#458 Lucas Lovell on SaaS Growth, Global Payments, and the Future of Product

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Mehmet: Hello and welcome back to the episode of the CT O Show With Mehmet today. I'm real please. Joining me, Lucas Lovell, VP of Product at Paddle like Lucas. As I was explaining to you before we did the actual recording, the way I love to do it is I [00:01:00] keep it to my guests to introduce themselves. So tell us a more about you, your journey, and what you're currently up to, and then we can start the conversation from there.

Mehmet: So the floor is yours. 

Lucas: Awesome. Thank you Meir. And firstly, thank you very much for, for having me on the show. Um, I'm really excited to be here and have a great conversation with you. Um, so as you mentioned, I am currently VP of Product at Paddle. Um, I've been at Paddle for about four and a half years. Um, and prior to Paddle I, I was in, I was in SaaS.

Lucas: I actually had my own company. Um, so I was, I was a founder of. Of a small SaaS company, um, that I originally launched in Australia and then ultimately relocated to, to Paris in France, which was a pretty interesting journey. Um, before that to work backwards, I, um, I, I, I studied law actually, and I didn't really, I didn't really fancy being a lawyer is, is, is the honest answer.

Lucas: Um, and so I thought the best way to, to get into tech and into business was to. Start my own company. Um, and did that with a couple of friends back a long time [00:02:00] ago now. Um, which was an awesome experience. Had a lot of fun. Um, we ended up raising a little bit of money. Uh, we relocated the company as I mentioned to, to Paris in France, and grew the company.

Lucas: I. Over there for about four years. Um, we were a tourism company. Um, we were a, a SaaS platform and now our, our primary customer was sort of mid-size tourism companies. Um, so Covid bit us pretty hard. I won't go into the details of that story, but, um, ultimately, uh, the outcome of that was that we decided to move on from that opportunity.

Lucas: Um, and that was when I started at Paddle. So. I joined the Paddle team, um, four and a half years ago when the company was much smaller than what it is now. Um, it's been an amazing journey. It was just off the back of, uh, paddle's series C funding round. Um, and since then we have done a series defunding Round.

Lucas: We, we, we acquired a company called ProfitWell, um, which many of your. Listeners might be familiar with. Um, and since growing the company to about 300 people, [00:03:00] um, with hubs sort of across Europe and the us, um, I'm based in London, um, and lead a, a, a wonderful product team and work very closely with everyone across product and engineering, but but also across the whole business, um, and with our, with our awesome customer base to make sure that we're building the right things to solve their problems.

Lucas: So. It's been a great journey. Paral is my first, uh, foray into FinTech actually. So it's my first time I've been on the payment side, um, of the equation, but it's, but it's been great and it's been, it's been a lot of fun. 

Mehmet: Fantastic. And thank you again, Lucas, for being here with me today. I always, maybe my audience would know I'm a little bit biased towards, uh, product people, uh, because in, in my career, you know, I interacted with a lot of them.

Mehmet: Uh, and you know what I love about. What you do, Lucas is, I mean, in general as people of product is, you know, the empathy you have for everyone around you. So let's, let's, you know, start with, you know, where you are today and talk a little bit about [00:04:00] Pedal. So you. Position paddle as merchant of record. So for maybe someone who's new, maybe someone who's asking, what is that like?

Mehmet: Like what is this exactly? The merchant, uh, of record model. Can you explain that to us? 

Lucas: Great. Well, well, well, the starting point is that you're correct that the Merchant of Record is a model. Um, it's a, uh, it's the model that we operate under, and what it means is that Paddle as a payments platform is playing a different role.

Lucas: Than what the likes of a stripe or, or, or other direct payments platforms like that are playing insofar as we are technically operating as a reseller if you use paddle. Um, and that means that we are taking on full liability for the transaction and means that all of the responsibility around tax compliance, fraud, et cetera, it all falls on us.

Lucas: So it's a great option for, um, companies who are looking to scale and grow internationally because they don't have to worry about [00:05:00] taking on a lot of the operational burden associated with that. Um, because we're effectively selling on their behalf as they, as they go global. Um. The most common value proposition that people point to with merchant of record is the tax value proposition.

Lucas: So by using Paddle, we will calculate the tax rate, um, charge your buyers the right amount of tax globally and take full responsibility for that, but then also file and remit the tax on your behalf, um, so that if you are answering into a new market. You don't have to worry about spinning up new entities.

