"Ship Pricing as Fast as Product" - CEO Alvaro Morales on Orb's Mission to Revolutionize Billing Infrastructure

Welcome to Grey Matter, the podcast from Greylock featuring Saam Motamedi, Enterprise partner at Greylock. Today's episode welcomes Alvaro Morales, CEO and co-founder of Orb, a modern billing infrastructure powering revenue workflows for AI and software companies like Vercel, Pinecone, and Perplexity.

Orb recently raised a $25 million Series B round from investors including Greylock. The episode is available in multiple formats including a full transcript and a video version on YouTube.

Timestamp: [00:02-00:47]

Orb is flexible billing infrastructure designed for modern pricing software models. The platform enables software businesses to experiment with different monetization strategies, including usage-based pricing, consumption-based pricing, or hybrid approaches that combine seat-based and consumption models.

The core mission of Orb is to make it easy for companies to evolve their pricing. When a company's pricing model changes, the billing infrastructure must adapt, but so must many other aspects of the business - from how finance teams handle revenue accounting and forecasting to how go-to-market teams structure their workflows.

"Thank you for having me Saam, I'm excited for this conversation. Orb is flexible billing infrastructure for modern pricing software models... The goal of orb is to make it really easy for companies to evolve their pricing."

Timestamp: [00:48-01:51]

Orb serves companies at the forefront of sophisticated business models, particularly in verticals such as:

• Cloud infrastructure
• Data and AI
• Fintech

These companies face a critical choice: invest substantial engineering resources into building billing systems or focus those resources on developing their core products. Orb alleviates this burden by powering their billing infrastructure and providing the flexibility to evolve without diverting engineering talent from product development.

"A lot of the customers that we serve right now are in verticals such as Cloud infrastructure, data, AI, fintech - think about the kind of software companies that have the most sophisticated business models out there."

Timestamp: [02:04-02:41]

Alvaro Morales and his co-founder Chatesh met while working at Asana, where they built the company through its IPO. Both came from software engineering backgrounds with no prior experience in pricing or billing.

Alvaro's journey into billing began unexpectedly when he was tasked with supporting a price change at Asana. What he initially thought would be a simple coding task revealed itself as a complex, cross-functional challenge that took months to implement even simple pricing changes.

"I knew nothing about pricing or billing going into that job. In fact, I remember when I got asked to support a price change happening early on, I saw that there was a meeting with the finance team and I thought, 'Great, I'm going to walk into this and look at a bunch of Excel math and models and write three lines of code and move on with my life.' Well, in many ways that didn't end up being the case."

This experience led to an eye-opening realization for Alvaro: pricing is deeply customer-centric and product-centric, focused on understanding the value provided to customers. Despite its strategic business importance, the technical implementation of pricing changes was often painful and time-consuming.

Timestamp: [02:42-05:05]

Alvaro and Chatesh identified a fundamental contradiction in the software industry: while pricing changes could significantly impact revenue, engineering teams often had to tell business teams that implementing these changes would take 6-8 months due to architectural limitations.

The co-founders recognized that the principles of developer platforms – extensibility, flexibility, and iteration – hadn't yet reached revenue infrastructure. This gap presented an opportunity to infuse their engineering DNA into the cross-functional space of billing and finance.

"I found it really uncomfortable to be one of the engineering voices in the room having to tell 'no' to business teams on like, 'fantastic idea, but it's going to take me six to eight months to re-architect and refactor every assumption we've made around pricing in the business.'"

Orb emerged from this insight – a flexible billing platform designed to adapt to evolving pricing strategies without requiring extensive engineering resources, addressing the painful disconnect between business strategy and technical implementation.

Timestamp: [05:06-05:46]

The fundamental challenge in billing infrastructure stems from the way product and engineering teams have traditionally approached pricing. By hardcoding pricing constraints into their systems, companies become locked into rigid frameworks that are difficult to evolve as business needs change.

This rigidity becomes particularly problematic when market conditions shift or new products emerge, causing initial requirements to change dramatically. Orb's solution addresses this challenge by providing a flexible infrastructure with visibility across many different types of customers and monetization models.

