After Paddle raised $200 million at a $1.4 billion valuation last week, the London-based startup is making a key acquisition to bring more functionality to its payment platform for SaaS businesses. It acquired ProfitWell, which built a popular toolset to provide analytics and retention tools to businesses that sell their products through subscriptions. Paddle buys technology and product, but also an interesting user base: ProfitWell says it has more than 30,000 customers, including big names in the world of SaaS services like Canva, Hubspot, Notion, Zenefits, Prezi and Autodesk, who now all become Paddle Clients.
The deal is valued at more than $200 million, Paddle said, in cash and equity. Paddle has some 3,000 customers; and beyond that, he’s gained some notoriety as a fly in the ointment for Apple by building and preparing to launch (provided Apple opens up its platform or is mandated) an alternative to the flow of Apple’s native integrated payments for iOS publishers who want more direct control over their subscriptions and billing.
“Paddle and ProfitWell share a common goal: to maximize revenue for our software customers by addressing operational and financial hurdles that cost unnecessary time and labor. Both companies aim to ‘do it for you,’ rather than just helping you solve it,” Paddle CEO and co-founder Christian Owens said in a statement. “That’s why we are delighted to announce that we are acquiring ProfitWell. Having created the number one subscription metrics product on the market and cementing its reputation as the trusted authority on revenue growth in the $400 billion SaaS industry, ProfitWell will add tremendous value to our offering. We couldn’t be more thrilled to have Patrick and the team on board to help us achieve our mission of managing and growing SaaS businesses automatically. »
Boston-based ProfitWell appears to have been primed, giving its co-founders, including CEO Patrick Campbell, a comeback. All of the startup’s employees will join Paddle, with Campbell becoming Paddle’s chief strategy officer and fellow co-founder Facundo Chamut becoming the startup’s chief product officer.
The deal underscores Paddle’s ambition to build a more comprehensive platform around its core payments business. It’s a very classic playbook for a payments company, not just because digital payments remain a low-margin business; but because providing a wider range of services around these payments helps diversify revenue and further creates an ecosystem of products to help retain and retain customers.
It’s also the path payments giant Stripe has taken as it expands its services (most recently: launching an app marketplace to complement Stripe’s native products). In the case of Paddle, ProfitWell offers the company a fairly comprehensive suite of services aimed at SaaS businesses: in addition to its core payment product, it will offer tax, billing and reporting, and now retention analytics and pricing – all services that SaaS-based companies need to manage their subscription business and reduce churn, but not necessarily “at the heart” of the technology they build themselves to sell to others .
The issue of retention (and its flip side, churn) is important in the SaaS world: there has long been an aspect of subscriptions where users enter payment details once and actively, but also sometimes forget by inadvertently paying again, turning them into repeat customers.
But as the market matures and we find ourselves in a phase of economic and spending tightening, some will want to move away from that and take a more proactive role in managing spending.
“At ProfitWell, we are committed to driving revenue growth for some of the most exciting and forward-thinking businesses on the planet, and by joining forces with Paddle, we see an opportunity to do even more,” said Campbell in a statement. “Paddle shares our mission to help thousands of software companies avoid operational hurdles that impede growth by taking care of these issues entirely. These shared goals, combined with the natural cultural fit between our two companies, meant that adding our subscription metrics and loyalty tools to the offering made perfect sense. We are excited to have the opportunity to bring our teams together to build a truly holistic and powerful payment infrastructure at the heart of the SaaS market.
Interestingly, while ProfitWell’s products (its flagship service is appropriately branded “Retain”) are designed to analyze millions of data points to help its customers identify when someone is at risk of wandering off and provide tools to prevent this from happening, the product itself is not priced on this premise, but on a pay-as-you-go model, much like AWS. The base rate for the service is zero, with customers paying only when revenue is recovered. (It also offers reporting tools for Recognized Revenue and “Smart Pricing” to help businesses analyze and implement more accurate and efficient subscription pricing for customers, and these are price on a monthly basis.)