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This comment might be in jest, but we've actually been working on a few different ways to help optimize [1] and manage our AWS spend [2]. That said, there are

This comment might be in jest, but we've actually been working on a few different ways to help optimize [1] and manage our AWS spend [2]. That said, there are quite a few places left for us to optimize. We're hoping to share more of the techniques and architecture we've used to get better performance in upcoming blog posts. [1] https://segment.com/blog/the-million-dollar-eng-problem/ https://segment.com/blog/the-million-dollar-eng-problem/ [2] https://segment.com/blog/spotting-a-million-dollars-in-your-aws-account/ https://segment.com/blog/spotting-a-million-dollars-in-your-...

jgalt212 9y ago
yes, sorry for the snark. It was more about, how does one go about spending $94MM in this day and age? And even after reading your well written post on AWS cost control, I still can't figure out how to spend that much money on a software biz other than given the lion's share to AWS. e.g. even if your engineers and salespeople cost (all in) $200K a year. $94MM = 470 person years of expensive staff.
- pkrein 9y ago
  completely theoretically with nice round numbers, let's say a SaaS company has $50m in annual revenue, and they want to grow to $100m in annual revenue next year. lastly, let's assume time required to pay back the cost of customer acquisition (marketing, sales, setup support) is 24 months, and customers always pay annually up front. (24 months is kind of a long payback time, so this is a bit extreme.) doing the math... you have $50m in revenue so you can buy another $25m in recurring revenue with that. and then you need another $50m in capital from somewhere to add the other $25m in recurring revenue to get to $100m ARR total. it also follows from the math above that the faster you grow revenue, the more capital you need. :) saas math is a bit funky.
  - jgalt212 9y ago
    fair enough, but sometimes no matter how much you spend you won't be able to double revenues from $50MM to $100MM. Will the market allow you to grow that fast? So yes, the math is funky. As a counter example, many companies are using excess cash to buy back stock and not grow the biz. As another example, what did Github did with their $100MM? I'd argue that the Github product and client base looks substantially similar to what it did before a16z gave them that chunk of change.

jgalt212 9y ago

yes, sorry for the snark. It was more about, how does one go about spending $94MM in this day and age? And even after reading your well written post on AWS cost control, I still can't figure out how to spend that much money on a software biz other than given the lion's share to AWS. e.g. even if your engineers and salespeople cost (all in) $200K a year. $94MM = 470 person years of expensive staff.

pkrein 9y ago
completely theoretically with nice round numbers, let's say a SaaS company has $50m in annual revenue, and they want to grow to $100m in annual revenue next year. lastly, let's assume time required to pay back the cost of customer acquisition (marketing, sales, setup support) is 24 months, and customers always pay annually up front. (24 months is kind of a long payback time, so this is a bit extreme.) doing the math... you have $50m in revenue so you can buy another $25m in recurring revenue with that. and then you need another $50m in capital from somewhere to add the other $25m in recurring revenue to get to $100m ARR total. it also follows from the math above that the faster you grow revenue, the more capital you need. :) saas math is a bit funky.
- jgalt212 9y ago
  fair enough, but sometimes no matter how much you spend you won't be able to double revenues from $50MM to $100MM. Will the market allow you to grow that fast? So yes, the math is funky. As a counter example, many companies are using excess cash to buy back stock and not grow the biz. As another example, what did Github did with their $100MM? I'd argue that the Github product and client base looks substantially similar to what it did before a16z gave them that chunk of change.