Lago

What Is Lago?

The problem is one that most software companies hit around the same time — when usage-based pricing starts to look attractive and the engineering team begins calculating what it would take to build the billing logic themselves. The answer is usually three to six months of engineering time, a significant number of edge cases nobody anticipated, and a metering system that works until it has to handle your largest customer and breaks in ways that are deeply embarrassing and financially awkward.

The alternative — outsourcing billing to Stripe Billing or Chargebee — works until it doesn't. These platforms handle subscriptions well. Usage-based billing is a different problem: event streams, aggregation rules, complex pricing hierarchies, prepaid credits, custom contract terms. Stripe Billing can be coerced into handling some of this. Building on top of it means working within its data model rather than your own, which creates constraints that compound over time.

Lago, founded in Paris in 2022 and backed by Y Combinator, proposes a third path: a billing engine that you own, that you can run anywhere, that handles every pricing model you might need, and that separates the billing logic layer from the payment processing layer so you can use whatever payment processor makes sense for your business.

The open-source self-hosted version is free. The cloud-managed version starts free and scales with your billing volume. The trade-off on the self-hosted path is infrastructure responsibility. The trade-off on the cloud path is cost at high revenue volumes. Neither trade-off is hidden — Lago publishes them prominently, which itself distinguishes the company from vendors whose pricing models reward inattention.

Key Features

Real-Time Event Metering

Lago's metering pipeline handles up to 15,000 billing events per second. Events are structured JSON sent via API: a unit of compute used, an API call made, a gigabyte stored, a message sent, a document processed. Lago ingests them, applies the aggregation rules you have configured (sum, count, count unique, maximum, or weighted sum), and produces the usage totals that drive invoice generation.

The aggregation system is where the billing logic complexity lives, and Lago's configurability here is extensive. Filters on event properties let you segment usage by customer attribute, plan type, or custom dimension. Grouped charges allow different rates for different usage bands on the same metric. Prorated charges handle mid-period plan changes without manual calculation.

Pricing Model Coverage

Lago handles every pricing model a software business is likely to need:

Flat subscriptions — fixed monthly or annual fees, with or without free periods and trial management.

Pure usage-based pricing — charges calculated entirely from usage event aggregation. Pay-as-you-go with no floor commitment.

Hybrid plans — a base subscription fee plus usage-based charges on top. The most common model for infrastructure and API businesses.

Prepaid credits — customers purchase a credit balance that depletes as they consume the service. Real-time balance tracking and threshold alerts.

Volume and graduated tiers — different per-unit rates applied to usage bands. First 10,000 API calls at one rate, next 50,000 at another.

Custom contracts — minimum commitments, enterprise rate cards, negotiated pricing terms applied per-customer.

Invoice Generation and Tax Handling

Lago generates invoices from the billing data it has calculated. Invoices include line items for each charge component, applied credits, taxes, and any coupon discounts. PDF and structured data formats are available. Tax rates can be configured per customer tax ID or jurisdiction.

The key limitation to understand: Lago generates the invoice but does not collect the payment. A payment processor integration (Stripe, GoCardless, Adyen) handles the actual charge against the customer's payment method. Lago orchestrates the payment trigger via webhooks — it knows when an invoice is due and signals your payment processor, but the money movement happens outside Lago's system.

Coupon and Discount Engine

Lago includes a coupon system for promotions, trials, and customer-specific discounts. Coupons can be percentage or fixed-amount, one-time or recurring, with or without expiry dates, and targeted at specific plan charges or the entire invoice total. This is more flexible than the discount systems in most billing platforms, which is relevant for teams running complex promotional campaigns or partner pricing structures.

Revenue Analytics

The Lago dashboard surfaces revenue analytics: MRR, ARR, customer churn, average revenue per user, and usage trends by metric. For self-hosted deployments, this data lives entirely within your infrastructure. For cloud deployments, Lago provides these analytics within its managed interface. The analytics are functional — sufficient for day-to-day monitoring — but not a replacement for a dedicated revenue analytics platform at high customer counts.

Pricing

Lago's pricing model is one of the most genuinely transparent in the billing software category.

Self-Hosted (free): The full open-source codebase is available on GitHub. Docker-based deployment runs in any environment — your own VPC, on-premise, or air-gapped infrastructure. No licence fee. No usage limits. Community support via Slack and GitHub. The trade-off is full infrastructure responsibility: you provision the database, message queue, and application servers, and you maintain them.

Starter (Cloud): No monthly fee. The first $250,000 of cumulative billing volume through Lago Cloud is included at no charge. After that threshold, Lago charges 0.75% of billing volume processed. This is a meaningful amount of billing volume — many companies will complete their early growth stage before reaching the threshold.

