CloudZero: Why We Invested
You can’t run a technology business if you can’t connect technical decisions to business outcomes.
Imagine running a business with no way to match costs to revenue. How would you know if new products are profitable? Which customer relationships you’re making money on? If offerings are priced correctly? What discounts make sense to attract customers? And the list goes on.
As a long time operator, that scenario prompts a visceral reaction in me… and it’s not a good one. But the leaders of digital native and SaaS businesses routinely face these challenges as they expand on cloud infrastructure. Products are designed, priced, and sold; then resources are spun up as needed. At the end of a billing period aggregate costs are known, but if those costs grow beyond expectation, it’s really hard to figure out why. A CFO might rant at an Engineering leader to reduce those costs, but without the ability to understand the relationship between the code and the cost, it’s really hard to figure out what to do about it. Queue the Pepto Bismol.
With that backdrop, it’s easy to see why CloudZero’s vision of putting engineers in control of cloud costs by connecting technical decisions to business results resonated so strongly with me when I first met the company’s founder, Erik Peterson, in mid-2019. While the company was too early for us to get involved in at that time (our “early traction capital” focus is on Series A enterprise software investments), Erik captured my attention and I’ve followed his progress ever since.
By the time I met CEO Don Bulens in early-2020, CloudZero had a solid if basic product in market and a handful of real customers, and the time was right for us to engage. Unfortunately for me (though fortunately for the company,) they had strong investors (including Tim Barrows from Matrix Partners and Michael Skok from Underscore) and weren’t looking for more money. But the months that followed gave Don and me a chance to get to know each other, and when he gave me the heads-up they were contemplating an additional capital raise to scale the business, I jumped at the opportunity. I spent time with the rest of the leadership team and was struck by the level of experience and talent Don had been able to recruit while still in the relatively early stages of commercialization. After many Zoom calls with customers and partners, Don and I went for a two hour walk in the woods (the pandemic version of the boardroom,) and agreed to terms.
Over the course of my diligence I found that while there are plenty of cloud cost management tools on the market, CloudZero is distinctive in its orientation toward engineering teams, making cost data actionable and allowing engineers to design for maximum profitability.
It’s a product that treats Engineering leaders like the executives they’ve become instead of the nerdy specialists they once were, part of the solution to getting costs under control instead of part of the problem.
Two quotes stuck in my mind from my conversations about the company with Engineering leaders: “With CloudZero, I’m able to be a leader of the business rather than just a leader of the engineering team,” and “CloudZero has my back.” The simply stated and near universal sentiment across customers convinced me there was urgency here on the part of the buyer, and that’s on the top of my list of things that make for a compelling investment. Couple that with customer stories of significant savings achieved by acting on the insights surfaced by CloudZero’s platform — which almost immediately pays for itself — and it’s easy to see why we invested.
Imagine running a cloud-deployed business where all your costs can be mapped back to customers served, features deployed, and the software that drives them. That’s exactly what CloudZero enables, and my stomach feels better already.
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