I can't help but wonder if that safety net feeling is part of what doomed Everpix. If they had believed they were incredibly lucky to land $1.8M and that they had to build the whole business with that (rather than having a belief that more funding awaited whenever they needed it), would it have forced a different set of decisions to be made that would have driven revenue and growth, and ultimately success, instead?
From the sounds of it, what doomed them was pricing too low in a way that made it impossible to create higher tiers of service, and, perhaps most importantly, using AWS for everything. AWS bills monthly, so if in fact they were running a $35k/mo bill there, a HUGE refactor was passed by. But then again, startups don't hire sysadmins anymore.
Even at 35k/mo, that's 420k/year. That seems reasonably low to me (in the sense of a fundamental operating expense, not in terms of the going rate for hosting, which I have no clue about). By contrast, look at their people costs:
Total Salaries (between 6 people) $1,168,710.45
Total Payroll $1,298,819.67
Total Personnel Costs $1,411,513.53
That's about 10x their hosting expenses. Even if they had free hosting it seems like it would only have kept them going for another 2-3 months.
I don't know why the article list salaries, payroll and personnel costs as separate numbers like that. Payroll includes salaries, and personnel costs includes payroll.
Is this payroll over one year? If so, that's absurd. No one should be making $200k+ in salary at a startup that still has yet to turn a dime of profit. Just shaving 10% off that number would have covered their AWS costs for another 3 months.
But it wasn't necessarily scalable from a business perspective, and that might not have been attractive to the investors they needed. Especially if it's true their pricing was low.
I think the relevant standard should be: focus on the core of your business, outsource everything else.
If you are a photo backup company, storage is (or at least should be) part of your core.
It seems like they tried to take the heroku route, repackage aws services with premium software and sell it for a premium. But forgot to charge the premium end user price.
Amazon regularly features SmugMug at their conferences and in case studies. I haven't looked at the specifics recently but they basically went all-AWS. (SmugMug is also a bit different from your typical consumer photo site but they are a photo storage and sharing company.)
Correct me if I'm wrong, but doesn't Dropbox use AWS? (Or at least did until recently.) The two services' pricing (on a per GB basis) is within the same ballpark.
So all of their acquisitions and burn has come from (crunchbase caveat) ~7MM? There's some missing pieces to be sure, but suffice it to say that having that much cash in your back pocket allows a different set of considerations.
Drew said the same thing at TC Disrupt in SF this year. Reading between the lines: All the acquisitions and ability to pay 300+ staff without needing to touch a massive $250 million pot of money is basically telling the market (eg: Box): "We can play the enterprise game very well and have the revenue to prove it"
Do you think they were better off by having their own servers ? (Honest question we use AWS and Rackspace, and we feel the pain of Monthly bills as well).
I suggest you start by simply comparing the cost of dedicated hosting-provided hardware. This is the middle ground between owning your own stuff and something like AWS.
Pricing out the cost of owning your own servers can be tricky since you need to account for a number of factors:
* Initial cost of hardware - don't forget to include things like network switches, remote console devices, etc. - you may also want to buy something like a remotely accessible power switch so you can forcibly reboot machines
* Rack space costs
* Bandwidth costs
* Sysadmin time to manage the hardware (you already need a sysadmin to manage things like backups, logging, etc.)
* On-site remote hands if your rack host is not physically near your sysadmin
But regardless, I'm pretty sure that _anything_ ends up being cheaper than AWS once you get beyond a fairly small number of servers. The big advantages of AWS are integration with other services (storage, load balancing, etc.) and the ability to spin many machines up and down very quickly.
However, if you can tolerate waiting a day or so to provision new servers, dedicated hosting-provided hardware is almost certainly going to be quite a bit cheaper.
You could also compare this to something like Linode. Again, you lose the ability to provision new machines almost instantly, but they are pretty quick to bring up new machines (minutes, not hours or days). They also have a number of nice integrated services like backups.
Finally, you can also do some sort of hybrid setup where you have core stable services on dedicated machines but still spin up AWS instances to deal with bursty computation needs.
I did this math at Eye-Fi, a competitor of sorts to Everpix. What I learned, is the answer to whether to build or buy is the classic: "it depends". The driving factor? Data retention policy. The one move Amazon made during my analysis that had a huge shift in the calculus was to introduce Glacier.
My takeaway, the economics of a lifetime storage offering are very difficult to achieve. Glacier changes the rules by altering the SLA for data access to make the money work out.
If you just use EC2, no EBS, and reserved pricing then AWS is just as cheap as other providers if not cheaper. It is all the nice features that make it expensive. S3 is pretty damn cheap too.
Of course, raw hosting costs are only part of the calculation. You have to include sysadmin time and salary.
Dedicated servers don't really give you permanent storage either. Granted, it is more permanent than EC2 instance storage, but hard drives do get corrupted. You still need backup and replication for a robust solution.
