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Uncensored Everpix metrics, financials and slides

597 points by jot 13y ago

pkincaidsmith 13y ago
Everpix team, thanks for being generous. These metrics and insights are a gift to the startup community. Thanks also for choosing SendGrid to deliver your transactional and marketing email. Judging by the different categories of email you sent, you put a lot of thought into your email program. Question: How essential was reliable email delivery to your business expansion? What lessons did you learn about using email effectively? (BTW, would you consider publishing more of your email metrics on GitHub? For example, SendGrid reports the type of email clients that read the mail you sent (e.g. desktop, mobile, webmail), and the mailbox providers that you sent the most mail to (e.g. Gmail, Yahoo, Hotmail, etc.) Here's where to find and download those reports: http://www.screencast.com/t/5mW9bm4Ueq http://www.screencast.com/t/5mW9bm4Ueq) Best wishes for your next gig!
minimaxir 13y ago
Per [1], the average cost of each user the month before closure was $0.56, and the average cost of each user with accessible photos was $0.75. Just one of the many important costs of a freemium business model. [1] https://github.com/everpix/Everpix-Intelligence/blob/master/Internal%20Metrics/System%20AWS%20Costs%20(Average%20Cost%20Per%20User).csv https://github.com/everpix/Everpix-Intelligence/blob/master/...
PaulHoule 13y ago
sugoi!
adventured 13y ago
Could Everpix have been run by a very small team at the end, rather than shut down? It looks like it was near adding a net 1,000 subscribers per month. Also, wouldn't it have been possible - with the understood pain points - to substantially reduce costs by moving off of AWS? Trading the ease of AWS for the critical cash for operations.
- loceng 13y ago
  This could have been beginning of a hockey stick growth too. You'd think this is where a VC would be willing to accept some risk.
  - jmathai 13y ago
    If you read through the VC correspondence the hang up was that the space simply isn't big enough (>$100M). According to the VCs the hockey stick would have hit a ceiling too low for them to invest.
  - pbiggar 13y ago
    Series A investors make very few investments that are time consuming and capital consuming. Often, a specific partner will make just 1 investment per year, and stick with that company for 7+ years. They'll also allocate ~$15m in capital to it (the $5m for the Everpix raise, plus another $10m for follow-on investments in future rounds). So they're not willing to take risks like this, it doesn't make sense with the model.
- dreamfactory2 13y ago
  Although AWS are continually cutting costs so probably worth sitting out and focussing on cost reduction elsewhere and growth.
- jusben1369 13y ago
  Yes they probably could have. I'm purely guessing here but I suspect the founders had a decision just like the VC's. Does anyone want to keep this alive and try and salvage it? It would be doable but a massive grind for 18 months and we're probably never going to build much more than a $5 to $10 million per year business even if we really do make it. Or do we just want to chalk this one up and walk away and use the experience to try and hit a home run next time?
- accountoftheday 13y ago
  Buried beneath a stack of preferences it makes little sense for founders to make any sacrifices to save the company (i.e. not take a salary for a while) since all money will go to investors first.
mbesto 13y ago
Amazing. This one piece is simply eye opening - https://github.com/everpix/Everpix-Intelligence/blob/master/Financials.md https://github.com/everpix/Everpix-Intelligence/blob/master/... And here it is - the side effects of the talent war in full effect: HR - $1,374,695.06 - or 52% of total costs And the real winners of the whole thing (the pick axe industry): AWS - $394,588.35 - or 14% of total costs
- suyash 13y ago
  how many full time employees? Also Consultant costs seem way too high..looks like they hired a bunch of contractors.
- crystaln 13y ago
  > HR - $1,374,695.06 - or 52% of total costs Why would it be unusual for the majority of costs to be salaries for a company that sells services and develops products? This has nothing to do with the "talent war." That's just the way things work. What else would they be spending money on? > AWS - $394,588.35 - or 14% of total costs How much higher would that number have been had Everpix built out their own infrastructure?
