I'm Keith Sodorling and welcome to the Zero Prime Podcast, where we explore the early
stories of top startups by the experiences of their engineer founders.
This week I chat with Alvaro Morales, the co-founder and CEO of Orp, the flexible billing engine
for modern software pricing.
I think you'll enjoy hearing Alvaro's thoughts on his personal journey as an engineer founder,
how he thinks about pricing strategy and where it's headed with the rise of gender to
the AI, and also hearing more about some of the challenges he's faced and successes he's
had on his journey as a first-time founder.
So Alvaro just wanted to welcome you to the pod.
Thanks for having me Pete, excited to be here.
So I know that you reside in San Francisco now, but your journey to SF started from a
distant place in Lima, Peru.
So I'm curious, what is the tech world like in Lima and what's the story of you eventually
coming to the US?
Yeah, that's right.
I was born and raised in Lima, Peru, and only came to the US when I was a teen for
college.
And it's so interesting to think about the tech world in Lima because now being in this
country for over 13 years, it's awesome and wild how much has changed.
So as interesting as part of when I was a teenager who went up there, maybe access to technology
was still fairly limited among the general population, meaning you're catching like the
beginnings or middles of the mobile phones trend, the country that is significantly
still cash, cash driven as opposed to electronic transactions.
And maybe the view of technology investment was heavily incurred among maybe profitability
orientation as opposed to a true venture capital orientation.
And I think what's interesting is that you forward, fast forward at the clock today to
where Peru is where a lot of Latin America has been an amazing transformation where there's
a lot more venture community and startups propping up.
All equivalents of Venmos have really taken over and been accelerated by the pandemic.
It's just a much more dynamic and true innovative ecosystem, much like Silicon Valley is.
So it's just so exciting to kind of see the true opportunities and entrepreneurs coming
out of where Lima is now at this stage.
That's neat.
And you mentioned cash payments and digital currency or digital payments and other things
in that bit.
Does that backdrop have anything to do with the reason that you started orb?
Not as much not directly.
I would say that the really interesting thing about that trend that I'm noticing in particular
is just so much of technology in our day-to-day lives that we grow accustomed to.
And I think probably for me, like the single biggest representation and manifestation of
that in my day-to-day has often been like, how am I paying for goods when I'm walking
to the corner store.
So I think that is almost like an access to technology index that can probably be my penetration
of index there that I am clearly geeking out of it.
So maybe no surprise that I found a company in the broad fintech sector.
Got it.
So how did you end up in the US from Peru?
I went to MIT to study computer science, but the journey to get there was by no means a
straight path, actually.
I would say it's funny to look back on this, but I went through what was very much an existential
question and challenge when I was in my high school years of do I go into technology
in computer science or do I go into acting.
And as you might imagine, one of those paths was reassuring and calming to my parents and
maybe one of those wasn't as much.
But through that, I guess, just pondering that question, I really connected with the passion
that I had to build and obviously went the computer science route.
And it's just been really interesting years and how through a lot of the go-to-market
and marketing activities that I'm doing these days is the founder of ORB and finding ways
to maybe connect with some of that artistic roots and then passion in addition to like the
fun infrastructure build we're doing at ORB.
Got it.
Now, you were, you had internships or early engineering roles in your career at Yahoo and
Palantir and then Asana, I believe.
What did you learn from those places and how did that prepare you as an engineer to
start a company in the first place?
Yeah, it was really interesting to get those set of experiences because it was very much
an exploration in company stage.
I think it started at Yahoo and Summer where the company was at 12,000 people and I joined
Palantir.
The company was about 1,500 people and Asana was at less than 100.
I almost like knew some of those internship opportunities to explore not just run applications
of software engineering and product development, but almost like find where I would connect
the most in the impact that I was having and I think I had very much a lot of curiosity
and excitement around being an entrepreneur.
My college roommate, we thought about a startup in college and explored that for a bit and
all of that.
So I would almost say some of that professional journey was getting to a point of comfort
in terms of maybe I've seen a few things that might be interesting and have provided enough
of a foundational learning to take this place.