Lucas: Um, registering for tax with the right authorities, um, and having to go through the process of filing and remitting in many, many jurisdictions around the world. So, um, the merchant of record model, uh, makes selling SaaS globally easy. Um, that's the way we think about it. Um, for software and digital product companies who want to go global from day one, which is pretty commonplace these days, um, the merchant of record model provides, um, a really easy way to do that, and that's what Paddle does.[00:06:00] 

Mehmet: Great. Now, someone might ask, um, uh, Lucas, like, okay, the world is also going towards the alternative payments, right? Like mm-hmm. Crypto and so on. So how you, you know, the, uh, uh, merchant of record model still can accommodate, or let's say, uh, 

Lucas: yeah, 

Mehmet: integrate with with what you do. 

Lucas: Yeah. So there's a, there's a few things to point out, right?

Lucas: I think that are important. So, so whilst Paddle is a merchant of record, it is still a, it is still a core end-to-end billing and payments platform. So what we do, the technology enables you to, um, power all of your billing and payments and paddle plays that role, right? So, um, we support and we help our customers capture revenue all around the world.

Lucas: From a functional perspective, we just do that under the merchant of record model, right? So, um, when, when we talk about. A paddle checkout and the way that paddle operates, the merchant of record model, um, is sort of the wrapper around all of the [00:07:00] capability that sits within the product. Um, so we still do things like, um, all of the billing models.

Lucas: So we do subscription billing, we do payments, we do checkout, we do all of those things that you typically expect in a payments infrastructure product. Um, so when it comes to, to, to local payment methods, it's a really, it's a really good question. Um, paddle offers a suite of payment methods out of the box.

Lucas: So, um, paddle as it's an all in one offering, you integrate, paddle, and you get access to all of these payment methods that you can configure in the dashboard and turn on pretty simply. Um, now currently we offer, we offer a number of them and we plan on offering a lot more, but it's really important for, for, for companies who are scaling globally to think about, um, the payment methods that they're presenting to buyers in regions and geographies around the world that they're perhaps not accustomed to.

Lucas: Because local buying habits are very different right in the world. So where. Where we sit, I'm in the uk. Um, in the US you know, credit cards are pretty prevalent. Wallet payments such as Apple Pay and [00:08:00] Google Pay are also very prevalent. Um, but there are many countries where, um, credit and debit cards aren't used as much, um, where the MasterCard and Visa rails aren't as prevalent and they rely on alternative forms of payment.

Lucas: Um, a great example of this is Pix as a payment method in Brazil. Um, so PIX is the most popular payment method in Brazil. Um, it's not a card form of payment. It's a very different type of payment. Um, and so what, what the, what, what Paddle does and what Paddle offers as a system is access to all of these local payment methods.

Lucas: We don't do all of them. We're hoping to do a lot more, and we're, we're planning on rolling out many more local payment methods this year. Um, but ultimately being able to deploy payment methods, um, locally is a really powerful tool to make sure you are driving conversion rates through your checkout, um, and also maximizing revenue outcomes in those particular regions.

Mehmet: Fantastic. Just outta curiosity, Lucas, and you know, because we're talking about your role as, uh, VP of product, [00:09:00] how challenging is it, you know, because. From one side, your clients are probably like SaaS companies, you know, scaling globally. But at the same time, you need to talk, I believe, with the providers.

Mehmet: Right. And we're talking about a lot of moving parts, like compliance, taxation. Mm-hmm. So from a product management perspective, I would say, or product planning perspective, how, how much, like is it different than traditional? Um. Product in, in any other company? 

Lucas: It's a great question. Um, I think, I think there are a number of ways to think about this.

Lucas: Um, the first thing to say is that as a product team at Paddle, we have quite a few types of customers. So as you pointed out, one of our primary customers is, um, software companies. Software companies that choose to use Paddle, um, to power their payments globally. [00:10:00] Um, another one of our customers is their buyers, because we are also providing the checkout functionality, um, which means that we need to be providing.

Lucas: A, a modern buying experience that is reflective of modern buying habits. And that's because we want to help the other type of customer who is the software company, maximize revenue and grow their businesses successfully on paddle. So we have to think about the software companies first, but also the end buyers or the consumers of that software.

Lucas: Um, given we handle risk and compliance and fraud and tax, it also means we have a lot of internal customers, internal teams at Par who are managing those things as part of the merchant of record model. To make sure that our product meets the needs, um, of, of sort of the most recent compliance standards, um, and most recent tax changes.

Lucas: So we work, we work very closely with our tax team because tax rules change globally all the time. Um, and we need to make sure that. We are, um, meeting those requirements, um, because we provide that value on behalf of our customers and we do that [00:11:00] so our customers don't have to. Um, we also need to make sure that we're responding and reacting to changes in consumer protection law as it pertains to subscriptions.