"Somebody in the company puts together a list of product requirements - here's what our pricing is today, here's some ways that we know this could evolve - and then three months happen and the business completely shifts direction or there's something that happens in the market or there's a new product to go change. So whatever set of requirements you thought you were building towards just changed out from under you."

Timestamp: [05:47-07:10]

Orb recently raised a $25 million Series B round, following a $4 million Series A just last year. This new funding reflects the company's impressive growth trajectory and the increasing market demand for flexible monetization solutions.

Alvaro attributes this growth to two converging trends:

1. The potential for fundamental change in how value is delivered in software, particularly with AI innovations
2. A challenging macroeconomic environment where many software companies are seeking new growth strategies beyond headcount expansion

These factors have accelerated demand for Orb's flexible monetization platform, resulting in over 5x revenue growth in the past year and a tripling of their customer base since the beginning of the year.

"It's a really exciting time for the team and the company. This round is falling out of the timing and relevance of what we're doing. We're really building a business off of what I think is going to be one of the most important and disruptive trends in software."

The Series B funding will allow Orb to continue investing in product development and team growth to meet increasing customer demand and advance their vision for modernized monetization infrastructure.

Timestamp: [07:11-08:48]

Saam Motamedi notes that at any given moment, one or two major trends dominate the software industry, with the shift in software pricing being one of the most significant current trends. Alvaro begins to explain how consumption-based pricing has emerged as a key part of this evolution.

Looking back to 2021 when Orb was founded, trailblazing companies like Snowflake and Twilio were already demonstrating the advantages of consumption-based revenue models to public markets. These companies showcased how consumption-based pricing could drive exceptional net dollar retention and efficient business growth.

"We were seeing some very successful trailblazing public companies like Snowflake and Twilio lead the education of the public markets around here are the advantages of a consumption-based revenue model in its ability to drive kind of astounding best-in-class net dollar retention and really efficient growth as a business."

Alvaro notes that public markets typically require waves of successful companies to become educated about new business models, similar to how SaaS itself represented a significant shift in understanding for investors.

Timestamp: [08:49-09:54]

• Orb provides flexible billing infrastructure that enables companies to experiment with and evolve their pricing models without extensive engineering work
• When a company changes its pricing model, it impacts not just billing but many aspects of the business including financial operations and go-to-market strategies
• Cloud infrastructure, data, AI, and fintech companies with sophisticated business models benefit most from Orb's solution
• Pricing is fundamentally customer-centric and product-centric, focused on aligning value delivery with monetization
• Traditional approaches to billing infrastructure hardcode pricing constraints, making it difficult for companies to adapt when business needs change
• Consumption-based pricing is gaining prominence in the software industry, demonstrated by the success of companies like Snowflake and Twilio
• Orb has experienced over 5x revenue growth and tripled its customer base recently, reflecting strong demand for flexible monetization solutions

Timestamp: [00:02-09:54]

Companies:

• Orb - Modern billing infrastructure powering revenue workflows for AI and software companies
• Greylock - Venture capital firm and investor in Orb
• Vercel - Customer of Orb
• Pinecone - Customer of Orb
• Perplexity - Customer of Orb
• Asana - Where Alvaro and his co-founder previously worked and identified billing challenges
• Snowflake - Mentioned as a trailblazing company with consumption-based revenue model
• Twilio - Mentioned as a trailblazing company with consumption-based revenue model

People:

• Saam Motamedi - Enterprise partner at Greylock and podcast host
• Alvaro Morales - CEO and co-founder of Orb
• Chatesh - Co-founder and CTO of Orb

Concepts:

• Consumption-based pricing - Pricing model where customers pay based on their usage
• Usage-based pricing - Similar to consumption-based, focuses on metering specific user actions
• Hybrid pricing - Combining seat-based and consumption models
• Net dollar retention - Metric tracking revenue changes from existing customers over time

Timestamp: [00:02-09:54]

Building on the success of companies like Snowflake and Twilio, consumption-based pricing has become increasingly prevalent in software for two primary reasons:

First, it enables companies with best-in-class products to create a powerful flywheel where product adoption drives increasing value. For consumers, this model eliminates "shelfware" problems, similar to paying for an unused gym membership.