And were you trying to build relationships with the founders of those companies directly
or was it sort of more of an indirect appreciation of how the organization was growing and changing
and how did you really like to do a mentor or two or how did you really sort of ascertain
what skills they were that you might need to learn in order to take the plunge yourself
I'm curious.
Credit and have a ton of gratitude for the amazing culture that can be like Asana specifically
created.
Even though I got a lot of excitement and satisfaction out of building product and working
through challenging engineering infrastructure problems, it was almost like I was always like
what does the sales team what are metrics that a marketing team looks at and I think one
of the exciting things about being at Asana at the time I was there and since was by virtue
of maybe using a product like Asana to do work collaboration across all departments.
There's a lot of de facto and natural transparency and visibility into what these functional
teams are doing and there was actually a lot of excitement and energy and like this engineer
is kind of interested to learn more about the business.
So let me actually like connect with a couple one on ones and get some of that going.
So I've internment or ended up just updating a lot of those conversations and a lot of
cross-functional DNA company that made those feel like interesting and worthwhile to pursue
as opposed to like I'm going on random site quests and not doing my job.
Yeah, it sounds like an engineering escapade without business sense is kind of like a side
project.
I'm sure there's different ways to define side projects but I'm sure that is a homework
of a lot of engineer founders who get serious about starting a company and maybe some start
the company without business curiosity but I think you quickly get into trouble probably
with that path and be far better if you were able to bolster your own appreciation of
business needs, how business you just think, how sales and marketing work.
Even if you have a co-founder who supports you with extra experience in some of those skills
I think as an engineer founder at least for myself it's been critical to understand how
business works and I've had to start businesses from the ground up myself with various types
of revenue models and learn to do sales myself and those have all been extremely instrumental
in my own development as an entrepreneur and as an engineer founder.
Totally.
Well, let's go back to Orb then so what's the key insight that led you to start Orb and
do you remember the point in time when you really started to generate this insight or did
you have in a hot moment where all of a sudden you realize this is something that the world
needed based on some previous experience?
Yeah, very much so I think my brain got hooked into this world.
I knew nothing about pricing.
I went into coming out of college joining us on as a software engineer and I knew nothing
about pricing and one of my team got tapped into support, a pricing change of the company
it was doing and I have to have made a kind of role by isn't really a little bit and I thought
okay, I'm going to go in and see a whole bunch of Excel models, look at a couple of analyses
write three lines of code and move on with my life.
What instead I found is that this discipline of thinking about pricing and value and how
you at the end of the monetized innovation is incredibly customer centric and incredibly
product centric.
This is not like a math optimization exercise where there is a sulfur X type dynamic for
it.
It's really a new one set of trade offs that come down to understanding who your customers
are, what value you're providing for them, what value they're perceiving from you and how
to sort of exercise those sets of trade offs towards ultimately something that is really
growth full and aligned with the customer.
That I think formulation and framing of the space got my engineer brain super interested
and excited about almost like seeing the way the gears turned there and then I got to
see how like in the company it took us like months to roll out a simple price change to
a per-seat price or like it would take us weeks before we could think about repackaging a
product into a different tier.
So I'm looking at that situation both in terms of an immense revenue generating opportunity
for businesses that incur so much pain and effort and are clunky to engineering and finance
teams and I think it was like one too many experiences of having to say no to great ideas
from the business in terms of that's great for our customers we just can't do it on the
billing side.
I did the seed for orb because I think they're the foundational insight is how could we
bring more of a developer platform lens to the space of billing where the essence of
that being iteration experimentation flexibility and prior to orb there has not been an infrastructure
tool that really brings that approach to what ultimately is at the core of a company's
business model.
And can you give us an example of a pricing change that maybe it's deceptively simple on
the outside but actually is far more nuanced and has all these other qualities that you
mentioned.
Yes, I think so much of this of like the boots on the ground experience here fits the metaphor
of like being the tip of the iceberg.
The fact of the matter is as you're building out product, you're making these core assumptions
around how your product works, the kind of lately abstraction of the monetization model.
Simple things like maybe our pricing is per team.