Lucas: Um, so there's been lots of changes around. Um, sort of subscription renewal rules. So basically targeting the problem of subscription fatigue. Um, so enforcing legally the requirement to send reminders x days before a renewal in certain jurisdictions. We're seeing that more and more and paddle as a motion of record again, is gonna comply with that and take on the burden of meeting that requirement.

Lucas: So that software companies don't have to, so as a, as a product person, person, right, you have all these inputs coming from a multiple, like a, a, a multitude of different customer types. Um, we have software companies who want us to expand our billing model, supportability, or expand our local payment method offering.

Lucas: Um, we have to think about buyers and how they interact with the checkout and make sure that our checkout is performant. It meets the need of buyer [00:12:00] expectations. Um, we have to look at what governments and regulators are doing around the world to meet, to meet sort of compliance requirements. And I gave a couple of examples before, and the same thing with tax, right?

Lucas: Um, and we also have to think about fraud too. Like how are, how are fraudster becoming more sophisticated and how do we make sure that we're protecting both, um, the software companies who choose paddle to power their payments, but also their buyers? So when you think about all of those things and all those different types of customers, they all represent a different voice in the room.

Lucas: Um, and they all input into how we think about advancing and moving our product forward. And one of the more difficult things for us as product people is how do you balance all of those needs, right? How do you balance the needs and asks of the software companies who are paying us to use the product?

Lucas: How do you balance that with sort of compliance requirements and tax rules to make sure that the product is moving forward? Um, the whole time? I think the nice thing you, you know, the, the thing that I always try and remind myself is that even though doing a piece, a, a [00:13:00] piece of compliance work on the surface might feel a little bit unsexy, right?

Lucas: Um, it's still the primary reason. The fact that we do that is the primary reason why customers choose to use Paddle, right? Because we are. Handling all of that for them, and we're doing it so they don't have to. So, so I think ultimately, um, it, it's a big challenge to manage all of those different groups of stakeholders and different types of customers.

Lucas: Um, but ultimately it forces us to be really sharp around our prioritization and making sure, um, we're prioritizing the right thing at the right time. 

Mehmet: Cool. Uh, of course it's not an easy job and not an easy, uh, you know. I think, you know, to, to, to, to be in with, I would say because, uh, I know for a fact, like, especially now, rules are changing very fast everywhere, uh, regulations and, and so on Now.

Mehmet: Coming back to, you know, focusing on the SaaS, right? And mm-hmm. SaaS businesses, uh, of course, you know, their challenge, we talked [00:14:00] about it, it's, you know, being compliant. The tax part, which you said it's the most, and I know also that from experience, you know, talking to other people also as well. But when it comes also for kind of localization.

Mehmet: From the pricing perspective for different regions, like what, what you, you have seen there, Lucas and uh, are there like any, of course I know like you would not advise them directly, but are there like anything that they should, you know, do before decide on the local pricing? Let's say they are based in Europe, uh, expanding in, in, uh, Latin America or coming to the Middle East or Southeast Asia.

Mehmet: Yeah. So, and you know how your solution also would, could help them in, in adopting these pricing strategies? 

Lucas: It's a great question and I think, I think the thing I would say upfront is that payments is a little bit of an invisible growth layer because most people don't perceive their payments platform.

Lucas: Um, [00:15:00] as a lever to help them grow their company. Right. And I think, I think that's a mistake, and I think that is starting to change. But I think fundamentally, um, inside a payments platform, there are lots of opportunities for you to configure and manipulate and pull different levers to help you grow your business.

Lucas: And one of them is pricing. One of them is localized pricing, which you just pointed out. Right. Um. And I think, I think one thing that we, we, we don't see a lot of, to be honest, we're seeing it more, but not a lot of is, is, is companies who are willing to localize their prices in different regions based on willingness to pay.

Lucas: Right? So the obvious answer is just FX everything into the local, into the local currency. So you will set a base price in US dollars, um, and then you just hit a button and it converts everything into the local currency. But. The problem with doing this is that actually purchasing power is different in regions all around the world, right?

Lucas: So what the more sophisticated companies are doing is identifying, um, those variations in purchasing power and adjusting their pricing accordingly, [00:16:00] so that they can maximize revenue outcomes in all of those. Relevant countries. Right. Um, so, so the way I think about it is if you use us do, if, if you use US dollar as the baseline or, or, or, or the US as the baseline, um, if you are in Western Europe or the Nordics, you'll typically see that willingness to pay is a little bit higher.

Lucas: Um, if you're in Eastern Europe, you'll see that willingness to pay is a little bit lower. Um, if you're in South America, you'll see that willingness to pay is. Quite a bit lower. Um, and all this data exists, right? All this data EE exists to help you think about price localization. Um, and I think, I think it's a really important exercise for companies to go through to make sure that, that they're apply, that their pricing in, in, in, in their most relevant regions and geographies.

