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The cost of startup cloud credits

26 February 2021 • 12:00

During my two and a half years working at Microsoft for Startups, one topic came up more than any other during the first conversation with a startup: credits. It’s no wonder. Many cloud providers are generous with their offers of credits. If you know the right people to talk to, getting five or even six figures worth of credit isn’t too much of a problem.

Every penny counts for a company just getting started and operating on founders’ sweat and angel investments. Besides, who doesn’t like free things?

Credits, however, do come with a hidden cost. While clouds have revolutionized access to compute infrastructure, they aren’t quite the same kind of commodities that electricity, sugar, or flour are. There are still switching costs if a company wants to move services from one cloud to another. The highest of those switching costs isn’t monetary. Instead, it’s the time and attention that could otherwise be spent on the most critical problem a startup has. Creating a product and getting it first to product-market fit, then scaling it to meet demand if it manages to find that fit.

To be sure, a startup is never locked into a cloud decision. It can always build new functionality on other clouds or pick a specific tech to use from another cloud in a multi-cloud strategy. You don’t, however, want to spend a team’s ability to be flexible on moving infrastructure around like chairs on a boat deck if you don’t have to.

I believe that the startups with the best chance of going the distance are those who pick a cloud and a technology stack at founding and then relentlessly focus on their chosen problem. Ignore the what-ifs and what-could-have-been and make sure that you’re going to make it as a company. Spend all of your flexibility on your product and adapting it to your customers.

So then, when you’re picking a cloud at founding, what should you make the decision on? Pick the cloud you want to be on for technology, customer access, and developer happiness reasons. If you’re a B2B startup, that point about customer access when you’ve achieved product-market fit can be critically important. Then, after you’ve factored for those points, if you can get a bucket of credits to go with your decision, all the better.