After exiting a previous YC startup, Francois and Kacy are now working on a simple and affordable AWS cost-tracking tool for everyone.
Davis Baer: What’s your background, and what are you working on?
Francois and Kacy: We’re CloudForecast, and we’re building simple and affordable cloud cost monitoring tools. Kacy and Francois are the co-founders, and we met 5 years ago working on a previous YC startup that got acquired. We’re offering enterprise quality cloud monitoring to be used by everyone no matter what the size of the company. We’re just short of $1k in MRR, and we’ve experienced 187% growth in converted, paying customers since July.
CloudForecast is a still a side gig for us and we have full-time jobs. Kacy currently manages a team of engineers after a decade working in Infrastructure Engineering. Francois is a Senior Software Engineer in a big tech company in SF and is currently focused on building Machine Learning models.
What motivated you to get started with your company?
We were end users of existing paid and free products in the market, but we realized that nothing in the market really fit the needs of small and medium businesses. Our competitors are expensive, and they are justifying the high price by offering a large suite of features that often go unused and don’t add value. They also require contracts that are designed to lock in companies. Existing open source products were clunky and not actively maintained.
At the company that we worked for, we came up with creative ways to monitor and alert on our AWS spend. We built a few small in-house services to help out with this. To validate the idea, we built an MVP in a few weekends and found out that a few people within our network were interested in paying for the service. We were pretty excited about that!
What went into building the initial product?
The MVP only required a few weeks worth of work. Francois focused on building the backend data processing side in Scala on AWS Lambda, and Kacy focused on building a web front-end (Ruby on Rails) that could simply onboard customers and set them up. It also helped that Francois’ wife is a UX engineer. She helped us with the design of the daily email and the front-end website. Since we were building this on AWS Lambda, running the backend is really cheap. Our Heroku bill for the Rails app was pretty low too. We were able to support three initial paying customers with the MVP for under $40 a month.
We really wanted to make the MVP as simple as possible, so we restricted it to be a bare bones product. The web front-end would collect the AWS credentials, a credit card, and an email address. The lambda functions would process the report on a daily basis. We met in person a few times to collaborate on the architecture and overall idea, but most of the work for the MVP was split out pretty evenly. We used that time to reach out to potential clients in our network and did more market research.
How have you attracted users and grown your company?
Marketing for developer tools is not an easy task! We hustled to get our first five trialing customers from our personal network. Getting the customers from our personal network was half the battle. We needed to make sure they felt loved, taken care of and that we listened to their feedback. That meant hustling to reiterate and improve our product as quickly as possible with every bit of feedback that came. Every improvement we did for these five customers meant that they were likely to become a paying customer.
All five eventually became paying customers, which gave us the confidence to do an official launch via a “Show Hacker News post in July 2018 (https://news.ycombinator.com/item?id=17551796). The Show HN post produced 63 signups, 20 free trials and converted 6 additional paying customers which we were pretty excited about! Out of the 14 trials that did not convert, many of them were too small and just wanted to test out the product. Unfortunately, some of them didn’t see the value in our product, so we worked with them to improve it.
We ran a few ads on various platforms with a small budget ($50 each) to test the water with the goal to invest more if we found a good angle. Reddit has performed well for us. However, LinkedIn did not yield any results, so we shut it down pretty quickly. We will revisit LinkedIn in the future.
Here is our current focus for user acquisition:
- Content marketing by creating helpful content around AWS and cost management.
- Cold outreach targeting our ideal customers, CTO/VP Eng of startups/SMBs spending up to $1M annually on AWS.
- Onboarding YC Startup School companies
- Building a strong referral program.
Our long term focus:
- Build relationships with AWS influencers and various online AWS communities.
- Attend and sponsor AWS community events, meetup groups, and conferences.
- Build a set of free tools in the AWS space to create qualified leads.
We highly recommend reading Paul Graham’s essay on “Do Things that Don’t Scale”. We took a lot of advice from the essay and applied it to our first set of customers. Doing things that don’t scale is still a very important part of our customer acquisition plan.
What’s your business model, and how have you grown your revenue?
We have two subscription tiers: $49/month and $149/month. For companies spending more than $100k/month on AWS, we created a custom plan (always <1%).
With our current product offering, converting 1% of our target companies (400,000 in total) will get us to a minimum of $200k MRR.
The revenue growth will increase as we build out more features to detect waste on AWS. The total market for cloud computing was $260.2 Billion in 2017. Based on existing research, it’s estimated that 35% of cloud spend goes to waste. If we capture a slice of that by saving people money, we will penetrate a market that can save $91 Billion annually. This number will continue to grow as the market is expected to reach $411 Billion by 2020.
Our monthly operating costs are pretty much fixed. We have a fixed Heroku bill, a banking monthly fee, Intercom (customer support), and Google Suite. Our AWS costs are pretty darn low too; we don’t like wasting money. The best part about this business is that our margins increase with more revenue!
What are your goals for the future?
We’re planning to grow into a fully-featured cloud monitoring service. However, our immediate focus is targeting the underserved market of small businesses and startups in this space. We also plan to implement GCP and Azure cost analysis within the next year. We have a few unique products on the horizon, and we can’t wait to share with everyone.
We are also heavily focusing on our marketing strategy to reach $2,500 MRR by the end of the year.
What are the biggest challenges you’ve faced and obstacles you’ve overcome? If you had to start over, what would you do differently?
Setting the right expectations was definitely a struggle for us at the beginning. We wanted to move quickly, but we were time-bounded by our full-time jobs. Clear focus on priorities is key to have decent progress and visible impact on your product.
We could/should have started building a list of potential leads that we could easily convert when our MVP was ready. In other words, we started our marketing strategy a bit late.
Have you found anything particularly helpful or advantageous?
Our original ShowHN post on Hacker News has been instrumental to our success so far. We’ve found that comments in the post and private messages we’ve received over email have been very helpful. It’s very validating that folks are finding our product useful enough to give us candid feedback and are invested in helping us make the product better.
We recently joined the YC Startup School community. YC is providing us with great content and an experienced community. It’s great to bounce ideas, learn from others, and motivate each other. YC is generously offering the content for free, and you can find all the videos here: https://bit.ly/2p32gJJ
One of the books that inspired our frugalness was “The $100 Startup”. Many of the business decisions we’ve made over the last year have been inspired by this book. Our marketing strategy is following the method described in the “Traction” book. The book explains various marketing channels and a system to follow to prioritize them.
What’s your advice for entrepreneurs who are just starting out?
Don’t be afraid to ask for candid feedback early! If you’re developing an MVP, try to identify a few ideal customers in your network.
Although some may disagree, we believe that building beautiful products that are easy to use is just as important as building out a fancy technical implementation.
Momentum is everything! Early in your project, you will be excited to build something awesome. However, that honeymoon phase doesn’t last long but talking to clients and showing them your product will fuel your motivation.
Where can we go to learn more?
If you would like to learn more about us, catch us over at https://cloudforecast.io.
We also have a blog that we updates about once a month at https://medium.com/cloudforecast
We’re also on Twitter at https://twitter.com/cloudforecastio
If you have any other questions, please reach out to us at email@example.com
If you are using AWS and want to try us, just signup and reach out to us at firstname.lastname@example.org and we will extend your trial!