the right way. We love usage / metering-based business models – because every dollar coming in, being tied to the use of the software, is actually a vote by the customer that that software continues to be of value to them. It’s the ultimate expression of NPS in a way. It keeps the builder of that software super aligned with their customers, a very tight loop where any issues the customer may be having are seen very quickly. In my work with other companies, there are efforts to open-up new offerings based on usage-based pricing, and more early companies wanting to start there. Kevin and the folks at Metronome have been able to help them chart this course.
As early believers, we congratulate Scott and Kevin and the Metronome team on their $30 million Series A. They have done an amazing job building a great team, getting product built quickly so they can validate it with the market, and making their first customers not just successful but ecstatic about working with Metronome.