CloudZero: Empowering Enterprises With Game-Changing Cloud Cost Intelligence

Threshold Ventures
Threshold Ventures

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By Josh Stein and Arpit Mittal

At Threshold, we invest in disruptive technology companies that are solving real problems for their customers.

As software companies continue to build in the cloud, many choose multi-cloud environments to leverage different cloud providers’ strengths or to avoid vendor lock-in. We were starting to observe a pattern that many businesses, without proper observability and management, may end up overspending on cloud resources or underutilizing them.

To solve it, many have chosen CloudZero as their cloud cost intelligence platform, which allows organizations to monitor their cloud spending in real-time, identify cost drivers, and optimize resource allocation to ensure cost-efficient cloud usage. CloudZero solves the problem with a deep product footprint across multi-cloud deployment and extensively covers Kubernetes, multi-tenant architecture, and microservices — something no other cost management solution provides.

We are thrilled to announce our recent investment in CloudZero, which we co-led with Innovius Capital.

At CloudZero’s recent company offsite in Maine

The Cloud Cost Management Problem

The cloud has radically improved the way businesses operate. Gartner estimated global end-user spending on public clouds would reach nearly $600 billion worldwide in 2023, up from $421 billion in 2021 and almost $500 billion in 2022. With rising cloud spend, the cloud cost management problem has become overly complex as cloud costs can quickly eat into profits. Several factors contribute to cloud costs, including the type of cloud resources used, the time they are used, and the location of those resources. Cloud cost management tools are often difficult to use and provide limited insights into cloud spending, and businesses often need to be made aware of the situation.

CloudZero’s Solution

CloudZero ingests data from cloud providers like AWS, Azure, and GCP — plus software platforms like New Relic, MongoDB, Databricks, and Snowflake. The unified data is then structured into a common format so companies can determine exactly what it costs to deliver their customers, value. CloudZero enables engineering teams to consider cost throughout the software development lifecycle down to the line of code or SQL without impacting velocity. The CloudZero platform doesn’t just look at Cost and Usage Reports. It pulls in context and metadata from the user’s environment to enrich their billing data and helps them understand how the cost connects with architecture. For even more granular visibility, CloudZero lets the users introduce telemetry streams to correlate utilization data with their cost of goods sold (COGS), so they can understand which customers drive which costs and what features.

Further, CloudZero’s sophisticated AI algorithms analyze historical usage patterns and identify anomalies or unexpected spikes in cloud costs. By detecting such anomalies, the product alerts the users to investigate the causes and take appropriate actions, such as identifying unused resources or optimizing usage before the waste occurs.

Bringing in granular visibility for engineering teams while providing finance and operation teams the capability to forecast the company’s unit economics was a consistent requirement across various cloud-driven enterprises that we spoke to. It was clear that CloudZero’s depth and breadth of offering is the only relevant solution for these companies. CloudZero has already achieved significant traction with customers in the financial services, healthcare, and e-commerce industries. The business momentum is further demonstrated by the inflection the company saw in the last several quarters, now having several six-figure and seven-figure contracts and saving tens of millions of dollars in cloud spend per year for many of its customers.

CloudZero’s Team-Market Fit

The strength of CloudZero’s team was another factor in our decision to invest. The team has a wealth of experience in the cloud cost management space.

We first met Phil Pergola, CloudZero’s CEO, in the fall of 2022 and built a relationship with him and the management team over the last several months. Phil previously served as vice president of customer success at CloudHealth and VMware. Erik Peterson, founder and CTO, is a leading voice for the FinOps Foundation and built scalable systems, HP, and others. With their deep understanding of cloud cost management, the CloudZero team is uniquely qualified to excel in this space.

Market Tailwinds and FinOps, a Cultural Shift

Financial operations, or FinOps, encompasses a discipline of cloud financial management and a shift in mindset regarding cloud infrastructure, support, and implementation. As companies seek to re-evaluate every line item on the cost sheet, FinOps becomes increasingly critical — with many selecting CloudZero to power the culture shift. By uniting stakeholders, aligning cloud spending with business objectives, and implementing governance frameworks, CloudZero is helping software teams reduce costs, increase agility, and improve governance.

CloudZero has strong financial backing, raising funding from top-tier investors — including Matrix Partners, Underscore VC, and G20 Ventures. This additional financial backing gives the company the resources it needs to grow its leadership position in the category. We are excited to be a part of CloudZero’s journey and look forward to seeing the impact that it will have on the cloud cost management space.

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