October 12, 2020 | technology | No Comments
These days when you found a startup, you don’t go out and buy a rack of servers. And you don’t build an in-house datacenter team. Instead, you farm out your infrastructure needs to the major cloud platforms, namely Amazon AWS, Microsoft Azure and Google Cloud.
That’s all well and good, but over time any startup’s cloud setup will become more complex, varied and perhaps multi-provider. Throw in microservices and one can wind up with a big muddle, and an even bigger bill. That’s the problem that Yotascale wants to attack.
And there’s money backing the startup’s progress, including $13 million in new capital. The round, a Series B, was led by Aydin Senkut at Felicis with participation from other capital pools, including Engineering Capital, Pelion Ventures and Crosslink Capital. Yotascale has now raised $25 million in total.
The funding event caught my eye, as I’ve heard startup CEOs discuss their public cloud spends in somewhat bitter terms; it’s hard for most startups to change infrastructure direction after they get off the ground, which means that as they grow, so too does their outflow of dollars to the major tech companies. The same megacaps that might turn around and compete with the very same startups that are pumping up their revenues and margins.
So spending less on AWS or Azure would be nice for startups. Yotascale wants to be the helper for lots of companies to better understand and attribute that spend the correct part of their platform or service, perhaps lowering aggregate spend at the same time.
Let’s talk about how Yotascale got to where it is today.
The startup’s CEO, Asim Razzaq, talked TechCrunch through his company’s history, which didn’t get started until after he had wrapped up tenure at both another startup, and PayPal.
When he set out to found Yotascale, Razzaq didn’t fire up a deck, raise capital and then get right to building. Instead, he first went out to do customer discovery work. That effort led him to the perspective that current solutions aimed at understanding cloud spend were insufficient and led to data being used against infrastructure teams in arguments for lower spend when it wasn’t a good idea (cutting backup expenses, for example).
During that time he also determined who Yotascale’s target customer is, namely the head of platform engineering at a company.
The startup self-funded for a while, with Razzaq telling TechCrunch that he wanted to be completely sure that he had conviction concerning the project before moving ahead.
After starting to work on Yotascale in mid 2015, the company raised some capital in 2016. It set out to solve the spend attribution problem that companies with public cloud contracts deal with — including having to contend with modern architecture and its related issues — while earning the trust of engineers, according to Razzaq.
From its period of customer discovery to working on product market fit after raising funds from Engineering Capital, Yotascale raised a Series A in mid-2018. Why? Because, Razzaq, told TechCrunch, as ones gains conviction, one must scale their team. And thus more capital was required.
During our chat with the CEO, it was notable how sequential his company-building process has proven. From talking to potential customers, to working to understand who his buyer is, to waiting on scaling the startup’s go-to-market efforts until he was confident in product-market fit, Yotascale seems to follow the inverse of the “raise lots and spend fast and try to win right away” model that became quite popular during the unicorn era.
How did Yotascale know when it found product market fit? According to its CEO, when companies started pulling the startup into their operations and not the other way around.
Yotascale reported 4x year-over-year annual recurring revenue (ARR) growth at some point this year, though Razzaq was diffident about sharing specifics concerning the metric.
Sticking to the theme of reasonableness and caution, when asked about why his Series B is modest in size, Razzaq said that he was not interested in raising big rounds, and that $13 million is an amount of money that can move his company forward. What’s coming from the company? Yotascale wants to add support for Azure and Google Cloud in addition to its AWS work of today, to pick an example.
(You can find other hints that Yotascale is perhaps more mature than its peers at its current age. For example, in 2018 the company hired a new chief revenue officer, even putting out a release on the matter.)
That’s enough on this particular round. What will prove interesting is how far Yotascale can push its ARR up by the end of Q3 2021. And if it raises again before then.