Thank you for your answer. I agree with you. And after I read this article I went on to do some research decided to move the servers in-house. But I am also researching a Hybrid cloud using AWS.
s3 seems great for scaling out storage, but I'm sure there are gotchas.
I work in a very different area, but my experience with ec2 are you should drop what you're doing and immediately price out leaving. Roughly: for big hadoop tasks, ec2 is a horrid environment. The boxes are slow, flaky, and shitty; the network is slow and super shitty; and everything about the experience is ass. Oh, and the emr admins are assholes who push broken code; code that couldn't even have run once. These assholes, after issuing us a hotfix to a boot action, proceeded to change the path to the hotfix (without mentioning it to us), breaking our production clusters twice in in 30 hours. I guess I hold a grudge but I like sleeping. The point is emr and perhaps ec2 are complete amateur hour.
Quoting myself earlier:
from a former employer who wants to stay anonymous, ec2 bill per month: $97k
peak, softlayer: $26k. 1/3 the cost, 2x the performance.
And let's not mention emr; a $15k/mo cluster in softlayer did something like
5x the performance of an emr cluster that was costing (and running!) $2k/day.
I'm not kidding about 1/3 the cost and twice the performance. And this wasn't even with rack/switch local boxes, which would improve performance even more.
I can vouch for your numbers. My music start-up was one of Softlayer's early customers. We stayed with them for a while before moving to an even cheaper host. In all, we were pushing over 100TB and paying under $3,000/mo for everything(web, storage, db servers).
This was over 5 years ago. I am sure things would be even cheaper now.
Soft Layer seems to be as expensive as EC2, if not more expensive, especially when compared to reserved instances.
The 244gb cr1.8xlarge (16 cpus, 240gb ssd) amortized over 3 years costs $659 / month. Softlayer would charge quite a bit more for similar specs ( order of magnitude more).
My startup is in the same space as them and I can promise you that running our own storage is much cheaper. Azure and AWS run around 7K per month for 100tb.
When you factor redundacy I need to buy 200tb, factor in other server infrastructure with the cost of a 4TB drive running around 180 and I can spend 15K to buy 200TB of storage.
Put another way, we can own twice the storage capacity (or 1x mirrored) for roughly 2 months of S3 storage.
S3 is already redundant - it virtually guarantees no data loss and mirrors your storage across multiple data centres.
You're also completely ignoring the costs of hosting this stuff, the computers they're in, redundant network switches, failed disks over time, and administration costs to rack and stack failed drives plus all the risk associated with your redundancy going wrong. You're also assuming your hard drives will be able to handle the performance needs. Not to mention this is one site - no DR.
So, Amazon S3 at $7.5k a month for 100 TB is $90k annually with RIDICULOUSLY high redundancy and known performance. Reduce it to 99.99% availability (about what your setup with dual drives might be if you run it well) and you're at $60k annually.
You really are going to host fast, reliable 100 TB for under $60k? Betting your business on it?
It's something that was absolutely on the table for our planned 4th generation infrastructure. It was unlikely to us we could stay on AWS. We already had 400 millions full-res photos and running 80+ EC2 / RDS instances for 50,000 users. At our growth rate, we would have been close to a billion photos by end of year.
It's far from simple though: you need to find the people who can build such systems and also be able to afford the capex. And then there's the risks of running your own system and opportunity cost.
It's really unclear we would have been able to go this far in the first place without AWS.
Not to pile on, but a storage startup should have had a systems person among the 7 employees. I would do it in the first 10, but the only reason it wouldn't be in the first 5 is that I have the skills myself.
It's really unclear we would have been able to go this far in the first place without AWS.
You could have drastically cut your burn on that last $550K by hiring a sysadmin and bringing it all out of AWS (maybe keeping S3). This would have likely also involved retooling on the app side, but in the long run it would have given you more time for positioning/promotion/etc. All in all, 4th Gen is way late for this.
P.S. Number of photos is basically irrelevant, were you actually using market-fit metrics for infrastructural decision support?
yes. they would have 100% been better off, provided they actually knew what they were doing, which i guess is questionable since the business failed.
pricing out servers and researching / working with smaller infrastructure providers who actually care about you and your account (imagine that) is real work, which is why so many people avoid it these days.
it's much easier to click a few buttons and "choose" machine type x in the offerings that amazon has designed to maximize their own profit.
Yes, when you have a large amount of storage, it is well worth doing it yourself. The cost of redundant storage devices with replication ends up being paid for in like 3 months of S3 bills.
I could not agree more. Running on Amazon instead of let's say OVH incurred maybe 10x costs.
At the same time they probably didn't have an adequate pricing and freemium ratio and/or didn't do enough to market their good product. I could have been a customer but was not aware of everpix.
When you go down the VC path, they expect hypergrowth; certain doors are opened and others are closed. Personally, next time around I minimize dependence on funding.
