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Awesome, thanks for sharing. The PR expenses (109,552.34) seem pretty high and I wonder what that line item entails. Did you guys use a PR firm or run any expensive marketing campaigns?
So one of the things that's interesting here is the Amazon component. And the anonymity of Amazon vs a smaller provider. Let's assume for a minute the founders actually wanted to keep it alive (I'm guessing they didn't but that's a whole other story) You're generating revenue of say $40,000 and your Amazon costs are $30K. If you went to a small or mid tier sized provider and said "Good news/bad news. We're generating…
I know when I was doing my music start up it would cost is many many times more to be on amazon than the two high power dedicated servers.
I don't know the story in their case but I find it shocking how many high bandwidth start ups have never even explored the option of not using AWS. I mostly blame this problem to the easy availability of funding which encourages you to throw money at problems. The issue though is that the more you build out your infrastructure around AWS exclusively, the harder it will be to explore other options later.
with all the lamenting about how hard running a consumer photo service is, I wonder how imgur does it. their traffic must be insane, and they have no subscribers, so how come they can do it and these relatively upmarket services can't?
It's really hard to believe because I bet the end user didn't really give a damn about whether it was hosted on amazon or elsewhere. It's also hard to believe why not just outsource the generic stuff. I really don't see anything unique about everpix that a North American can only do and not some guy across the ocean. Was it absolutely necessary to have in-house talent for everything when it was a threat to the continued operation of the company?
I wonder if they were simply bootstrapped and grew as a small business focusing on net profit, would they have made a better decision.
with all the lamenting about how hard running a consumer photo service is, I wonder how imgur does it. their traffic must be insane, and they have no subscribers, so how come they can do it and these relatively upmarket services can't?
You know at some point we are going to have to sit back and ask "Where the F&*^K" does this $100M or $1B business number comes from. The minute I get the opportunity to put my money my mouth is, I will invest solely in lifestyle businesses: one to two guys/gals wanting to build a profitable business with a yearly dividend, one where if the team makes $500,000/year we are all extremely happy.
Funding rounds that want to raise millions in VC are for companies that aim to eventually be a $100M business.
A smaller business wouldn’t involve venture capital. And the bank is still a viable option if capital is needed to scale, as long as there is a realistic repayment plan.
So one of the things that's interesting here is the Amazon component. And the anonymity of Amazon vs a smaller provider. Let's assume for a minute the founders actually wanted to keep it alive (I'm guessing they didn't but that's a whole other story) You're generating revenue of say $40,000 and your Amazon costs are $30K. If you went to a small or mid tier sized provider and said "Good news/bad news. We're generating…
When I first read their story, I wondered exactly what you wrote: how much was their amazon hosting bill and could they have at least kept the lights on if they went with a smaller provider? I know when I was doing my music start up it would cost is many many times more to be on amazon than the two high power dedicated servers. I don't know the story in their case but I find it shocking how many high bandwidth start…
A counter example would be a start-up I worked with that started out on a smaller provider. When we launched a beta of the application, we unexpectedly got invitations for national TV coverage with less than 24 hours notice. We asked the provider for everything they could give us, but they only had a limited amount of unused capacity themselves so there was little they could do. Of course we couldn't come near to soaking up the traffic spike, and lost a huge potential number of positive user experiences.
That sort of thing doesn't happen to you on Amazon or the other largest on demand providers.
I wonder why they didn't simply downsize on the hosting. I mean if that's a huge part of the operating cost, so much you need to shut down the entire operation, doesn't it make sense to go with a different host? even resorting to a dedicated box or choosing a different cloud provider? It's really hard to believe because I bet the end user didn't really give a damn about whether it was hosted on amazon or elsewhere. I…
I can assure you that without the facilities of AWS, which saved us a ton of time and development overhead early on, there would have been no Everpix. Period. Actually, the very first Everpix was on Google App Engine, but that's a different story.
As an early stage startup, whose core business is not building infrastructure, do you really want to be in the business of managing for instance your own S3 type storage with the same performance and reliability at 200+ TB scale? We never lost a single user photo or account. Never lost a database server either. When your users trust you with their life photo collection, that does matter.
Then of course, if your company starts gaining traction, your bills increase so things change. As a matter of fact, post Series-A, our plan was to switch out of AWS, concurrently to our infrastructure's redesign to go from managing 100s of million of photos to billions.
Doing the switch earlier would have been premature IMO: there was no one the team with such experience, even less bandwidth. The opportunity cost would have been significant on all the other aspect of the company. Let's not forget the required upfront capital which takes some time to recoup so savings would not kick in from day 1. Finally there's also the fact our infrastructure was still rapidly evolving (type of EC2 machines used, database architecture, etc...), so even buying reserved instances was very difficult as there was a good chance of buying machines we would not need anymore 6 months down the road ultimately wasting money (it did happen).
So what we did instead what focusing on driving continuously driving down AWS costs through various optimizations - if you were to look at our dashboard graphs, you would notice AWS costs were growing slower than users / photos, which reflected that work.
Long story short, the infrastructure was paying for itself through subscription revenues. The real "killer" was payroll. I use quotes because in this type of business, it's expected to have payroll your largest expense - there was no surprise. BTW note that the team was already 1 person = 1 entire product component like iOS or infrastructure so quite lean and highly productive. For a VC backed consumer business, you pretty much need the VC money to cover these fixed costs until you reach profitability.
So one of the things that's interesting here is the Amazon component. And the anonymity of Amazon vs a smaller provider. Let's assume for a minute the founders actually wanted to keep it alive (I'm guessing they didn't but that's a whole other story) You're generating revenue of say $40,000 and your Amazon costs are $30K. If you went to a small or mid tier sized provider and said "Good news/bad news. We're generating…
However it's important to keep in mind in a situation like this, and at this scale of burn rate, you're not looking for a solution to shave off a few thousands $ left and right, which is kicking the can down the road (if even), but for a long term solution.
The key problem here is that I don't think you can realistically switch a business built on the VC funding track to the bootstrap track without the collateral damage of killing your company's essence i.e. the product.
For instance: when suggesting to have fewer employees, that is implying you have room for that or that your employees are interchangeable, which is far from the truth. It's not like we had 5 tech support people, and we could have downscaled to 3. We had hired quite slowly and were already as lean as it gets i.e. 1 person per project: iOS, Web, Infrastructure, Science, Design, Imaging / QA. All these folks were working at full capacity managing a multi-platform service managing hundreds of millions of full-res photos with ~100 servers, displaying photo collections of 10,000+ photos in very responsive apps, and running cutting edge computer vision science at a scale no other consumer photo startup was doing (the closest was the semantic search in Google+ Photos). You can certainly cut salaries (which we did and only works up to a certain point in the very competitive SV hiring market), but you can't remove positions which would be akin to extending a bridge to nowhere.
Regarding the infrastructure expense, I shared some thoughts here: https://news.ycombinator.com/item?id=7041640