Lucas: It's reflective of local purchasing power. We can provide all that data. We have that data on, on, on our side of paddle. I would love to productize that at some point and put it into the product. Um, but I think it's a great, it's a great way for companies to maximize, um, their revenue [00:17:00] and, and, and monetize their customer base most effectively.

Mehmet: Right. So, so it's kind, you know, planning for, um, first. If they go with a certain strategy, would it be like, uh, resonating with the audience over there? Yeah. And you know, probably also like seeing the appetite also for, of course, like this is, maybe it's a mix of marketing plus, you know, visibility study, right?

Lucas: Yeah, yeah. Pricing's one component, right? The, there are many other components that, that need to come together for a successful localization strategy. Um, so if you think about. Uh, there's a, there, there's a, there are a range of pillars of localization, right? So you have language localization, right? Which is, you need to localize your language, um, uh, of the product itself, right?

Lucas: In many cases. But also of all of the documentation around the product, of all of your support channels. If you're going to go big in a certain market. Um, you have currency localization as well, so making sure you're charging in local currency. [00:18:00] Um, you have localization of payment methods, which we alluded to before, right?

Lucas: Different payment methods, um, that are relevant to different, different jurisdictions or different geographies. Um, and then you have localization of pricing. So, so the way, the way I think companies should think about it is, is. Common, the common approach is to do like a tiering system. So identify your, your, your tier one countries and fully localize in those regions.

Lucas: Right? And it's a pretty, like, one of the most logical things that folks do is that they, they choose the English speaking countries. So the, so folks in the UK will, will sort of address the US market because, you know, they perceive it to be a lower lift to fully localizing their offering in the US than say, you know, some European country that speaks a different language predominantly.

Lucas: Um, although people in the UK are lucky in so far as English is generally accepted as, as, as the business language, so that's, that's an advantage. But, but I think, you know, the way, or, or, or the pragmatic way to think about it is, is not to, not to [00:19:00] attempt and localize everywhere. So you have this concept of being a meter wide and at an inch deep, right?

Lucas: Where you just turn something on everywhere, but you don't actually put much effort into localization. It's probably a better strategy to be an inch wide, but a meter deep and identify what are those core markets that you really want to go to market in and localizing deeply within those core markets and, and, and giving yourself some focus.

Lucas: Right? Um, and, and I've seen, I've seen some great companies think about this in terms of tiers. So, you know, a tier one country. Um, if they're going to market in that country, they'll, they'll, you know, spin up a small to sales team, have a dedicated support channel for that particular country, have everything localized into languages, set up an entity, right.

Lucas: You know, enable customers in those locations to sort of contract with a local entity, et cetera, et cetera. But then you have varying levels of depth right, to which you can localize. But I think, you know, in your tier one, tier two sort of portfolio of regions. You're better off sort of staying an inch wide and [00:20:00] going and going deep on localization and sort of just hitting a button and, and, and turning it on everywhere around the world because you're probably not gonna see, um, great outcomes from just doing that without going deep 

Mehmet: Right.

Mehmet: Now another use case, I know Lucas also at Paddle, you, you kind of tackle is the dilemma of the app stores and Yeah. Right. So. Tell me more about it. And I, I know like people, you know, especially in the past two years, they were really bleeding, you know, money because of, uh, all these high commissions and, you know, sometimes, mm-hmm.

Mehmet: Like also the policies and so on, but maybe from the payment perspective and everyone was talking about the unfairness over there. So what's the offering, um, that patent have? Yeah, 

Lucas: yeah. It's a, yeah, yeah. It's, it's, it's really interesting actually. It's, it's a space that, that, that we've got into, um, in the last 12 to 18 [00:21:00] months.

Lucas: And it's been quite fascinating actually. It's been a big tailwind in our business. And what, and what you're referring to is. Mobile app companies or mobile app developers who are choosing to use the web. As an acquisition channel in order to improve unit economics fundamentally. Right. Um, so a typical web to app flow, which is, which is what we call it, is where, um, a mobile app company will launch an ad campaign on the web.

Lucas: Um, so when user clicks on the ad, they'll go through some sort of. Onboarding flow to build, intent to purchase. And then at the end of the onboarding flow on the web, they'll be presented with a paywall. Um, and the paywall asks 'em to select a plan. They select a plan, they pay for it on the web, and then after they've successfully paid for it, um, the, the, the web will display a QR code that sort of links them off to go and download the app.

Lucas: So what you're effectively doing is acquiring the user on the web and having them transact on the web before they've even gone to the app store to actually use the app. But the primary [00:22:00] interface for the user is still the actual app itself. So think of it as like an acquisition flow that occurs on the web that enables mobile app developers to transact and have those payments recurring on the web through a provider like Paddle or Stripe or others.

