How Cloudability CEO Mat Ellis grew Cloudability to $20M revenue and 1K customers in 2018.

hello everyone my guest today is matt ellis he founded cloud ability in april 2011 and is its current ceo before the company he held executive positions with four startups and key technology roles at free delay pepsi cola and goldman sachs he currently sits on the boards of oregon entrepreneurs network and the technology association of oregon originally from the uk and now residing in portland matt is known as a mentor and advisor to startups across the us matt are you ready to take us to the top yes all right so tell us about cloud ability what do you guys do and what's your revenue model how do you make money we make your cloud cheaper and we do that by reporting on what you're doing and helping to optimize it if you think about a supply chain of materials and the materials of the cloud services then we master those we haven't made the best buying decisions every day and we charge you based broadly on the amount of money you're spending on the cloud okay so you look at kind of cloud budget you're taking some percentage of that um not just a percentage there's a bunch of other fees it gets quite complicated now we're dealing with very large enterprises very large tax companies that are spending hundreds of millions of dollars on the cloud so with some services and some other things okay is it so i mean walk me through that right a complicated pricing model can be a good thing or a bad thing it could mean you're not leaving anybody on the table but it can also be really hard to explain how do you deal with that well there are two modes for cloud cost management first mode is reporting so i'm reporting we charge you a percentage of the spending and that works because generally you're growing your cloud deployment and we're helping you make sure you're not wasting any money but in the second mode you're optimizing it so you've kind of moved to the cloud you've got the hang of it and now every day you want to take advantage of moore's law which means moving aggressively between the different products well in that mode we're adding value we're not just doing reporting we're actually reducing your bill typically by 20 to 30 percent a year on a unit cost our build personal credibility in february was the same as it was in april 2015 for businesses 11 times bigger so in that mode we have to charge you a bit more like regular software and it's based on the kind of modules that you're using okay when you look at your financials though is it predictable kind of sas revenue or does it get lumpy okay yeah we sign we sign annual contracts and generally put a package together for you based on whether you're just reporting or whether you're reporting and you're optimizing i know you have a large kind of a delta between your cohorts of customers enterprise small business et cetera yeah but if i if i it's gonna be a tough question for you but we'll see if we can make it work if i forced you into an average i mean are we talking 100 grand typically typical acvs or where are you at generally um typically it's a hundred to 250 grand atp is a sweet spot okay yeah good okay so we're right on the money there and then give us more of the back story so you launched it talk take us back to launch day and why decide to spend the rest of you know the next part of your life on cloud ability well i spent 10 years in big data um i followed my wife out to oregon which is where she grew up and i had no no job at the middle of the recession i had 10 ideas to go follow all in big data and what year was this it's 2010 and two months in uh i'm in hospital two emergency surgeries no health care because it's obamacare very large healthcare bills and i needed to get back on my feet and get back to being liquid i called around a few buddies who were moving to cloud we've been doing two years of cloud in my last startup um so i helped move to the cloud they all had problems with their spending they complained all the time i'd unwittingly helped their tech team get around all financial controls and because there were three people i worked with before when they called me up and asked for what they'd spent yesterday on the cloud i couldn't charge them 400 for a billing analysis and it was taking up a lot of my time so i wrote credibility to get them off my back and i sent a daily email with what they spent yesterday and what i thought they were going to spend for the month that was great a few months later it broke i was in iceland at the time that's pretty if you got a few if you got a few months out of it that's pretty damn good actually right oh yeah yeah yeah a few months have no phone calls everyone's happy and and then i come back from iceland and my voicemail's filled up my inbox is filled up and people are trying to see me because this thing's not working and they really need it and that's when i sat down and thought hang on what's going on here and that's when i realized that a cloud is simply the maturation of technology the way you made technology work before was you had smart people to make it just work that ubuntu server wasn't going to stay working unless it's someone to keep it working now you buy it from google for eight cents an hour now the problem is not making it work picking the right one and that's a supply chain problem and that's what we do we see it we're erp for people with a supply chain of raw materials of cloud which held very early days it's a lot of it's like with sap in the early days which is reporting on what you're buying but the more advanced users are using not just to making choices but getting down to building materials for each individual customer not an average but an actual and one of these pretty and between 2011 and today i mean what have you scaled to in terms of total customers using you we have 11 of amazon's revenue going through our system and um and a very large amount of the other two big clouds going through our system too walk me through that metric you said 11 of aws going through your system when amazon say their um revenue for q1 is 5.6 billion yep we will have about a billion dollars for that spending go through so about half a billion dollars of revenue is that kind of how you measure your market share it's amount of spend through your system yeah and who are the two other big ones rackspace or google and itunes google and i got it got it and what percentage of those do you have i couldn't tell you oh okay okay got it but is amazon your biggest yes okay i'm the biggest in the market anymore okay and i mean can you give me an actual number on like the number of customers you're serving is it is it okay why don't you share that just a competitive thing yeah okay but if you if you're controlling 11 revenue i imagine it's it's not a it's not a low arpu high volume game you're very much in the enterprise space yeah yeah we're similar to companies like axio we have you know under a thousand customers yep but they're some of the biggest things in the world yep that's right what's your kind of i mean do you measure penetration on like fortune 500 or anything like that yes but again it's a really competitive early market who do you compete with who do you compete with there's a company called cloud checker health out of boston and a company called cloud checker out of uh rochester they both do kind of reporting and they're more kind of um tech ops single pane of glass diana c we do data science on your infrastructure it's it's more for the pool kids and sas companies but also the cheap kids who want to get a few points off their margin airlines supermarkets they're very big users of our product so there's we call them big kids and cool kids internally the big kids are like really big companies that are very focused on on efficiency really smart kids and cool kids yeah that's interesting um and nothing in between you're either smart you're either smarter you're cool right well there's a lot of people who are early and proud and for them a simple reporting tool is pretty straightforward and also a tool that might be oriented towards a more devops way of thinking where a human is picking from a list of a million options just for instances alone yeah a human might have a religion that this particular one is good we let the data do and that's the background we've got on our think set team we're all like big data met some of us is ad tech we just let the data do the talking and so we have to be very accurate we processed two exabytes of data last year and to get these very accurate we call it the true class platform because we automate our recommendations our competitors put a human in between and if you're kind of still dealing with treating your servers like pets instead of like cattle you kind of give them names a bit about around their neck then that's good enough churn is obviously critical in a sas business tell me about your churn and how you think about it you see in a typical quarter we may lose a customer we lose very few customers our customers are on a five-year journey with us and we have this is that hey matt is that a legal journey i mean are they signing five-year contracts um we wish they would but they find three contracts sometimes and the first three customers who signed for this in 2012 are still customers today yeah so is that code for you saying you know lifetime value is...