5 cloud investors illustrate the various paths ahead for startups • TechCrunch
Cloud cost optimization Startups are everywhere, finding sympathetic ears among enterprise customers looking to cut costs amid the economic downturn. But should younger start-ups be similarly meticulous about their spending on the cloud?
According to many cloud investors, startups should prioritize building over optimization — unless it will save them a significant chunk of money.
Shomik Ghosh, partner of Boldstart Ventures, summed it up succinctly: “In the early stages of a product or transition to market, optimizing cloud spending should be the last thing on the founder’s mind besides utilizing as much of the cloud resource credits as possible.”
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While founders should not lose sleep over cloud costs in the early stages, they should still carefully consider other expansion decisions, such as cloud markets, before walking away. Anshu Sharma, as an entrepreneur, pointed out that using cloud marketplaces as a distribution channel has its pros and cons, and probably shouldn’t be done from day one because it “can make your offering a commodity”.
Astacia Myers, co-founder of Quiet Capital, agreed, saying that startups should focus on finding the right product for the market first. “We encourage startups to consider cloud markets as soon as they find the right product for the market, not before,” she said.
“To successfully tap into the cloud marketplace, solution product marketing, value proposition, and ROI must be clear while demonstrating a quick time-to-value, which is what happens after PMF.”
However, given how quickly things move, startups can explore markets earlier than they can: “Historically, we’ve seen startups join cloud markets in Series D+. Now we’re starting to see companies consider them after Series B.”
Founders should also remember that startups are destined to get bigger and therefore should plan ahead. “It is always important to select a technology suite that is available across all major cloud providers that is as flexible as possible to support these migrations when they are needed (using Kubernetes is a great example of allowing this),” Liran Grinberg, co-founder and managing partner at Team8 said. .
To find out what cloud-related tips investors are giving startups these days, we spoke with:
- Shomek Ghoshpartner, Boldstart Ventures
- Lyran Kreenbergco-founder and managing partner, 8 . team
- Tim Tullypartner, Menlo Ventures
- Astacia Meyersfind a partner, the quiet capital
- Anshu SharmaAnd the angel investor and co-founder/CEO, Sky Flow
Shomic Ghosh, Partner, Boldstart Ventures
Founders are looking to cut costs amid the economic downturn. How important is it for startups to optimize spending on the cloud in the early days?
It depends on what is meant by “the early days”. In the early stages of a product or go-to-market (GTM), optimizing cloud spending should be the last thing on the founder’s mind along with utilizing as much cloud resource credits as possible. Finding the right product for the product market, the users involved and understanding the end-user workflow and how the product is essential to those users are the most important areas founders need to focus on.
When a company starts getting a few million in ARR, it makes sense to closely manage spending on the cloud to optimize gross margins and therefore bottom line (net cash burn or free cash flow).
Cloud providers often attract startups with free credit, but they also charge a fee for data output later. With cost optimization becoming a greater consideration than ever, how important are early stage decisions about choosing a cloud service provider?
I think choosing an early stage cloud provider based on cost loses the forest to the trees. I know some founders who, in the early days, switched cloud providers to continue using free credits. This may be possible when there are only a few people on the team, but as the team grows, everyone needs to learn and relearn the documentation, APIs, and UI, which has a hidden “cost” greater than any money saved.
Cost optimization isn’t just about bill size at the end of the month. It’s also team product development speed, avoiding downtime, developer experience to allow teams to move faster, etc. All of these points should be your top priority when choosing a cloud service provider in the early stages.
What are the pros and cons of using a multicloud setup instead of building on top of a single public cloud?
As the company has expanded, teams have become a little more focused on functional areas. In the early days everyone does everything, but as the team expands, you have not only the back-end infrastructure team but inside it, a database team, a security team, an ML team, a QA team, etc. Multicloud can help you get the benefits of best-in-class tools from every cloud provider.
In the early stages of a startup’s life, it is very important to go from zero to one. Astacia Myers, Co-Founder, Quiet Capital
For example, Google BigQuery might be better for some use cases than Redshift or Azure Synapse, while AWS might have better infrastructure management tools. The trade-off should, of course, make all of these cross-platform tools interoperable, and the major cloud providers are not incentivized to do so.
This is where startups come in, and by focusing on making one product the best, they can work across platforms and integrate easily (Snowflake, for example, can be used across any major cloud provider).
When should a startup consider starting the business, if any? Do you advise AI/ML startups differently?
In terms of terminology, I think “on-premier” should also be called “modern on-prem” Copied Polished, as it addresses not only self-managed metal servers, but virtual private clouds as well.
The most common reason why startups should consider speaking locally is to deal with sensitive data, which especially occurs in regulated industries (health care, financial services or pharmaceuticals). The scope of what is considered sensitive is growing over time with regulations in place, so startups need to be aware of it.
Not many machine learning tools need to be deployed across any environment, as large organizations keep some of this data in tightly controlled environments. Ultimately, startups need to meet customers wherever they are – if you’re designing the cloud first and dealing with customers with sensitive data, you should consider your “any environment” deployment strategy, whether using replication, building yourself, or choosing not to work with those customers .
Have cloud costs reached a stable level with respect to the marginal cost of computing or storage?
I think that’s a difficult prediction for anyone to make. People say Moore’s Law is coming to an end, but then another law pops up. I don’t think human ingenuity has stabilized, and companies continue to cut costs on their platform with ASIC [application-specific integrated circuits] or ML to optimize workloads. For example, Snowflake continues to drop prices; So it’s hard for me to say that cloud costs are flat.
What do you think of cloud markets as a distribution channel?
they are great! The most obvious benefit to aggregate is the customer’s overall billing commitment to that cloud provider. It speeds up the buying cycle, allows the customer to standardize billing and enables them to make better use of the huge future contract they have likely committed to their cloud provider for many years.
If this contract is not used in full by the end of the term, the customer ends up paying for the services that were not rendered.
How big is the market for cloud service providers to offer additional services beyond their basic offering?
I don’t have a laugh when I say infinity. For proof, just go to AWS and look at their product catalog for all the different services listed. It will take years to fully understand everything it has to offer.
And if we extend the terminology of “cloud service providers” beyond the computing and storage layer, every public and private company that provides a cloud service has multiple product offerings at scale.