So we have this team entity in our data model and we're going to build a whole bunch of
products.
Well, one day we want to do the click up to go up market and roll out an organization
concept and data model.
Now, I'm not just like making a change to pricing.
I'm actually again having to go in, refigure out how a 10 year old code base with a whole
bunch of product features works and excise out that logic that's been kind of scattered
throughout the code base to make modifications.
So really with a solution like orb, our mission here is like how can we get these engineering
teams to decouple how your product works with how you price it and almost like offload
and move that business logic into orb's control plane to truly enable that iteration
and flexibility.
Got it.
And I know that one of the hallmarks of your platform is this flexibility and I think you
encourage companies and startups to sort of tinker with pricing or as you said experiment
with pricing, which is this sort of Silicon Valley iteration experiment, explore kind
of technique.
What's the downside of that?
Like, can this create chaos in an organization or a lack of control?
Like if you give us just power tools to change pricing easily at the drop of the hat,
can that go wrong or what's the other side of this?
I think it absolutely can go wrong, but I have yet to meet a single software organization
that kind of feels like, oh, maybe we're like tinkering too much with pricing.
The fact of the matter is pricing is as close to the customer relationship as it gets.
Doing something like running a price change carries this big risk of this trust that I've
been building up for so many years in my customer relationship.
I can lose it overnight for some poorly executed, poorly communicated pricing change where
I like have just missed the mark on it.
Two examples of fired CEOs of public companies as a result of pricing changes.
The thing though that I feel like too much of the innovation ecosystem is gravitated towards
is a pendulum swing radically in the other direction where look, we're innovating on product
day in day out.
In the course of a year or launching new features, new capabilities, all that, to me,
it doesn't make sense through first principles, why are we not thinking about pricing also
as a product that we need to iterate and evolve and evolve to match up with what we're
doing.
There's a bunch of good mitigations, like maybe focusing your pricing iteration on net
new based tumors that don't have prior expectations, but I think in general, if you kind of think
about a value curve that increasing and going up into the right as you continue to innovate
on the product, it's really an ideal if you're pricing for these every five years, that
is kind of a rough approximation of what the true value delivered to the customers.
So let me just ask you straight, is or behind Wendy's new search, search style pricing?
Yeah, this is funny, we love pricing evolution, but maybe that's not one we would want any
hands on.
There's some fun ideas of interesting pricing ideas from B2B domains that maybe through management
consultants made their way to consumer fast food.
Well, that being said, you do have some really large name clients that lots of folks in
our community would know about and actually other companies in the zero prime portfolio and
no mother duck is one, replete is in there for sale, you have some really interesting customers.
I'm curious, what was the very first stages of signing up those customers and how did you
work with design partners because I know from being a founder myself that customer activity
like that doesn't just grow on trees and it really takes a lot of nurturing and intention
and strategy.
So I'm just curious and to get the ball rolling in the earliest days, how did you find
design partners and do you have any lessons to share with listeners on that front?
Yeah, and I would say that kind of getting pushing that boulder up of the mountain was probably
one of the for sure hardest steps in the journey to date, even as challenges continue to
abound and new lessons continue to be there.
What was really hard when we were pitching the original ideas of or to early design partner
prospects was actually how we would internalize the feedback that we got from those design partners.
We got a lot of notes, it took a lot of a lot of attempts at really signing those early
design partners that came on the journey to help us build this product vision.
But as a first time founder is going through this journey the first time, it was hard for
us to tease apart a no from a I'm not resonating with a pain point that you're talking about.
I don't have this problem at my organization with a look.
I do have this problem, but at the end of the day, you are two guys with a slide dig trying
to get your hands on my company's mission, critical revenue infrastructure.
So that was a good or lessened to realize, ah, as much as we think we're in the business
of software, we're really in the business of trust.
And there you almost begin to think, how can you engineer motion and a go-to-market strategy
that optimizes for trust building such that work can really known for providing best in
class support, amazing reliability and scalability and uptime to what will serve that this problem
is so important.
So realizing that and almost like crafting a like, okay, what are ways to seek out innovative
headline type partners that can really bolster a trust story, make them extremely successful
and build from there.