"Consumption-based pricing is really around this idea of how do we avoid the shelfware or how do I avoid paying for that gym subscription that I pay for but don't go for, and really only pay for what I consume. It's a more fair model, it's aligned to value - if I'm not using it, I'm not paying for it. If I'm using it, I'm paying and continuing to pay more."

Second, the efficiency metrics of consumption-based models are remarkable. Alvaro notes that around Snowflake's IPO, a dollar of revenue acquired could become $1.60 in just a year, demonstrating tremendous revenue potential through this approach.

Timestamp: [10:01-11:37]

Two major market shifts have accelerated the adoption of consumption-based pricing:

1. A challenging macroeconomic environment has exposed the limitations of seat-based pricing. When customers downsize their workforce, seat-based contracts inevitably shrink regardless of how valuable the product is to the remaining team.

2. The explosion of AI innovations since the launch of ChatGPT has created new possibilities for software monetization. Alvaro observes that major platform shifts throughout computing history have not only spawned innovative companies but also disrupted existing business models.

"When you think about platform shifts in the software industry, every major one has not only resulted in just a generation of companies providing significant innovation, it's also disrupted the software business model."

Alvaro draws parallels to historical transitions: the PC era established license-based pricing (selling CD-ROMs), while early cloud computing gave rise to SaaS subscription models. He suggests AI may shift software value from access-based models to outcome-based orientations, focusing on what agentic software can achieve for users.

Timestamp: [11:37-13:30]

Saam notes that by 2024, consumption-based pricing has become nearly ubiquitous, especially for AI companies. Alvaro shares insights from Orb's experience working with numerous AI businesses:

AI companies face unique circumstances that make pricing strategy crucial earlier in their development:

1. They're tapping into new enterprise budgets
2. They have significant infrastructure costs (AI compute is expensive)

Despite these unique factors, Alvaro emphasizes that effective AI pricing still follows fundamental principles:

"At a high level, we work with a lot of AI companies at Orb, and I think it's a real passion of mine to work with founders on their pricing strategies. One thing that we have observed is the nature of AI businesses being very innovative and new... but second, also being fairly costly to run from a cost of goods sold perspective."

Timestamp: [13:31-15:03]

Alvaro outlines three core principles that guide effective AI pricing strategies:

1. Simplicity - Pricing can't live in a complex Excel spreadsheet; it needs to be easily communicated in sales conversations with customers.

2. Cost Awareness - While not directly tying pricing to costs, companies need to understand their margin profile, especially when OpenAI or Anthropic bills represent significant expenses.

3. Flexibility & Iteration - Perfect pricing rarely happens on the first attempt. Companies must test different approaches and evolve based on market feedback.

"AI pricing is just great pricing strategy and goes back to the fundamentals. It's really about: one, can you keep it simple... two, I think you should be aware of your cost structures... and then number three, it's about flexibility and iteration. You're not going to get it right in the get-go."

Alvaro concludes that successful AI pricing is more about applying solid pricing fundamentals than applying AI itself.

Timestamp: [15:03-16:32]

Saam asks if customers need to fully adopt usage-based pricing to benefit from Orb. Alvaro explains that pure consumption-based pricing isn't the right fit for every business, reinforcing that pricing isn't about mathematical formulas but understanding specific customer and market needs.

Many successful companies implement hybrid approaches:

• Combining seat-based with consumption elements
• Using usage-based limits within feature tiers to drive upsells

"Maybe more of a seats plus consumption hybrid strategy might be better for you, or maybe it's like you use usage-based limits in your feature tiering to drive upsells through what you're doing."

The common denominator across successful pricing strategies is flexibility. Traditional billing approaches often treat pricing as "set it and forget it," missing opportunities to evolve. Alvaro emphasizes that to be a good fit for Orb, organizations simply need to seek more flexibility in their monetization approach - something increasingly important for all software companies to remain competitive.

Timestamp: [16:33-17:52]

Looking three years ahead, Alvaro expresses deep fascination with early industry experiments in outcome-based pricing models.