Lucas: Um. This is good for two reasons. The first one is, as you mentioned, fee optimization. So the app stores charge a lot more than what web payments platforms charge. So, um, apple and Google will charge up, you know, up around the 30% mark on a transaction fee for any payments going through the app store.

Lucas: Whereas app, you know, paddle's list pricing is 5% 50 cents. Um, so quite a significant amount lower. Than, than what the fees are on the app stores. And the second reason why it's great is actually because of marketing attribution. Um, so because of what they, because of the way that the app stores are set up, um, it's much more difficult to, um, track where [00:23:00] a successful conversion came from.

Lucas: Um, and so that makes marketing more expensive because you can't do as much targeting, um, which drives up cac. Um, and so on the, on, on the web, they get lower fees and usually a lower cost of acquisition, which means that the, um, the unit economics works out pretty well. So, so that's the model, right? And it's not to suggest that the web becomes the only acquisition channel.

Lucas: It's just around, you know, optimizing unit economics and improving their return on ad spend by using the web as another acquisition channel. Um, and from Paddle's perspective, the reason why it's great for Paddle is because the app stores operate a merchant of record model. Paddle operates a merchant of record model on the web, which means that as these companies are transitioning to using the web, they don't take on any of that extra burden around tax and compliance by using a product like Paddle.

Mehmet: Right. And I think it's a, it's a fair thing, you know, uh, SaaS companies, they are doing, especially now [00:24:00] with, you know, I, I. I was telling a friend the other day, you know, at some stage, you know, especially after the smartphone came out. So everyone was going to the mobile app. Mobile app, mobile app, and I think it was during Covid or after Covid.

Mehmet: I, I cannot like exactly tell which year I started, like as there was a go back. To web app first and then mobile second, which honestly it made sense because you know, like everything is like mobile, um, you know, responsive. So the idea of, you know, unless it's a game or I don't know, like. Yeah, something very sophisticated that needs the hardware of the phone.

Mehmet: So I, I think it's a fair way also, which giving, um, freedom for, for developers or like even SaaS companies, uh, to go this way. Now, one thing also, which you do, but first I'm gonna ask the question this way. So of course these SaaS companies, they want to [00:25:00] acquire customers. They want to make business. They want to increase revenue, uh, they want to expand scale using something like what you offer Lucas.

Mehmet: So, but hopefully, you know, they're hoping to either have someone to buy them or go to an IPO, right? 

Lucas: Yeah. Yeah. 

Mehmet: Uh, so I know that you can offer something there, but first, like what they have to do to be ready for an acquisition or even maybe. And exit, uh, through an IPO? 

Lucas: Yeah, it's a great question. Um, I think, I think, I think the main thing that I would say.

Lucas: In this area is, don't underestimate the importance or the opportunity that exists within your payments platform to help make that a great outcome. Um, so I think there are, I think there are two ways of thinking about it. I think, I think the primary way of thinking about it again, is back to this idea that payments is typically an invisible growth [00:26:00] layer.

Lucas: So, you know, there are lots of opportunities for you to improve the unit economics of your business. Um, by adopting, um, or pulling the levers within your payments platform to help you be successful around the world, right? When you talk about localized pricing can help you grow your company, improving your checkout conversion can help you grow your company.

Lucas: Um, leveraging things like payment orchestration to maximize payment acceptance. Can help help you grow your company. Um, doing experimentation on different pricing and packaging models can all help you grow your company, right? So I think, I think if you actually look at, look at the things you can do inside of a payments platform, there is quite a lot there for you to help your bus to help you grow your business.

Lucas: And when you're thinking about an exit opportunity, every additional point, point, 0.3, 0.4, 0.5 of a percentage point around around revenue growth is meaningful, right? So like we know that. Local lines pricing, local payment methods can drive checkout conversion by five to 10%. Yeah. [00:27:00] That's not a small number.

Lucas: When you, when you start to put that onto a company that is doing a lot in net new acquisition. So I think, I think there's this, there's, there's a ton inside of a pla of, of, of your payments product that you're probably not looking at. Um, that can really help you get your business to a point where you're gonna maximize your outcome at some sort of exit or, or liquidity event.

Lucas: I think that's the first one. The second one, I think is, is, is more specific to merchant of record. Um, and that is around the idea of. Removing risk or taking risk out of your business. So typically as companies start to grow and scale and they start to grow really quickly, um, they get a little bit lackadaisical about taking on risk.

Lucas: Um, and if you're not using a merchant of record, it means that if you're going and spinning yourself up, um, or launching a new markets and you're not really thinking about. Tax compliance that can show up eventually as a liability once some due due diligence gets done at some sort of acquisition event or, or liquidity [00:28:00] event.