I think it was one component to that.
And I think a second component was having real clarity and intellectual honesty on what
is the ideal customer profile for orb and what is the most appealing or exciting or best
fit way to build the product to really serve that use case.
And for us, we support billing for some of the world's fastest growing organizations that
are very innovative in launching new products and want to go out to market with a new product
and stand up billing for it in less than a week.
From that data architecture, a developer first focus falls out in a way, we kind of, even
if we didn't have those customers at the beginning, we knew what those organizations
would need and we were really building for them.
And this whole notion of getting a first couple of marquee customers that sort of increased
the trust in the brand for others, I mean, obviously that's a chicken or the egg kind
of a thing, right, where I guess could you go into more details into how you actually
got their trust in the first place? Is this a lot of in-person face time?
Is this a lot of, you know, I don't know, non-zoom meetings, resume meetings?
Is this meeting in their office and working with their team?
Like how did you build that trust when you're still a couple folks in a startup and really
trying to like knock down your first marquee customer too?
Like how did you stay undonted and how did you reverse engineer that process?
Great question, because I think it really had to do with bringing a collaborative focus
and a collaborative ethos to how we showed up with our customer relationships.
When I was at Asana, I worked on growth engineering for a long time and we ran sort of experimentation
and an AB test at scale and my customers there were maybe these numbers on a spreadsheet
that would dance up and down, whereas when I started Orb, from the very beginning we created
a culture that was very customer centric, we were in shared Slack channels with all our
early customers, we knew them by name, we would understand their longer term priorities,
auxiliary, orthogonal to just the direct billing point that we were solving and we just spent
a lot of time getting to know those folks as people and really deeply understanding what
they needed.
I think that was important.
I think the way it was first was it almost like field audience research from a product
marketing one, like really kind of understanding not just what problem are you directly solving
but what is the world level conversation that is resulting in folks feeling like we got
a pricing yesterday because we're behind the curve and kind of starting to unearth that.
But second to just like turning those early customers and early design partners into champions
and customer references, that's how you get the ball rolling for Orb.
So I would say we didn't shy away from showing up a more unpolished and collaborative way.
Like, oh, interesting business problem, let's bust out Lucidchard and try to like collaboratively
build interesting solution shape for this new problem we're encountering.
Like at the end of the day you have to realize that the kinds of organizations that seek out
innovative startup vendors, you want a little bit of an insider seat into what that innovation
journey is like.
You can go to an incumbent and a 20 year old public company if you just want like a really
buttoned up rigid type solution out there.
But if you're experiencing a problem for which there doesn't exist a solution, the more
you can turn those early prospects into folks that feel like they're part of your team
and part of the bench, I think for us that was a really important tactic to boot shop
credibility.
It's really great.
Is that you and your co-founder CTO involved in all those trials where there are other people
involved as well?
Or was that mostly the two of you primarily?
Definitely the two of us, but really everybody of the company for at least the first couple
of years of the company, we have an engineering team that's very customer centric is in our
customer facing Slack channels and it's interesting.
As an engineering leader, I was managing some teams at Asana.
There's often like these ideas of like we're working on a roadmap.
We got to protect the team from trash and interruptions and all that.
Use it or love when the work that we are solving for is in the direct path to solving our customer
problems.
And it's resulted in a really interesting kind of engineering culture build around that.
Cool.
That's really neat.
I wanted to ask you as well about usage based pricing because obviously with companies
like Snowflake and others, there's more complicated architecture, separation of storage
and compute and other sort of axes that teams are actually costing their own solutions
against, but maybe at the end of the day, they sort of roll into sort of some kind of usage
based pricing, which is quite common and popular these days.
I think of an analogy between the generous of AI world because now the cost of inference
to serve these services is frail and based AI apps is high as well.
So I'm wondering like how you think about sort of the AI world and usage based pricing
and if orb has a position on how you're able to support customers think through and implement
such pricing schemes.
It's been a really interesting trend and acceleration to a lot of the momentum we're seeing in our
business.
