There’s never been a better time to be in the cloud computing business, and while that opportunity is bringing people to Seattle in droves, there are lots of challenges awaiting companies that try to make their way through this new world.
Three Seattle-area CEOs working in various parts of the cloud computing world shared their experiences and insights on navigating the cloud during our GeekWire Cloud Tech Summit in June. After stints at larger companies, Geeman Yip of BitTitan, Michel Feaster of Usermind, and Joe Duffy of Pulumi all realized they wanted to be closer to the products and customers than they could be at big companies with thousands of employees.
“This is the time; there’s no better time than now to create any cloud startup, particularly oriented toward the business,” Feaster said. She was referring to how buying power in the tech industry has shifted over the last few decades from big software packages sold by big vendors to big centralized IT organizations to smaller one-off services sold by startups to the people that will actually be using the product, like sales or marketing (Usermind’s speciality).
But while businesses are realizing the benefits of this spread-out approach to tech buying, in which individual business units purchase their own cloud services, there are still challenges when it comes to implementing this type of approach. Those challenges “to me, as a entrepreneur, are our opportunities that we can seize and not only improve the market but monetize them,” Yip said.
Duffy’s company, Pulumi, is the youngest of the three featured on stage, launching just a week before June’s Cloud Tech Summit. Pulumi caters to more traditional IT shops with development tools that help companies use Kubernetes as the gateway to a multicloud infrastructure, which puts it squarely in the crosshairs of big companies like Amazon Web Services and Microsoft.
While that sounds daunting, companies like Pulumi see great opportunities in finding the gaps in Big Cloud’s product strategies.
“As a startup founder, you have to really understand, where are the financial incentives for these companies to go and innovate in these areas? In many cases, it’s just not there; it’s in their best interest to partner with a startup and not starve out the ecosystem,” he said.
The cloud has also flipped the script for younger tech companies when it comes to finding their initial customers. Back in the day, fellow technology companies and financial services companies were the ones who were always hunting for the next big tech breakthrough, but the growth of software-as-a-service has allowed everyone to charge ahead.
“In my observation it’s been the laggard industries that are the cutting edge adopters of SaaS, and they do it because it’s the only way to level the playing field,” Feaster said. This creates tremendous opportunity for startups to sell against the giants of the field, and expands the overall market.
Still, don’t expect to sign a lease for office space in Pioneer Square and start watching the purchase orders come in right away.
Lots of cloud startups fail because “they provide a bunch of features, functionality and a technology stack that doesn’t actually solve a real problem,” Yip said. Aspiring cloud startups need to understand how to create value with that technology, rather than just throwing it out there and hoping the customer will be dazzled, he said.
Hiring remains a key challenge for any startup, and that’s especially true in Seattle as the area evolves into a tech center in its own right. With big established public companies like Amazon and Microsoft in the area, “the thing you don’t do is compete on price, because you’re not going to win,” Duffy said. Instead, you have to sell potential hires on your vision, and that’s not always easy.
Another classic mistake is to scale hiring too early before everything is actually working, Feaster said. “You have to build a great team of people who are better than you at every function” but you also have to make sure they have a clear foundation on which to grow, she said.
And, of course, there are those two giants on either side of Lake Washington.
“Being a startup playing in this space is like being a cockroach at an elephant ballroom dance,” Duffy said, invoking an old saying. “If the big company decides to turn left, and you’re the cockroach, you might get squished.”