  - mbesto 13y ago
    My points weren't criticisms, they were merely highlighting the sentiment that comes from outside "the bubble" that is SV. It is unusual to people outside SV* to see such a high number (the % was just an additional data point that signals to non-tech people how much salaries constitutes tech startups). This has everything to do with the talent war - the market dictates that an engineer's salary must be $foo because Facebook/Google/etc are willing to compensate that much. People are generally curious why that "that's just the way things work" who aren't familiar with it. > company that sells services and develops products Here is my criticism now - not all products and services are equal, yet the costs to develop them (in SV) are. FB/Google/etc.'s high revenues dictate that their products and services constitute a developer that costs $foo - they set the market rates. Talented developers are fungible, but their salaries are not - thus the disconnect. > How much higher would that number have been had Everpix built out their own infrastructure? I don't have the answer to that question, and probably very few people do. There are two points to be addressed there - (1) could they save money by building their own? mature companies deal with that question all of the time (2) this is a real life indication of how much a software services money can make on one client by "selling pick axes in a gold rush" - thereby singalling a reinforcement to that sentiment. *(note - I'm in SV)
badclient 13y ago
Would love a breakdown of the AWS cost.
- pandemicsyn 13y ago
  Its all there - https://github.com/everpix/Everpix-Intelligence/tree/master/Internal%20Metrics https://github.com/everpix/Everpix-Intelligence/tree/master/...
- minimaxir 13y ago
  From [1], the vast majority of the AWS cost was Storage ($9k in Oct 13), a large ECC instance from Feb-March 13 ($7k per month), and backups ($5k in Sept 13) [1] https://github.com/everpix/Everpix-Intelligence/blob/master/External%20Metrics/AWS%20Billing%20from%202012-10.csv https://github.com/everpix/Everpix-Intelligence/blob/master/...
- swisspol 13y ago
  This is the best data: https://github.com/everpix/Everpix-Intelligence/blob/master/Internal%20Metrics/System%20AWS%20Costs%20(Monthly%20Spending).csv https://github.com/everpix/Everpix-Intelligence/blob/master/...
- siverson 13y ago
  AWS costs seem reasonable to me and it is definitely the smart way to build a service like this. Saves a ton on time early and services like this can optimize later when they are much larger.
wheaties 13y ago
Thank you for this. Reading the VC letters was just so amazingly refreshing I can't begin to tell you. I love how they said "no" in almost all the same ways. I'd really like to know the two that were so standup, that they wouldn't fund a competitor or someone who could, eventually, be a competitor. In all honesty, those are the types of funds you want backing you. They've bought your vision and they're not going to do anything to undercut you.
- MediaSquirrel 13y ago
  Are you kidding? The "we can't fund a competitor" VCs are just saying "no" like everyone else. There's nothing particularly noble (or ignoble) about it.
  - jchonphoenix 13y ago
    In the particular case of Everpix, I'm relatively certain I can guess who these VC funds are and who that competitor is. Given this information, it's not just some empty excuse for a VC to bow out.
- ig1 13y ago
  It's not uncommon for VCs to have policies of not funding competitive startups, it's in their own interests as well as the startups. If a VC has funded two competitors it means the startups become reluctant to share information with the VC, the founders of the first startup become unhappy with the VC and follow-on rounds become very messy and cause bad politics. Certainly it happens (in some cases due to pivots, etc.) but I imagine it's something that most funds would prefer to avoid.
carsongross 13y ago
What a hugely useful thing for you guys to do. Thank you, truly. The lesson I see from this: AWS hurts bad if you are using it heavily, but salaries... salaries kill. Automate, outsource and self-build as much and as long as you can possibly stand it, and then push on a lot longer than that.
- nashequilibrium 13y ago
  Is the AWS cost so high because they primarily stored pics? If so what can be done to reduce this cost in terms how to store the pics?