Performance (Cloud): $599/month flat fee covering up to $100,000 of monthly billing volume, with 0.75% on billing above that level. The flat fee structure makes budgeting predictable and unlocks access to more advanced features and priority support.

Enterprise: Custom pricing for organisations with high volume, compliance requirements, or dedicated infrastructure needs. Pricing caps and dedicated infrastructure are negotiated per account.

The percentage-based cloud pricing has a natural break-even point with the self-hosted option. At high billing volumes, running your own Lago infrastructure is economically preferable to paying 0.75% of your revenue to a vendor. Lago acknowledges this openly — the company's philosophy on their own pricing model is available on their blog, which is an unusual degree of transparency.

EU Compliance & Data Privacy

Lago is headquartered in Paris, France, a full EU member state. Its cloud infrastructure processes and stores data within the EU, with no cross-border data transfer concerns for European businesses. The company's French incorporation subjects it to GDPR requirements structurally.

The cloud product is SOC 2 Type II certified — an independent audit that verifies Lago's security controls meet established standards. Role-based access control (RBAC) allows organisations to manage who within their team can view, edit, or export billing data. Audit logs record billing events and configuration changes for compliance and forensic purposes.

For organisations with strict data residency requirements, the self-hosted option provides a level of data sovereignty that no SaaS billing platform can match. Billing data — which includes customer usage patterns, invoice history, and contract terms — never leaves your own infrastructure. This matters particularly for financial services companies, healthtech organisations, and enterprises with data processing restrictions that extend to vendor relationships.

Who It's Best For

Engineering teams at SaaS or infrastructure companies building usage-based or hybrid pricing models who want full control over billing logic without the constraints of building on top of Stripe's data model.

Companies with complex pricing — multiple metrics, volume tiers, prepaid credits, custom enterprise contracts — where Lago's flexible aggregation and pricing configuration covers requirements that standardised billing platforms handle poorly.

Organisations with strict data residency requirements that need billing data to remain within their own infrastructure and cannot accept a third-party SaaS billing vendor with shared multi-tenant storage.

Teams evaluating the build-vs-buy decision on billing who want a well-maintained open-source foundation they can fork and extend rather than building from scratch or accepting a black-box vendor.

Lago is not appropriate for companies with simple flat-rate subscription pricing — Stripe Billing or Chargebee handles this with less operational overhead. It is also not a good fit for teams that lack the infrastructure capability to run a self-hosted metering pipeline reliably.

The Verdict

Lago addresses a real problem with unusual clarity. The billing engine category is crowded with vendors whose pricing models obscure total cost and whose feature sets are optimised for subscription-first businesses that have since retrofitted usage pricing. Lago built usage-based billing as the primary design constraint, made the full codebase open source, and published its own pricing trade-offs honestly. The limitations are genuine — you still need a payment processor, the integration ecosystem is growing rather than mature, and self-hosting requires infrastructure discipline. But for engineering-led companies building complex pricing models on EU infrastructure, Lago is the most architecturally sound billing option currently available.

Frequently Asked Questions

What is the difference between Lago self-hosted and Lago cloud?

The self-hosted version is completely free and open source — you deploy it on your own infrastructure, manage your own database and message queue, and pay nothing to Lago. The cloud version is managed by Lago, removing infrastructure overhead, and is priced based on the volume of billing you process: the first $250K cumulative is free, then 0.75% on billing above that. The features are largely equivalent, but the cloud version includes enhanced analytics and a lower operational burden.

Does Lago process payments directly?

No. Lago is a billing and metering engine, not a payment processor. It handles event ingestion, usage calculation, invoice generation, and subscription management — but the actual movement of money still requires a payment processor like Stripe, GoCardless, or Adyen. Lago integrates with these processors via its payment orchestration layer and webhooks.

What pricing models does Lago support?

Lago supports virtually every pricing model used by software businesses: flat subscriptions, usage-based pricing (per API call, per GB, per seat), hybrid plans that combine both, prepaid credit systems, volume discounts, graduated pricing tiers, per-unit capped pricing, and custom enterprise contracts. Aggregation rules can be configured to sum, count, take the maximum, or count unique events.

Is Lago suitable for high-volume billing?

Yes. Lago's event ingestion pipeline can handle up to 15,000 billing events per second. For high-volume use cases, the self-hosted option gives you full control over infrastructure scaling. The cloud Performance and Enterprise plans include dedicated infrastructure for high-throughput workloads. The main consideration is that Lago Cloud's percentage-based pricing becomes significant at very high revenue volumes — at that scale, self-hosting often makes more economic sense.

Is Lago GDPR compliant?

Yes. Lago is a French company headquartered in Paris, and its cloud infrastructure processes data within the EU. The open-source self-hosted option gives organisations complete control over where billing data is stored and processed — an important consideration for organisations with strict data residency requirements. Lago's cloud product is SOC 2 Type II certified.