He explains the evolution of pricing approaches as attempts to approximate a hypothetical value curve representing the true ROI a software solution delivers:

• License-based pricing draws a simple line that roughly estimates value
• Seat-based pricing creates a closer approximation based on user count
• Usage-based pricing gets even closer to actual value delivery

Outcome-based pricing represents the next frontier - pricing based on measurable outcomes users seek from software.

"The idea behind outcome-based pricing is what if you price based on a measurable outcome that you are seeking to get out of a software solution."

Alvaro points to customer service platforms like Zendesk as early examples, where pricing could be tied to successfully resolved customer inquiries rather than just access or usage.

Timestamp: [17:53-19:51]

Expanding on outcome-based pricing, Alvaro draws parallels to advertising campaign pricing. When companies allocate marketing budgets, they establish a relationship between spending and expected results - more budget typically yields better performance.

Alvaro envisions software adopting similar models, particularly AI systems:

"Perhaps we're going to start seeing some software adopt a similar model where maybe you can pay less and you get a little bit less of a sophisticated foundation model or a less sophisticated agent to run your task. You can pay more and you can get higher results."

This approach would create an even more granular connection between pricing and value delivered, allowing customers to adjust spending based on desired outcomes.

Timestamp: [19:52-20:52]

The pricing landscape is evolving at unprecedented speed. Alvaro references a tweet from Jim Barton noting that since the launch of GPT-4, the price per token has dropped nearly 90% in less than 12 months.

For comparison, he mentions that AWS S3 storage costs have dropped 97% since 2013 - but that change occurred over 11 years, not months.

"Since the launch of the GPT-4 model family of OpenAI, the price per token has dropped nearly 90% since its release... That timeline is not happening in 11 years, it's happening in months, and that's the ecosystem that we're living in today."

This rapid evolution creates both challenges and opportunities. Companies building pricing strategies around AI models face a dramatically different cost structure within months, opening possibilities for business models that weren't previously viable.

Timestamp: [20:53-22:02]

Saam synthesizes the conversation by noting that we're on an evolutionary arc in pricing - from the PC era through the cloud era to AI and outcome-based models - all moving toward aligning pricing as closely as possible with actual value delivery.

This evolution requires rapid iteration, experimentation, and data-driven decision making. Saam suggests this makes platforms like Orb essential, as traditional engineering approaches can't keep pace with the rapidly changing landscape.

"Honestly, I don't think it's hyperbolic to say if the industry is changing that fast and your engineering team much like me is going to tell you it's going to take a year to shift pricing, maybe you're not going to stand up to the competition."

The segment concludes with Saam beginning to transition the conversation toward the broader billing landscape.

Timestamp: [22:03-22:44]

• Consumption-based pricing creates a fairer model that aligns payment with actual value received - "if I'm not using it, I'm not paying for it"
• Two market factors accelerated the adoption of consumption pricing: economic pressures exposing limitations of seat-based models and the explosion of AI innovation
• Major platform shifts in technology history have consistently disrupted not just products but also business models
• AI companies must consider pricing strategy earlier than typical software companies due to high infrastructure costs
• Effective AI pricing follows three core principles: simplicity, cost awareness, and flexibility through iteration
• Hybrid pricing models combining seats and consumption often provide the best approach for many businesses
• Outcome-based pricing represents the next frontier, charging based on measurable results rather than access or usage
• The pace of change in AI pricing is unprecedented - GPT-4 token prices dropped 90% in less than a year
• Companies unable to rapidly evolve pricing strategies may struggle to remain competitive in this fast-changing environment

Timestamp: [10:01-22:44]

Companies & Products:

• Snowflake - Referenced as a trailblazing public company with consumption-based pricing
• Twilio - Referenced as a trailblazing public company with consumption-based pricing
• OpenAI - Mentioned regarding their GPT-4 model family and infrastructure costs
• Anthropic - Mentioned regarding AI infrastructure costs
• AWS S3 - Referenced for its 97% price reduction since 2013
• Zendesk - Mentioned as an example of customer service software exploring outcome-based pricing

People:

• Jim Barton - Referenced for his tweet about GPT-4 token price reduction

Concepts:

