Everybody’s talking so much about cost optimization and extending runways that startups across the board are looking at every little expense as they seek ways to navigate the downturn. But some costs are better left untouched simply because the work involved may not be worth the payoff.
According to several investors we surveyed recently, cloud costs are one such area that startups can afford to ignore, at least in the early days. As Zetta Ventures managing director Jocelyn Goldfein put it, the math needs to make sense if you’re prioritizing cost cuts over growth. “It’s not really worth optimizing your cloud spend until you can squeeze out at least half a month, better yet a full month, of runway. Usually, that’s not the case at the early stage.”
It’s also increasingly important to not lose focus on product development if you’re a growth-stage startup. “I’ll always believe that getting things working end-to-end in a timely fashion and iterating on user feedback is the priority. Over-optimizing early is an anti-pattern,” said Menlo Ventures partner Tim Tully. “As they say in product teams, K.I.S.S. (keep it simple, stupid). You can always go back and optimize later.”
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Keeping it simple, though, isn’t always an option for startups these days with the plethora of cloud and component providers crowding the market. Multicloud is now a more viable option than ever in such an environment. “While choosing a single public cloud offers more simplicity and speed,” Team8 managing partner Liran Grinberg says, “a multicloud setup will allow you to leverage the best-of-breed offering from a functionality standpoint as well as optimize for cost down the line.”
However, Grinberg added that startups should be mindful of the implications of using multiple cloud vendors down the road. “Firstly, egress costs can be expensive enough to make this not worth the while. Second, you need to manage more than one provider, so your monitoring, cost management, infrastructure as code and security solutions need to support all the vendors you are using.”
Besides the usual suspects, there are now more vendors and models available to startups than there were a few years ago. This includes virtual private clouds, which can be useful for companies dealing with privacy and regulatory concerns.
For a company to run its own servers, all the investors agreed that founders should first carefully weigh the pros and cons of doing so, and only proceed if it’s going to be worth it. Tully said, “Going on-prem from a data center perspective, as opposed to cloud on-prem, i.e. virtual private cloud (VPC), would require a very compelling business reason to justify.”
“For starting on-prem, you should have a really, really good excuse, as the overhead cost for running this kind of operation is almost never worthwhile for startups (and even for very mature companies, for that matter),” Grinberg added.
Read the full survey to find out what investors look for in cloud startups, the best ways to approach and pitch them, why cloud marketplaces are a hit and more advice on what to prioritize when it comes to cloud-related decisions.
5 cloud investors illustrate the various paths ahead for startups
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