We're obviously supporting and serving a lot of companies that are playing an important
role in the infrastructure layer for enabling other AI companies to build kind of best in class
customer experiences.
We're also starting to see a lot of what you call traditional application level SaaS companies
start to think about how they might incorporate AI into their product offering and in the process
of doing so have to radically rethink and shift away from a maybe more of a core seat based
pricing model.
The thing that's really I think deeply foundational about this innovation cycle we're
in is that a lot of the ways entrepreneurs have gotten used to think about pricing, which
honestly is often like, well, let me just like figure out product market fit and willing
us to pay and as I go and like let me think about product before price as an idea and
figure out pricing later as we scale, well, that gets flipped in its head when you're thinking
about incorporating AI and a LEM technologies that carry some true costs to them.
Even as getting off the ground startup, you might be contemplating a pretty serious
open AI bill or you might be contemplating some pretty serious training and fine tuning
type costs.
So I think the consequence of this incredible innovation cycle that we're in is that it's
even more important to think for founders to think about pricing as early or perhaps
even before product because you just the answer of like, oh, I'm just going to figure out
later as we grow and probably can assume we're going to have amazing SaaS type margins that
just like doesn't cut it when your application later company really kind of looks more like
infrastructure cogs.
Yeah, it's exactly right.
And more and more companies have to come to terms with that, especially at small scale
because you know, your free Google cloud credits or AWS credits can only go so far.
And these are even companies who are obviously not training their own LLM, which is yet another
order of magnitude difference in cost and GPU compute.
But yeah, even for those ones that want to operate a meaningful scale for an inference
based service, there's huge considerations that they have to think through and founders
beware sort of pegging your business model on these kinds of APIs.
Do you see like, this is a little bit of an aside for Orp specifically, but do you see
more companies adopting open source models or on-prem versions of these models where they
know that they can control the cost or is that really the domain of large companies only
these days in your experience?
We're seeing a lot of companies getting off the ground that are trying to forward look
one, two, three, sometimes even four years ahead in terms of cost and margins and future
proving or pulling forward architecture decisions with that in mind and often like something like
being more in control of the end to end cost performance and fine tuning type decisions
is something that gets pulled up.
And my view on this is even though it's harder, it's like we're making it harder for these
startups to answer all the existential questions that they need to answer.
I think this is strictly good though, just like the maybe kind of fundraising market correction
coming off of the deserve error has brought a level of rigor and discipline and thinking
around, but business fundamentals that every founder, every engineer founder, like deeply
has to think through now, similarly from the unit economics of your business.
And answer of like, well, figured out when we're like huge and about the IPO, like that type
of thinking and type of answer, I think does not cut it in 2024.
Yeah, it doesn't fly anymore.
I couldn't agree more.
That's all said.
Well, we have to let you go, Alvaro, but I just want to ask you before we leave, what's
the thing that's been most challenging for you in your transition of being an engineer
founder to being a startup CEO?
I have loved the challenge of figuring out sales as an engineer founder.
I feel like I've really sunk my teeth into an immense respect for the craft and an immense
challenge there.
And almost like, I found in that need to like drive founder, let's say you'll support our
sales team now and all that so much of a feedback loop built in in terms of what we're building
and who we're building it for.
And it's just taken a lot of mistakes and a lot of mishaps to kind of find a path towards
it.
And even though that's been by far the kind of the single most challenging thing, you
know, no, and in that I'm not saying, I'm not saying it was easy, but the kind of architecture
and scaling challenges that we saw for ore for sure are very deeply interesting, but keep
going back to some of these business and go to market type challenges that are very important
and foundational to define.
Well, I appreciate you spending time with us and thanks for sharing your experience with
the community.
Yeah, I really enjoyed this.
Thanks for the time.
Thanks for joining us for another episode of Zero Prime Podcast.
I hope you enjoyed my chat with Alvaro Morales from Orb.
You can find Alvaro on X at Alvaro Morales and find more info on Alvaro's company,
[email protected].
If you like hearing from engineer founders on the cutting edge of enterprise startups and
developer tools, please leave us a review on your favorite podcast app and subscribe
to the show.
We'll see you next time.
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