Paddle Secures USD 200M, To Supercharge SaaS Payments

Highlights –

• The firm works with more than 3,000 software customers in 200 markets and provides a platform for them to set up and sell their SaaS products in those regions.
• It will use the new investment to give its global expansion a push amid a rapidly growing demand from scaling SaaS companies.

Paddle, a provider of a complete payments infrastructure for Software-as-a-Service (SaaS) companies, announced it had raised USD 200 million in a Series D equity and debt financing at a valuation of USD 1.4 billion, making it a unicorn in the UK.

The SaaS market has been booming, more so since a surge in digital transformation due to the Covid-19 pandemic. The trend will continue as businesses and consumers become even more used to digital tools. According to Gartner, end-user spending on public cloud services will reach USD 397 billion this year, more than a third of which will constitute SaaS.

Generally, the benefits of cloud-hosted software are well-understood by the end-user. Still, SaaS companies remain distracted from core product development owing to a whole stack of infrastructure considerations that needs to be managed. And this is what Paddle promises to solve.

“We want to be the operating system for SaaS companies globally,” Paddle’s cofounder and CEO Christian Owens said.

Based in London and founded in 2012, Paddle helps SaaS companies register growth faster with fewer diversions. It handles all the billing and backend facets of SaaS software, including checkout, subscription management, tax and compliance, invoicing, fraud protection, etc.

SaaS surge

Even before the global pandemic, the SaaS surge was very much there. Paddle was in a good position to make the most of the world’s rapid transition to remote work and the large-scale digital transformation efforts that have cut across industries.

“As a result of the pandemic, more businesses and consumers suddenly had to use digital tools on a daily basis,” Owens said. “That increased demand meant a lot of software companies had to scale quickly to find their stride, and many were created from scratch to provide new tools. It also meant these companies had to be able to sell internationally almost immediately.”

One of the most important selling points of SaaS is that it allows firms to register growth and that, too, at speed. This is because the end-user can use it from anywhere with the least friction. However, a major barrier remains the resource-intensive backend work. The case is peculiar for small businesses where manpower strength is low compared to major corporations.

“What we’re seeing from these software businesses is there’s never been a greater need for the core infrastructure that helps them deal with operational headaches like maintaining tax, payments, and regulatory compliance, while they focus on developing and selling great products globally,” Owens said. “We’re in the perfect position to provide that infrastructure and help them scale and are doing it for companies that process millions of dollars of revenue a year.”

Earlier, Paddle had raised around USD 93 million, including USD 68 million in the Series C round 18 months ago. Since the last fundraising, the firm announced the first alternative In-App Purchasing (IAP) system for iOS developers (set to be launched soon). It also announced a partnership and integration with M³ter to enable users to deploy usage-based pricing and billing globally. Paddle now powers SaaS for more than 3,000 software companies in 200 markets, providing them with a platform to set up and sell their SaaS products in those regions.

Paddle has more than doubled its revenue growth since November 2020, registering an impressive average annual revenue growth of over 175% over the last four years. It has also expanded its team from 140 to 275 across London and New York offices. More hires are expected to match its acceleration as a business.

Paddle touts itself as a “merchant of record” that provides a set of services based on the specific needs of businesses that sell software online, covering checkout, payment, subscription management, invoicing, international taxes, and financial compliance processes.

Truly speaking, there are hundreds of “merchants of record” in the market for payments services, including PayPal, Stripe, Amazon, and many more. This isn’t surprising considering the complications surrounding SaaS, and just about any businesses selling online will turn to these at some point to handle that flow.

Paddle believes that many business opportunities can be leveraged by assembling the many complicated parts of providing a billing and payments service into a single product customized explicitly to software businesses.

With new funds credited to its bank, it will be able to build on this recent momentum. It will use the investment to give its global expansion a push amid a rapidly growing demand from scaling SaaS companies.

“It’s been a great couple of years for us, and we’ve hit numerous milestones in that period that demonstrate our growth and also the demand for the payments infrastructure we offer to SaaS companies,” Owens said.

The Series D round of funding, which values the company at USD 1.4 billion, was led by KKR, with participation from 83North, Notion Capital, FTV Capital, Kindred Capital, and Silicon Valley Bank. The financing is made up of both equity and debt.