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. 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.
I keep reading comments from this angle, so I'll throw in my 2 cents as an Everpix founder :)
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.
> it's expected to have payroll your largest expense - there was no surprise
Only when you are small haven't marketed the service and your subscriber numbers are still small. You could probably support 10x the subscribers with only 2x (or less) of an increase in staff.
Thanks for clearing that up. I'm quite surprised to see how large the salary cost is. That and the 400k for consultants ( was this for computer vision experts?)
I'm kind of impressed looking at the landing video, it's a neat idea, it's sophisticated using CV to organize photos. However, the market just didn't respond enough to cover the payroll costs.
Did having a VC funding in anyway impact your decision making to grow faster than you should?
I guess it starts with an idea, does it fit? if you have VC money you can see the answer faster but I fear that it puts an expiry date on your product if the answer is still no by the time you can't find another investor. Shame because investors are not always rational. Maybe the next investor could've seen the vision behind your product and pushed. Sad to see a seemingly great product disappear from the market and reducing consumer choice because they had to 'go big or go home'.
I also wonder what it would've been like if you started in a market where tech salary was on the low side, such as Vancouver, BC, where there are laws set in place so that you can work your developers and designers to death out of fear of losing their job in the scarce market and not having to pay any bonuses or overtime.
I wonder what the outcome would've been if you weren't funded, and grew customer by customer. Doing this would've fine tuned the margin between cost and profit and forcing you to grow at a rate that is right for your size at the right price at the right time (where supply and demand curves intersect) just like mom and pop's business.
Thanks for sharing this boatload of information on how a company works for those that never ventured out to startupdom. It really is in the spirit of hackernews. Brutal honesty.
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.