• Consumption-based pricing - Charging based on actual usage of a product or service
• Outcome-based pricing - Charging based on measurable results achieved rather than access or usage
• Pay-for-performance - Model where pricing scales with the quality or performance of the service
• Hybrid pricing models - Combining seat-based with consumption elements
• Value curve - Theoretical representation of true ROI a software solution delivers
• Shelfware - Software licenses purchased but not utilized (like an unused gym membership)

Timestamp: [10:01-22:44]

Saam transitions the conversation to discuss the broader billing landscape, noting that billing is perhaps one of the most important categories of software since it directly powers businesses. Alvaro explains that the primary pain point customers share about traditional solutions is their lack of flexibility and agility.

"The overall blocker and pain here is lack of flexibility and agility. I'm up against a new product launch, an important price change, or like 10x significant growth that's breaking everything we have in place, and the billing vendor or billing infrastructure is just not built for the evolution and change that I'm expecting."

Alvaro identifies specific limitations of traditional billing systems:

• They're often built around subscription or seat-based models that don't accommodate the flexibility required for consumption or usage-based pricing
• They might support yesterday's pricing models but provide no help when business direction changes
• They don't address the complexity of transitioning existing customers with contracts on old pricing models to new pricing structures

Timestamp: [22:50-24:10]

Alvaro explains that the fundamental gap in traditional billing approaches is their primary focus on automation rather than evolution.

"The fundamental gap here is that a lot of previous approaches to billing focused on just the automation piece of the value delivered. There is a manual invoicing process that somebody on the finance team would have to one by one issue invoices to customers, so software comes in and we're going to automate that and make it take way less time and be more precise."

While automation creates immediate value, traditional systems fail to consider the lifecycle of a company and how pricing needs to evolve over time. Based on their experiences at Asana, Alvaro and his co-founder developed Orb with an "extensibility first" approach – designing a system not just capable of representing different monetization strategies but actively helping companies implement them.

This approach has enabled Orb to help customers like Vercel launch billing for their generative UI product and support Pinecone in launching billing for their serverless vector database architecture.

Timestamp: [24:11-25:32]

Saam characterizes the competitive landscape as a "David and Goliath story," asking how Orb compares to large incumbents like Stripe and Zuora. Alvaro reflects on how his perspective as an entrepreneur has evolved beyond just focusing on innovative technology.

"As an entrepreneur, as a technologist, I thought this business was really about innovative technology, and it is, but more and more we find that it's kind of table stakes to have a best-in-class innovative product. What enterprises are looking for is a partner to help them get from point A to point B and do so in a way that's best practices oriented and that sets them up for success."

Alvaro highlights three key differentiators that position Orb in the marketplace:

1. Native support for modern monetization models - Unlike competitors offering static subscription or widget-based pricing, Orb is built from the ground up for flexible pricing approaches

2. Developer-first orientation - Focused on delivering value quickly with fast implementation and enabling continual change

3. Data platform foundation - Uniquely connecting every unit of product usage to revenue, creating an end-to-end system that serves both billing and finance needs

Timestamp: [25:33-27:34]

When Saam asks about the team at Orb, Alvaro expresses pride in the group they've assembled, while acknowledging the unique challenge of recruiting for a billing platform.

"Out of all things you can work on, it's worth asking like why would somebody choose to work on billing, right? It's not going to be the flashiest or the most headline-generating areas to work on."

What unites the team is what Alvaro calls an "infrastructural lens" – they may not be front and center, but they enable others to achieve their results better and faster. The company is guided by four core values:

1. Customer centricity - Everyone at the company is eager to engage directly with customers, even maintaining shared Slack channels and building long-term relationships

2. Minutes matter - Not just driving quality outcomes but doing so quickly, setting Orb apart from legacy players in terms of implementation timelines

3. Ownership - Taking responsibility for deliverables and outcomes

4. Attention to detail - Critical in billing where mistakes can lead to incorrect customer charges or accounting issues

"We work on billing where it comes down to literal dollars and cents on the accounting side. There are people that can go to jail if their accounting is not controlled and correct. If we get our systems wrong, we can charge customers incorrectly."