Lucas: So, so I think it's also about like, okay, there are opportunities to increase revenue, but there are op also opportunities to, to reduce risk or take risk out of your business to help you get through, um, an exit event more successfully. Um, and I think that's the. That's the second one that's really important for, for founders to think about.

Lucas: And the third one I think, is about data, right? So if you think of a company like Paddle, and this is the, this is the same for, for most or all payments platforms. Um, I. They are seeing your revenue before you are right. So you, you, you know, payments platforms are a very core piece of critical infrastructure.

Lucas: Um, and the data that they're providing you is the data on which you are determining a lot of the information that forms the basis of what your company gets valued at in the event of, of, of an exit or a liquidity event. So I think in saying that it's really important to have your data in a good place, and, and your payments platform is core to that, right?

Lucas: [00:29:00] As, as the provider of your revenue data. Um, having all of that data in a good place, having your house in order, making sure that that data is connected to, to, to other systems in your stack. Um, is really important and ul and, and, and ultimately play plays a critical role. So, you know, when, when we sort of speak to founders who are, who are wanting to exit their companies, um, we try and say, okay, what are the, what are the three things that we can really, really do to help you?

Lucas: And it's firstly, make sure that you are absolutely maximizing the growth of your company, right. And maximizing your growth rates by, by ensuring that every lever you've squeezed as much out of the lemon as you possibly can. Right? In terms of the growth levers. Secondly, we're playing our part in, in, in reducing or taking risk out of your business.

Lucas: And thirdly, we're giving your data to you in, in a way that can help you, um, you know, enter into a negotiation about valuation and, and, and, and provide the right foundations on which that conversation can happen. So, yeah, I think, I think there's a lot in there. We, we don't, we don't have a [00:30:00] service, um, per se, like a professional service that, that, that helps companies get acquired.

Lucas: But we work with lots of customers on all three of those fronts to help them, um, maximize their valuations. 

Mehmet: Yeah, absolutely. And uh, you know, I said like acquisition or IPO, but maybe also if, maybe, uh, raising capital they were Yeah, exactly. So maybe if they are raising their first, uh, first round and founders, you, you should know this, that people will ask you for your data room.

Mehmet: They would ask you for some 

Lucas: Exactly. 

Mehmet: Uh, you know, evidence that you have, customers, that you have some. Revenue. Right? Yeah, yeah, yeah. Especially, you know, I, I I focus on first time founders because some of them, they assume that, yeah. Like, I can just tell this and put some logos in my, in my pitch deck and I'm done.

Mehmet: No. Like, you're gonna have, you know, a, uh, yeah. Very, uh, thorough, I would say, uh, due diligence on you and on your company, and you need to be ready for these numbers. Yeah. Now you, you mentioned data Lucas, and I know we cannot [00:31:00] skip. Any discussion today without talking about the ai? Yeah, I can imagine where the AI and machine learning is playing a part, you know, in what you do at at Pedal.

Mehmet: But like, first, like I would be interested to know, use cases is, you know, that you have used it, uh, uh, on the platform. And the second thing may be, uh, how do you envision AI like shaping or reshaping? I would say, you know. Uh, payment infrastructure for SaaS companies maybe in the future? 

Lucas: Yeah, great question.

Lucas: I think like, firstly, I use AI myself a lot. I use, I use chat GPT products like that every day. So, uh, becoming, becoming ever more reliant on these sorts of products? Um, it's a great question. Like we're, we're, we're actively thinking about how we can incorporate more AI into the product. I think the thing that I always sort of talk about and remind.

Lucas: Remind folks of is that AI is a technology. It's not a product in and of itself, [00:32:00] right? We need to start with customer problems and we need to start with how do we solve customer problems? And if AI is the best tool or technology to deploy in order to do that, then then that's a great use of ai. But we're not the sort of company that is sort of rushing to.

Lucas: Integrate AI into the product just for the sake of it, because we don't believe that AI itself is the product, right? Um, so for us it's very much how can we, how can we leverage ai, um, to help solve customer problems and help make the lives of our customers better? Um, so that's the starting point. Having said that, like there are, there are many use cases for AI insider payments platform.

Lucas: Um, you know, given that a lot of the data that we sit on is actually numbers, um, it's probably less, less relevant to the common use cases around L LLMs. Um, but there are other ways that we we're doing machine learning around things like payment orchestration, um, and helping sort of generate insights and recommendations for our customers.

