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Chargebee Raises $125 Million at a Valuation of $1.4 Billion, Now Enters Unicorn Club

Enterprise software firm Chargebee said on April 20 that it had raised $125 million at a valuation of $1.4 Billion, making it India’s newest unicorn, signaling the funding boom underway in India and continuing the wave of software unicorns.

The round was co-led by Sapphire Ventures and existing investors Tiger Global, Insight Venture Partners, and Steadview Capital.

Moneycontrol first reported Chargebee’s funding round on February 23rd. This also makes Chargebee the 11th unicorn to emerge from India in just four months of 2021, compared to 11 unicorns in all of 2020, underscoring the high investor interest. Unicorns are privately funded firms valued at $1 billion and above.

US and Chennai-based Chargebee offers subscription billing and revenue management services to clients such as Freshworks, Calendly, Okta, and, among other subscription businesses. It now wants to target more businesses in segments such as ed-tech, OTT, and media. It has raised $230 million to date.

“We raised our round in October at a half a billion valuation, and what we have seen is a massive global transformation in the subscription space. Legacy businesses are looking at a recurring revenue model, and everything is moving to subscriptions that are causing an explosion in the market and creating demand for our business. For the next 5 years, we will look at expanding into more verticals like e-commerce, media, OTT, IoT while we maniacally focus on time to value for our customers,” Chargebee co-founder and COO Rajaraman Santhanam told Moneycontrol in an interview.

The startup was founded by Krish Subramanian, Rajaraman Santhanam, KP Saravanan, and Thiyagarajan in 2011. Interestingly, three of its co-founders- Santhanam, Saravanan, and Thiyagarajan were executives at Zoho- India’s most successful bootstrapped SaaS firm- before co-founding Chargebee.

“Our experience in Zoho gave us a lot of insight at a time when there weren’t too many software product companies. It gave us an opportunity to see a company building many products, the ability to spot an opportunity. We learned that by building products at Zoho and are applying our learnings from Zoho here,” Santhanam said.

Chargebee’s aggressive valuation underscores investor interest and high expectations from the company. Its listed rival in the US- Zuora, is valued at $2 billion, but in revenue, terms are much bigger than Chargebee, with over $300 million in Annual Recurring Revenue (ARR). According to sources, Chargebee’s revenue run rate stands at about $50 million.

When asked about the comparison, Santham said, “We focussed a lot on time to value on the product side, in terms of how we can get customers on the platform as soon as possible. The Net Revenue Retention (NRR) from our customers is between 140-150%, and that is where our growth value proposition comes in.” NRR shows to what extent a company can retain revenue from a given customer and grow it.

Chargebee’s major focus markets will continue to be the US and the European Union, though the Asia Pacific is also picking up.

Over the last year, SaaS IPOs of companies such as Snowflake, Zoom, Cloudflare, and Palantir have sparked a new wave of interest from investors in this space. Healthcare software firm Innovaccer became a unicorn earlier this year, while Druva and Icertis doubled and tripled their valuation to $2 billion and $3 billion in the last few months.

Santhanam also expects the market to get more competitive and more players to enter the space- a space that companies like Chargebee have created over the last decade. The large fundraise will also help Chargebee keep competition at bay, although it says competition isn’t a big concern right now. “95% of our customers don’t have a billing system, so what we are replacing is an internal system. A lot of time has gone into creating and solidifying the market. And now the market will see more competition,” he said.

“Capital gives us the freedom to have an honest look at the market; how can we stay focused on doing the right thing for our customers,” he added.

When asked, Chargebee also warned about the second wave of the coronavirus, which is gripping India and pushing cases to record highs.

“When the pandemic started, we clearly communicated that it is not business at all costs. It is essential to take care of employees. Now with the second wave, we are doing that again today. We are seeing what help people need from a mental and psychological point of view,” Santhanam said.

For many founders, becoming a unicorn and raising a lot of capital also brings its own challenges in managing expectations, growing too fast, and having a strong culture, among other things.

“From the beginning, we have said that the joy is in the journey. Becoming a unicorn is certainly a great milestone and validates what we have done so far. But we want to enjoy what we do. Success can be a byproduct of that,” Santhanam said.

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