Profit 101 Video: Startup Costs - Hosting
Nov 8, 2023
How to choose a Hosting solution when you're a startup
Now, everyone defaults to AWS, but is AWS the only game in town? Of course not. So then people think, "Oh, I'll go to Azure or GCP." So you've got your big three, right? Yes, and they also hand out lots of free credits to startups, which is very tempting and not at all unreasonable. But be careful with all of the ancillary services. AWS Lambda comes to mind. A lot of these services seem very inexpensive at first, but the costs can scale more rapidly than you expect. I've talked to startups running AWS bills of $15,000 a month, $20,000 a month, and what seemed like a very quick effective way to get reliable hosting turns into a bill that's larger than an entire employee hire.
So I'll give you a rundown on what we did in the past at Hidden Levers and how that worked for us. We used Linode; they're now owned by Akamai, you know, but pretty similar to DigitalOcean. There's a lot of these players that, and honestly if you use, so I'll say Linode, DigitalOcean, but I'll also put AWS LightSail up here. There are these lightweight versions of, you know, the big players like AWS that have risen up to compete with the Linodes and DigitalOceans.
What did we have? So when we were running full steam at $8 million and rising, closing in on $10 million ARR, what were our costs? Our costs were around $800 a month, and that was for server hosting, for database, all those things. We basically had two prod server instances. So we had two prod servers, call it two more integration servers that were also production, and we had one prod database, and then a number of test environments. So all of this collectively was, you know, call it like I said, $800 a month, and we were supporting $600 billion in assets in terms of the total value of the portfolios that were loaded on our system. This was a financial system analyzing investment accounts.
So $600 billion in assets, I think something like 4 million accounts, and we were running analytics across all of those for $800 bucks a month. Did it take some performance tuning of the code to make that possible? Yes, it did. But what that led to was a hosting bill of less than $10,000 a year. So something like 0.1%, maybe a little bit more than that, but essentially a rounding error in our total cost structure. Compare that to a firm running $25,000 to $30,000 in AWS, sometimes more, sometimes you hear $100,000, and you see how paying attention to building just what you need, you can run a scale business just having a couple of servers. By the way, we also had substantial reliability. We averaged in terms of unplanned time outages, I think we were around half an hour a year. So over the course of a decade, call that something like 5 hours, and you do the math, and that's like greater than 99.95% availability. I think it's even higher than that, maybe not quite five nines, but for most industries, for most use cases, that's pretty good. And by the way, it was better than AWS.
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Startup Costs Video Series
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