Lucas: That, that, that are gonna be really interesting. And I think like those sorts of things are gonna [00:33:00] become table stakes for a payments product, um, to be able to really make sure that you are, that you're getting the most out of it. So, so I think there are a few opportunities for us, for us there that, that we're actively working on, um, and sort of integrating more and AI layer, um, into the product.

Lucas: But, but it is very much customer problem first, not technology first. Um, so I think that's the, that's the starting point. Like we, we haven't built any specific things, or sorry, we haven't launched anything yet, but we are, we are building some stuff in the background, which, which I'm really excited about.

Lucas: I think like in terms of how AI is going to affect subscriptions, it's. It's really fascinating because I think we're already seeing a bit of an evolution in, in pricing and billing models. So lots of AI companies are deploying usage based or consumption based pricing models where you pay based on how much you consume.

Lucas: Um, that's very. Much more common in the B2B world, right? I think we are going to see that start to become more common in B2C as well, which is interesting. Um, but I think we'll [00:34:00] continue to see the evolution of companies providing functionality around consumption, metering of usage, and how that interplays with the price and the cost of the product.

Lucas: Um. You know, that, that, that creates some challenges around like budget predictability because you don't know how much you're gonna pay. Um, which is a challenge and one of the drawbacks of usage-based billing. But at the same time, I think, you know, directly tying the payment or the price of, of, of the product to the value you are receiving from it is, is, is a good move.

Lucas: And I think we'll see. More of that, to be honest. And the other interesting area, um, that I'm definitely not an expert in, but I'm starting to hear, hear, hear a lot more about is this idea of ag billing, which is, um. The, the idea that a AI agents will start billing each other for the performance of tasks.

Lucas: And then there's a really interesting question around like, what does that mean for API design? Like how do we, how do we design APIs that are going to be used and integrated with AI [00:35:00] agents and sort of reacting to, to the performance of tasks? And I think there's, I think there's a ton to unpack there.

Lucas: And I think, I think we'll see that area really start to accelerate as well. 

Mehmet: Yeah, it's, you know, exciting times to see. How this work, um, in a world where it's happening already. Like agents, we start to see a lot, of course, maybe they are still in infancy, uh, we might call them this way, but, uh, very promising.

Mehmet: We start to see like science that even the major companies, they want to be in that, uh, area also as well. With everything around ncps and, uh, yeah, yeah. All the stuff, uh, that's happening in, in there. So very, very interesting. Now, maybe not related directly to Paddle, but Lucas, I'm sure, like also you see kind of trends in SaaS, right?

Mehmet: So, mm-hmm. What are, like, you can say maybe like. [00:36:00] Something which is popping up a lot recently when it comes to, to, uh, SaaS trends. Like in this year. Uh, yeah. And maybe years to come. 

Lucas: Yeah. I mean, I think, I think the biggest trend in SaaS this year is the adoption of usage-based billing models as more and more SaaS companies.

Lucas: Start to have or incorporate AI as like the foundation of their offering. I think we're gonna see a lot more, um, folks really, really invest in usage based and consumption based models. I think that's the biggest thing, to be honest. I don't think there's anything else that, that, that would, that would particularly sort of trump that.

Lucas: Um, I think we're seeing, I think, I think the way it will play out is more that it will become more of a hybrid approach. I still think we'll see like sort of core subscription. Um, models. I, I think they'll continue to exist. I just think they'll be, they'll be combined with different usage components. So maybe you'll pay, you'll pay one price for a core offering and then you'll sort of pay us pay usage prices for overages and that sort [00:37:00] of stuff.

Lucas: So I think, I think we'll see a real blend of different billing models coming together to sort of bring us into this hybrid world. Um, I think that's, I think that's the main thing. 

Mehmet: Cool. Um, any playbook, you know, for, for scalability? You're seeing it, uh, working more than others, especially when it comes to go to market.

Mehmet: I know, like such a product question, but I'm sure you know, uh, uh, you part, uh, of, of a great team, I would say, who would think, you know about the go-to market and, you know, what are the playbooks that might work? So what, what are you seeing in that space? Lucas? 

Lucas: Yeah, it's a good question. What are we seeing in the go to market space?

Lucas: Um, 

Mehmet: for SaaS? Indeed 

Lucas: For SaaS? Indeed. Um,

Lucas: it's a tough one. I think there are, I think there are lots of things. I think a lot of it is, is, is sort of, is sort of similar playbooks that we've had in the past. Um. I think we'll continue to [00:38:00] see more, more in partnerships. I think we're seeing deeper, deeper sort of integrations and collaborations between companies as well.

Lucas: Um, we're really interested in the idea of sort of bundled offerings that actually combine products and services from different companies. Um, and I think, I think I'm seeing that more and more sort of joint, joint go to market collaboration between. Two products or two companies that have a lot of synergy between them, um, to drive more customer value.