Timestamp: [27:35-29:33]

Saam observes that billing is a problem where "the more you peel back the layers of the onion, you realize how big of a problem it is and how critical it is to companies." He draws an analogy to Shopify, which started as a simple web storefront solution but evolved into an operating system for running businesses.

"When Shopify got started, it's like 'okay cool, you helped me put up a web storefront, useful' but turns out like no, Shopify becomes the operating system on which you run your business, and that's why it's a $90 billion company with the impact that it has today."

Similarly, when viewing billing as an infrastructure problem and considering all the downstream go-to-market functions built on pricing and billing, it becomes clear that getting it right creates an operating system for customers. This makes billing one of the most interesting problems to work on, though it requires deeper understanding to appreciate its significance.

Timestamp: [29:34-30:29]

Alvaro outlines Orb's expanding capabilities beyond core billing functions, highlighting several areas where they're developing richer features:

1. Revenue reporting - Helping finance teams close the books efficiently
2. Revenue forecasting - Providing real-time insights on net dollar retention and other key metrics for board meetings
3. Seller compensation - Powering sales team compensation models through usage data
4. Customer success - Supporting churn prevention and renewals through usage insights

"We have rich capabilities around revenue reporting... We're going to continue working on areas like revenue forecasting where I want many of the board meetings that our customers run to include a little slide share from Orb that shows a real-time ongoing pulse of NDR and a lot of the metrics that folks care about."

Alvaro emphasizes that Orb is pursuing a fundamental shift in how the go-to-market stack needs to be built in modern enterprises, positioning the company to play a significant role in that transformation.

Timestamp: [30:30-31:17]

• Traditional billing systems focus primarily on automation but fail to address the need for pricing evolution over a company's lifecycle
• The primary pain point with legacy billing solutions is their lack of flexibility and agility when companies need to adapt their pricing models
• Transitioning existing customers from old pricing structures to new ones remains a significant challenge that traditional systems don't adequately address
• While innovative technology is important, enterprises increasingly seek partners who can help them implement best practices and set them up for success
• Orb differentiates itself through native support for modern monetization models, a developer-first approach, and a data platform that connects product usage to revenue
• Billing requires exceptional attention to detail as mistakes can have serious financial and legal consequences
• The strategic value of billing becomes apparent when viewed as infrastructure that powers downstream go-to-market functions
• Orb is expanding beyond core billing into revenue reporting, forecasting, seller compensation, and customer success tools
• The company is pursuing a fundamental shift in how the go-to-market stack is built for modern enterprises

Timestamp: [22:50-31:17]

Companies:

• Vercel - Customer who launched billing for their generative UI product with Orb
• Pinecone - Customer who launched billing for their serverless vector database with Orb
• Stripe - Mentioned as a large incumbent in the billing space
• Zuora - Mentioned as a large incumbent in the billing space
• Shopify - Referenced as an analogy for how billing platforms can become operating systems for businesses
• Asana - Implicitly referenced as the co-founders' previous company where they experienced billing challenges

Concepts:

• Extensibility First - Orb's approach to building billing infrastructure that anticipates and enables change
• Net Dollar Retention (NDR) - Key metric mentioned as part of Orb's revenue forecasting capabilities
• Go-to-market stack - The collection of tools and systems that support sales, marketing, and customer success
• Legacy billing vendors - Traditional billing solutions that focus on automation over flexibility
• Developer-first - Approach that prioritizes ease of implementation and integration for technical teams

Timestamp: [22:50-31:17]

Saam asks Alvaro to reflect on the biggest surprises he's encountered since founding Orb in 2021 and how the company has evolved differently than originally envisioned. Alvaro notes that while the core vision has remained consistent, the speed of transformation in the software industry has been shocking.

"I could not have imagined the speed that this transformation is happening in the software industry. Like that saying of 'it's slow at first and then it happens all at once' - I think that's really happening."

Alvaro explains that in 2021, during the economic boom, Orb's message of revenue efficiency was often seen as a "nice to have" or something companies would address when they "grew up." Now, in the current economic climate, it has become an urgent priority overnight.

Timestamp: [31:23-32:28]

Saam adds that another surprising development was how quickly the industry was catapulted into the AI era and its downstream impacts on pricing models.

