“When it comes to compliance, the amount of providers is very limited.”
In December 2018, Kaleido launched a tool to automatically remove backgrounds from images called remove.bg. They developed and packaged AI into a product users could freely upload images to and have the backgrounds removed. CEO, Benjamin Groessing explains:
“There's a huge gap between academics and making products easy to use and accessible for end-users and companies. Our mission is to bring the academic advances of the past decade really close to end-users.”
By offering the tool freely, Kaleido captured media attention and millions of users tried their product.
With their “proof of concept” showing traction, CEO Benjamin Groessing took to turning their software product into a software business. At the heart of this decision was finding the right solution to take payments and drive revenue.
“As we were looking for technical solutions, we were also looking at the tax compliance perspective. What do we have to keep in mind when we bill international customers? How does this work from a tax perspective? What other legal implications are involved?”
Benjamin’s team dug into exploring different technical solutions and tried out several combinations of tools to see if they could be a good fit.
“We looked at and integrated various solutions. Simple billing solution, subscription management platforms, and also API plus billing in one integrated solution and integrated various solutions from a technical standpoint. But in the end, we saw that there’s a lot of complexity not on the technical side but in the compliance aspect.”
With the concerns about tax compliance, Benjamin’s team dug deeper into the topic talking to tax advisers and doing their own research. They eventually came across the Worldwide VAT, GST and Sales Tax Guide published annually by EY - a 1,300 page PDF (now 1,452 pages in 2020).
“And at one point, that was both a really good day but also a very bad one that we discovered a PDF with 1,300 pages. And that really described everything we needed to know. So the good thing is we had a definite answer of how to do it. But the bad thing was, yeah, it has 1,300 pages.”
With the complexity and burden of tax compliance now clear, Benjamin’s team looked further into solutions that would enable them to scale and remain tax compliant globally.
“That’s when we discovered the Merchant of Record model and Paddle. We were really happy to see that being so much easier when it comes to compliance. Technically, there are quite a few good billing solutions out there - 1-time purchases, subscriptions, easy to integrate - but when it comes to compliance, the amount of providers is very limited.”
Paddle stood out to Benjamin’s team through sharing the same DNA.
“One big factor is the approach the company is taking. With Paddle, product decisions seemed to be based on data. Everything seemed to be aligned with what we were trying to do”.
Choosing Paddle from Day 1
The Kaleido team chose to launch their product remove.bg with Paddle from the start.
“We had another integration at first and then we switched to Paddle before we launched. I think we did that a week or so before and then started with the integration.”
Since anyone can signup and create a free account, Paddle made it easy to get started.
“In the beginning, we were really looking for something where we can just get started. We really had no time to talk to different people and negotiate on pricing or anything. We really just needed something that worked."
With Paddle, Kaleido were able to implement a complex billing model with 1-time credits and subscriptions at different price points, and sell in over 20 native currencies for higher conversion - no additional tools to integrate.
What’s more, they were able to build their complex billing model themselves without being upsold extra services from a billing provider.
“For a few months, we were doing everything through the Paddle self-service experience. We reached out to support for questions which usually work quite well. That worked well from the beginning.”
At Paddle, we recognize that larger sellers or migrating sellers value having a direct point of contact with an account manager, account executive, solution architect, and executives.
“As we were growing, Johan got in touch. From that point onwards, questions were answered even faster. Often questions we didn’t even ask were answered like how we could improve aspects of our strategy.”
Paddle’s account managers and quarterly business review reports helped shape the business strategy at Kaleido.
“What was always interesting is Johan preparing reports for us on a quarterly basis containing a lot of helpful insights to help us make decisions for the next quarter.”
These insights have included suggested optimization around currencies for targeting different countries, cancellation flows to reduce churn by 38%, willingness to pay surveys for pricing new products and more. Paddle’s worked with the wider commercial, financial, and technical teams across Kaleido. Chief Operating Officer Alexander Brix added this:
"Paddle is a great sparring partner in the pre-launch phase of our next product unscreen.com. Their team helped us perform a quantifiable market survey, allowing us to identify our users' willingness to buy before launching the product.”
The Paddle platform has made it easy to implement many of these strategic changes from enabling new currencies in 1-click, to setting up subscription pausing in cancellation flows, to sending invoices to enterprise customers - all from the same platform.
“What we really appreciated with Paddle was its transparency. It's easy to get started.”
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Kaleido scale their business without limits
With Paddle, Kaleido were able to scale their product remove.bg from zero to 4,800 customers from 119 countries within six months of launch, and then to 43,000 customers from 181 countries within 18 months of launch. Subscriptions are now their fastest growing revenue segment.
“For us, subscriptions are really key to our growth”
With advice from account managers and Paddle’s flexible subscription tools to build smart cancellation flows, Kaleido have been able to decrease average monthly gross MRR churn by 38% - even during Covid’s disruption.
On top of recurring subscription revenue, Kaleido have been able to bill for 1-time credits amongst infrequent customers, and enterprise invoicing for larger companies buying five and six-figure contracts like Sony Music and AT&T - all through one unified SaaS Commerce Platform.
The revenue strategy enabled Kaleido to grow from the founding team and software product into a software business.
“We grew from just two people to a team with several departments and growing not only with one product but building a suite of products. The team is changing every month. We're hiring a lot still. We still see new markets and new products evolve”.
Kaleido have been able to embrace the Paddle way of growth through new markets - across different geographies, industries, customer sizes, and products - all through using the same unified SaaS Commerce Platform.
“So the US is our main market, but Europe is also very strong. Asia is the market with the largest potential given there are so many free users already using our products. Reaching those users with our paid products has a lot of potential - more than other markets”
By enabling currencies and additional payment methods (a few clicks in the Paddle dashboard), Kaleido have been able to tap into local markets and how they prefer to pay. Only 30% of their checkouts are in US dollars, and less than 60% of their checkouts are paid by card.
Next, Kaleido plans to build more products and brands alongside their first remove.bg product - starting with the video background remover tool called Unscreen.
“We started with remove.bg as one brand which is very specific for solving one problem in the best possible way. Unscreen is the same thing - it’s a sister brand specialized on one thing. Our goal is to make Visual AI accessible, and brands based on the “jobs to be done” concept help with that. Going forward we might work on new brands, or a more integrated shared brand too."
Importantly, Kaleido can build and scale the business on the same infrastructure for all current and future brands, including the ability to cross-sell product and upsell to their future product suite without any extra integration.
With Paddle, Kaleido can scale without limits. They have nothing new to integrate, register, or incorporate, and they don’t have to scale their finance and support teams with these challenges too.
Kaleido makes Visual AI accessible. Their products remove.bg and unscreen.com are the market-leading products for automated photo and video background removal in high quality and are used by millions of people and businesses worldwide.