Lucas: Um, we're actually getting great results from like in-person events as well. I know that's quite a standard answer, but like, I think in-person community is gonna become really important. Um, and I think, I think there's something else that that sort of underpins that, that jumps into my mind and it might not be totally relevant, but I think it is.

Lucas: And I think there's still a really big importance on service, right. On customer service. And I think. Um, companies that go to market with an approach that is fundamentally advisory, right? And helpful, I think is. Is a really compelling offering in a very [00:39:00] crowded and busy software market. Um, and I think we're seeing companies be quite successful, um, by deploying that in their messaging and how they think about taking their product to market.

Lucas: There's a few tidbits for you. I don't, I don't know exactly what, what, what the biggest trend is or what the biggest thing is, but they're the, they're the things that jump to mind for me. 

Mehmet: Absolutely like community led growth, like everyone is talking about it, uh, big time, uh, nowadays because, and you know, whether it's like events based or like, uh, in any other form, maybe community based as an online community.

Mehmet: Yeah, it's, it's working a lot. Follow question before I ask Scoop Lucas where people can get in touch? Uh, and maybe you should, I should have asked this before, from. Markets perspective outside the big known ones, us, uk, rest of Europe. Yeah. So which one do you see it like the most promising one? Yeah. Some people say it's la Some people they say it's, uh, Southeast Asia.

Mehmet: Some people they say it's the MENA market. [00:40:00] Any, you know, yeah. Data points that you might be able to share with us. 

Lucas: Uh, it's anecdote. It's not, it's not quantitative data points, but I think India is really exciting. We were just at an event, um, last week. I wasn't there, but Paddle was there. Um, our CMO was there at an event called SAS Boomi in Chennai in India.

Lucas: Mm-hmm. And apparently it was amazing. Like the energy and enthusiasm from sort of the Indian ecosystem of founders is, is just quite incredible. Um, and we're really excited about, about India. Um, we were also in Singapore last week as well, um, doing some work there. Again, I wasn't there, but Paddle was there.

Lucas: Um, and we saw some really exciting stuff in Singapore too. So I think there's a lot to be said for, for, for sort of APAC and that, that part of the world. Mm-hmm. So, yeah, that, that one stands out. I'm actually off to Tokyo tomorrow. Um, we're gonna go and meet a bunch of founders in Tokyo next week. So I'm really interested to learn a bit more about the Japanese ecosystem.

Lucas: Um, but I think, uh, I think the one that stands out for me is definitely India. It just sounds [00:41:00] like a really exciting place and for me it's not so much about the numbers, it's about the enthusiasm and excitement and energy in the founder base. And I think that that exists in India for sure. 

Mehmet: Absolutely. I agree with you a hundred percent, you know, interacting with a lot of friends over there so I can feel the vibe, you know?

Mehmet: Yeah. I can feel, you know, the enthusiasm as you said Lucas look, really, it was a, uh, amazing discussion with you today. Before I let you go, I ask you where people can get in touch and learn also more about pattern. 

Lucas: Sure, sure. Um, so yeah, feel free to get in touch with me directly. I'm on LinkedIn, I'm on X or Twitter or whatever we call it these days as well.

Lucas: Um, if you just type in my name Lucas level, you should be able to find me. There aren't many Lucas levels in the world. Um, and, and yeah, very happy to, to to chat to you and share email there. Um, if you want more about paddle, paddle.com is your place to go, but, but if you want something more specific, I'm very happy to to speak to you one-on-one as well.

Lucas: So please do reach out and thank you Ette for having me on the show. It's been a great conversation. 

Mehmet: It was my [00:42:00] absolute pleasure, and for the audience, don't look. Right left and try to write down. I'm gonna make your life easy, so the links would be available in the show notes. If you're listening on your favorite podcasting app or if you're watching this on YouTube, it'll be in the description.

Mehmet: So again, Lucas, thank you very much for being here with me today. This is how I end my episodes. This is a quick message for the audience. If you just discovered this podcast by luck, thank you for passing by. I really hope you enjoyed it. So if you did so, please subscribe and give us aamp up. Suggested to your friend and colleagues and if you're one of the people who keep coming again and again, thank you very much.

Mehmet: I really appreciate all your messages, all your support, and you did guys really fantastic job. This year. We are charting in the top 200, you know, apple Podcast, uh, across multiple countries at the same time. I never saw this before in my two years journey, so thank you very much for being part of this.

Mehmet: And also thank you for choosing the CTO show as one of the most. Top [00:43:00] 45 Listen Business podcast here in Dubai. So thank you very much for this trust, and as I say, always just stay tuned. We'll meet again very soon. Thank you. Bye-bye.