He recalls conversations from 2021 where founders acknowledged they needed to eventually align their pricing with value delivery, similar to successful usage-based companies like Snowflake and Twilio. However, it wasn't considered an urgent priority at that time.

"In 2021, there were a couple examples of really good usage-based pricing businesses - businesses like Snowflake and Twilio that really aligned the way they priced with the way value was delivered... But again, it wasn't like a must-do essential... Fast forward to 2024 with the rise of agents, and it's like if you're still thinking about things primarily through a seat-based lens, you're toast."

Saam notes that now, in 2024, the vast majority (80-90%) of startups he encounters are usage-based, consumption-based, or outcome-oriented in their pricing approach. While he expected this transition to eventually happen, he's struck by how rapidly it occurred.

Alvaro agrees, acknowledging the element of "right place, right time" in building Orb and expressing excitement about accelerating their efforts to deliver value to more customers.

Timestamp: [32:29-33:50]

Saam asks about Orb's desired impact on the software industry over the next few years, particularly how their developer-first, usage-based billing infrastructure can unlock or accelerate broader innovation in business models.

Alvaro articulates a powerful vision focused on enabling innovation by reducing what he calls the "innovation tax":

"I want us to be known for helping create more innovation in this ecosystem and reduce this innovation tax. Because if you think about it, if you're putting engineers towards supporting billing and monetization of your product, you're doing so from having done an assessment and realized 'sure, that makes sense, that's ROI positive,' but it's still painfully taxing to what other things you could be achieving."

This allocation of engineering resources to billing systems creates an enormous opportunity cost, diverting investment from core product innovation. Alvaro succinctly captures Orb's mission:

"I want Orb to be known for enabling companies to ship their pricing as quickly as they've shipped their products."

Timestamp: [33:51-34:42]

Company Announcement:

• Orb has made a trial version of their platform available on their website
• Users can access it at withorb.com/trial
• The trial allows potential customers to experience first-hand what it's like to bring product-oriented thinking to pricing infrastructure

Podcast Information:

• For more conversations like this one, follow or subscribe to Grey Matter wherever you listen to podcasts
• A link to the YouTube channel is available in the episode description
• The podcast team includes Elisa Schreiber and Fitz Barth
• The episode was produced and edited by Eric Johnson from LightningPod.fm

Timestamp: [34:43-35:42]

• The software industry's transition to usage-based pricing models has happened much faster than anticipated, accelerated by economic conditions and AI advancements
• What was once seen as a "nice to have" feature in 2021 has become an urgent priority for businesses in the current climate
• The rapid rise of AI and agentic software has fundamentally shifted how companies think about pricing - companies still focused primarily on seat-based pricing may struggle to compete
• The majority of new startups (80-90%) now incorporate usage-based, consumption-based, or outcome-oriented pricing approaches
• Building and maintaining in-house billing systems creates an "innovation tax" by diverting engineering resources from core product development
• Orb's mission is to enable companies to evolve their pricing models as quickly as they evolve their products
• The company aims to reduce friction in monetization so companies can focus on creating value rather than capturing it

Timestamp: [31:23-35:42]

Companies:

• Orb - Modern billing infrastructure platform discussed throughout the podcast
• Snowflake - Referenced as an early example of successful usage-based pricing
• Twilio - Referenced as an early example of successful usage-based pricing
• Grey Matter - The podcast hosted by Saam Motamedi from Greylock

People:

• Saam Motamedi - Enterprise partner at Greylock and podcast host
• Alvaro Morales - CEO and co-founder of Orb
• Elisa Schreiber - Member of the podcast production team
• Fitz Barth - Member of the podcast production team
• Eric Johnson - Producer and editor from LightningPod.fm

Concepts:

• Innovation tax - Alvaro's term for the opportunity cost when engineering resources are allocated to billing rather than core product innovation
• Usage-based pricing - Charging based on actual usage of a product or service
• Consumption-based pricing - Similar to usage-based, focused on resource consumption
• Outcome-oriented pricing - Pricing based on the results or outcomes achieved

Timestamp: [31:23-35:42]