Zuora offers subscription services to all those online software companies

updated
Zuora is a Silicon Valley company that says it offers a simpler, less expensive way for companies to offer online subscription services. It launches today announcing it has gotten $6.5 million in a first round of funding led by venture firm Benchmark Capital.

Until now, software companies like Salesforce or gaming companies like World of Warcraft have faced a lot of pain in selling their products to subscribers.

The main provider of subscription services to date has been Portal Software, but it costs between $1 million and $3 million to implement. Aside from paying for Portal’s software, you have to employ consultants to help implement it, create a database and maintain it all. Meanwhile, smaller companies unable to afford Portal are forced to do their sales by hand, using an Excel spreadsheet, or relying on a credit card company which lets customers make an automatic payment every month.

With the explosion of software companies offering their software as a monthly subscription (known as Software as a Service, or SaaS), Zuora’s chief executive Tien Tzuo said he thinks there’s a significant market for its product. Zuora will begin by targeting SAAS companies, but they cater to all kinds of services, including game companies like WoW.

Zuora, based in Redwood City, Calif., was founded by executives who previously worked at Salesforce and WebEx who found that Portal wasn’t working for them. Tzuo spent nine years at Salesforce, and he led the company’s project to build its own subscriptions services product. Tzuo then decided to leave Salesforce to start his own company specifically designed to offer these services. Rather than discouraging him, Salesforce’s chief executive Marc Benioff encouraged him to do so, and agreed to invest as well. Tzuo’s co-founder, Cheng Zou, who is chief technology officer at Zuora, built the subscription billing service used by WebEx.

Zuora’s first customer is Coremetrics. Zuora says it will undercut Portal significantly, charging on the order of a few thousand dollars a month. Benchmark’s Peter Fenton joins the board.

[Update: We failed to mention another competitor, Aria, which has served SaaS companies with a billing services for more than three years, but it has focused on the gaming industry (our coverage). It raised $4 million in a first round of capital from venture firm Hummer Winblad back in October, and counts  Flagship Studios, Hellgate London, DigitalBridge, ZoomInfo and others among its customers. Aria says  it has been used in more than 236 countries.]