I think the approach Chargify is taking, is a real good one. In the
beginning, we at MoneyBird also found it hard to setup the billing
environment for our customers. Delivering a service like Chargify to the
starting businesses makes really sense. Maybe this also starts these
companies to charge something for their great services, instead of offering
everything for free.
Currently, we at MoneyBird are using our own API service
(http://moneybird.com/help/api) to bill our customers, but there is still
room for improvements. We are certainly looking into this, to make our
product more suitable for the kind of billing these startups are doing.
If you’re a small Web 2.0 business, you shouldn’t have to build an application from scratch to properly bill your customers.
That’s the thinking behind Chargify, a billing and subscription system by TechCrunch50 startup Grasshopper. The company’s API and hosted payment solution makes it easy to integrate the system into an existing website, allowing businesses to charge customers on a recurring basis, manage subscriptions, comply with PCI regulations and intelligence from billing.
I spoke with Grasshopper CTO and co-founder David Hauser about how his solution is different from FreshBooks, Zuora, Vindicia, MoneyBird and other competitors.
I also spoke with lead developer Michael Klett about how the system actually works.
ZDNet: Tell me about Chargify’s mission.
David Hauser: Chargify is a recurring billing system which helps Web 2.0 and software-as-a-service companies grow. We have learned a lot about the industry, and have tried to understand what companies currently being developed need most.
This is why we have integrated the following in our service:
- Business intelligence tools, which will provide you with information and trends that will help you make better business decisions;
- PCI compliance, which for anyone who has spent the time dealing with this will be thrilled at how much time we save them;
- multi-gateway support, so instead of having credit cards locked down with just one gateway like Authorize.net you can have options; and
- API Integration, because we don’t want you to be unprofessional and it should say your company name, not ours, on your customer’s credit card statement.
ZDNet: How did you conceive of Chargify?
DH: I started the company named Grasshopper six and a half years ago. Chargify came out of our Labs division. That’s a successful company serving lots of entrepreneurs.
There’s a real void in the market, and that’s why we launched it.
More than 50 percent of companies at TechCrunch50 were proposing charging someone something. So we see an opportunity there.
The first thing was that we wanted to make it really simple to use. The labs process is quite formalized. Building it, that was a core team of two people plus myself.
Just in hearing about it here and there, we’ve had a lot of people demanding to be in the private beta.
There are lots of people doing billing only: QuickBooks, FreshBooks, and others who will invoice and bill people. But when is the last time you invoiced a website? Never, because you bill their credit card and send them a receipt.
The other set of competitors would be what I call large-scale people: Zuora, Vindicia, Aria Systems. All of them are large, and so are their fees. The minimums for Zuora are $10 to $15 a month in fees and $50,000 in startup fees. That’s more than most startups can even imagine making in their first year with a Web app.
Chargify operates on a different level, but we provide all the functionality Web 2.0 people need.
ZDNet: So how’s it work?
Michael Klett: Customers start out on a merchant’s website that’s integrated with Chargify. They’ll enter their credit card data there to purchase an item. The merchant passes that data to us over SSL. We’d verify that and run that information against the merchant’s own payment gateway.
If successful, we’ll set up a subscription and set up a pass/fail type of response. If there are any problems, we’ll pass along the errors so the merchant can display them on their own site.From that point, Chargify takes over charging the credit card on a recurring basis.
Chargify’s API accepts method calls using HTTP, and returns responses as JSON or XML. It helps merchants keep the purchase flow on their own sites and let Chargify do the processing.
We also handle the Dunning process in case an account goes past due or a card is canceled. We’re handling a lot of that tough stuff.
Another way to integrate with Chargify without doing all that business with an API and coding is to direct people to a white-labeled page hosted by Chargify. It’s a great first start.
ZDNet: Can you really build a successful business around the little guys?
DH: When you’re selling to the enterprise, it gets really complicated.
We believe [the little guys] are the largest part of the market. Zuora advertises that they have 100 customers as a selling point — we have more than that in beta sign ups. We’re supporting over 40,000 entrepreneurs with our phone system.
This is a self-sustaining business with a few hundred customers and a profitable business shortly after that. There’s not a lot of overhead. Because it’s in-house, we’re already a customer and our other products will bill through Chargify.
ZDNet: Who’s shown interest in Chargify?
DH: Charities who want to collect donations on a monthly basis have expressed interest. Also, some offline-type billing applications [that are] on a yearly basis, such as lawyers or other professions with retainers. The application is flexible enough to deal with anyone who wants to bill someone on a recurring basis.
If you’re billing under 50 customers a month, it’s free. It’s good word-of-mouth branding. If you’re a freelancer who wants to send invoices, we’re probably not the right fit.
It’s all built in the cloud, so we can scale it up and down rather easily. The only tax on the system is concurrent transactions.
Public beta begins around November. There will be invites for people. Our target is to launch by 2010.
ZDNet: You mention support for PCI compliance, which addresses the security of customer information for transactions. How do you convince people the cloud is safe?
DH: We help ease the PCI compliance burden on customers with a shorter four-page form. The sensitive data is the credit card, expiration date, name and address, which will never be stored in public cloud infrastructure. Infrastructure we control or that we’ve placed somewhere specifically for PCI compliance will always be vaulted and encrypted.
Amazon Web Services is not PCI compliant. You have to be careful about that.
There are a lot of people out there that need us. There are a lot of Web 2.0 companies out there that aren’t making money but need to be. If you have a valuable web application that people want, you should make money.
Chargify can handle single or recurring transactions, free trial periods, promotions, refunds, receipts and reminders. Chargify does not charge individual transaction fees and, like the cloud, scales costs as your business grows. Read more about Chargify on its website.