VC kids treat themselves like kings and never truly get to hacking. What ever happened to internal hardware? Build, setting up, and tuning servers is one of the most fun parts of running a service.
When you get millions in funding its easy to piss away on the highest tier services. When you start from the ground up, every cent is managed.
It's a lot of fun, but it's also a bit of a trap in my experience. My previous startup was all custom, my current one is all as hands off as we can be infrastructure wise.
Unless going custom allows you to do something that you couldn't otherwise do (cases which are rare, but existent), it's just optimizing margin. And you can't margin your way to success. (To failure yes, to success no.)
As noted above, their hosting was a big number, but it wasn't a dominant cost. It's like Amdahl's law of money, it doesn't matter how little you spend in one area if that area isn't dominating your costs.
And all else being equal, it's usually the wrong choice; the best way to grow the bottom line is to grow the top line. If you can spend X weeks cutting costs by Y$, or X weeks increasing revenue by Y$, grow the top line. It's fuel, it gives you options.
The thing I miss the most about doing it our selves was the raw fun of it, and how efficient it felt. But in retrospect it was a lot of time spent on things that ultimately didn't change the outcome.
Build, setting up, and tuning servers is one of the most fun parts of running a service.
As someone who has worked in this space, I can tell you that the skills simply do not exist. They don't hire for them, because they all ("all") use outsourced hosting and deployment frameworks that insulate them from these things.
It's kind of sad really. I'd love to have a big office with a dedicated center to some really awesome equipment. It's like a work of art that you crafted yourself, right up to the cable management!
It's loads of fun, especially when you have dedicated chillers and sufficient power for everything. However, as you come to the realization that your C-level execs negotiated forever contracts for keeping data and servers spinning with no common outage windows, consolidation/virtualization becomes difficult and eventually the reality distortion field collapses and you're out on the streets with everyone blaming you for the failure, despite your ability to run modern services with stone knives and bearskins.
Plus, you don't have that all-important "Cloud" buzzword for them to throw around!
Yes, VC kids. Let's be honest. Kid creates a decent website/service in a few days/weeks -> VC funding -> ludicrous spending on top tier development environments, offices, staff, and services -> "oh fuck".
I'm 20 myself, and while I'm not the hottest shit around, I have been working at a bank for the past two years. I've been exposed to some really smart people with extremely challenging problems, way more so than creating a pretty service in a few weeks and getting crazy amounts of funding for a business that's most likely going to fail because we're just that, kids.
Before coming into my role, I truly did think I was the best because I was able to create pretty websites with whatever is the latest JS library everyone is fawning over. That illusion was destroyed immediately when you start designing and working on infrastructures that have to handle millions of payments a minute, working with multiple vendors, business units, testing units, and various other departments you need to familiarize yourself with.
I would urge you to consider whether you have an accurate picture of the world. It would be a staggering claim, to me, that even most of the people who get VC money could be characterized as "kids". Getting VC money is a lot of networking, calling, follow-ups, and frank discussion of terms. I don't think that selects well for "kids".
I always ask on question to every business, and nonprofit.
How much were, are the founders of the company making per year? It's usually a lie. I've also noticed when young
entrepreneurs are given a large amount of money; they don't
quite realize that it's probally all the big money they will ever see. I know I didn't. I made a lot of money in my twenties, thinking it would always be this easy. Sometimes,
the availability of money is just because you were at the
right place at the right time; people underplay luck--especially people in their twenties, or rich kids. Rich
kids have their parents to fall back on. Poor kids will never have that safety net. I don't know
anything about this company, but their situation is not
unique--it's the norm, that's why I cringed reading the
article and looking at the pictures. I've seen it too many
times before.
It is staggering to me some of the salaries that founders give themselves. I remember reading a tip for pitchdecks/term sheets that if you put your founder salary as anything above 150k that is slightly too high for most offers.
That is insane to me. I make less than 80k a year, in D.C., with a mortgage and two kids while I build on the side. A cursory glance tells me most founders aren't under such strict cost regimes. If and when I get funding and go full time I would take the absolute minimum to keep us fed and watered (~60k). How a founder could do otherwise to me is unconscionable.
70 k/year doesn't make a difference and it's not a good thing to have founders struggling with money. If your brain is too focused on the trivialities of life you can't invest yourself 100% in the company.
Apparently it would have in this case. That would have been two months of AWS for each founder, so saying it doesn't make a difference is clearly wrong.
I didn't say pay yourself nothing - pay yourself the minimum amount you have to in order to keep your life from impeding your work. If that means you need luxuries to be comfortable, then your lunch will get eaten by someone who is more spartan.
I thought everpix was a great product and had my family using it (4 paid accounts). I'm very sorry to hear this, and I wish the whole team good fortune.
Would you mind sharing the P&L statement and/or pitch deck that the verge used in its reporting? The verge's article seems confused, and I think one of the best gifts you could make to the HN community is to teach us from this outcome with actual source documents.