  - danielweber 13y ago
    I'm currently someplace where we are treating AWS as a VM provider and it's freaking nuts how much it costs. (We might be looking at the problem wrong or failing to appreciate the fact that we can always scale with enough money.)
    - eli 13y ago
      AWS excels at scalability. There are certainly cheaper ways to have a bunch of VMs running 24/7.
    - sehrope 13y ago
      If you have a fixed workload (i.e. X servers always online) then take a look at reserved instances. The break even point is about 6 months for the light instances and a bit more for the medium ones. I don't recommend the heavy ones as the cost structure is different (you pay regardless of whether tt's on so ... if you later change your instance types you still have to pay hourly for the full term of the reserve). Even better is if you can plan your infrastructure on AWS around using spot instances. They can be really cheap (we're talking a 5x times cheaper then on-demand and 3-4x than reserved). If your instances are used in a stateless fashion with all persistent state saved externally (DB, S3, etc) then you can do some pretty cheap scaling with spot instances. One setup I've played with is a core set of non-spot instances phalanxed by a number of spot instances (at a couple different price points) for stateless web traffic. As long as the spot price stays below your bid you have significantly more instances available (which should give your users better response times). When the spot price rises your spot instances die and things slow down, but your app would still be alive thanks to the non spot instances. Again it takes quite a bit more engineering to get a setup like this but this is the kind of thing you need to do to take advantage of elastic computing.
dchuk 13y ago
The trend towards startup transparency is pretty damn awesome as a startup founder myself. Even with startups that have nothing to do with photo sharing, being able to see the guts of a (failed) startup is extremely insightful.
boggzPit 13y ago
Thanks pretty interesting insights for other startups!
rokhayakebe 13y ago
You know at some point we are going to have to sit back and ask "Where the F&*^K" does this $100M or $1B business number comes from. The minute I get the opportunity to put my money my mouth is, I will invest solely in lifestyle businesses: one to two guys/gals wanting to build a profitable business with a yearly dividend, one where if the team makes $500,000/year we are all extremely happy.
- username223 13y ago
  This is what separates you from the real movers and shakers: they just want to get in, get theirs, and get out, and they believe they're sufficiently smarter than the rubes to do it.
  - deleted 13y ago
    [deleted]
- ameister14 13y ago
  You can already do that; invest in existing companies that pay a dividend. They're established and they understand that their investors value their continued profits more than risky behavior.
- syntern 13y ago
  VCs are probably skipping this small-scale opportunities because there are $100M / $B numbers too, and why go small, if they can go for the big show? We need to give these lifestyle business more spotlight, so that people who are aiming for such won't get embarrassed that they are not aiming for $B.
- sorbits 13y ago
  > "Where the F&^K" does this $100M or $1B business number comes from* Funding rounds that want to raise millions in VC are for companies that aim to eventually be a $100M business. A smaller business wouldn’t involve venture capital. And the bank is still a viable option if capital is needed to scale, as long as there is a realistic repayment plan.
grahamburger 13y ago
So is there another service that does what everpix did? I had it in the back of my mind to jump in because it's a service I've really wanted, but didn't get to it before the great shutdown. I've looked at Loom and I use Trovebox, but neither seem to support videos very well, Loom is iOS only, and Trovebox is moving to a different business model.
- joshstrange 13y ago
  After Everpix shutdown I looked around and found both Loom and Trovebox but I also found PictureLife. I tried both Loom and Picture life for a little over a month and settled on PictureLife. Check it out, I am very happy with it.
jmathai 13y ago
Amazing. Kudos for all the transparency around your shutdown. I'm still reading through all of this. I'm founder @ Trovebox and recently posted this which anyone doing a subscription consumer photo service should read. "Hello 2014, Goodbye Consumer Photo Service" - https://medium.com/p/b1234eaf75b https://medium.com/p/b1234eaf75b
bidev 13y ago
Hey Guys, Thanks for posting this. Could anyone please clarify for me following things? I have just started to learn about startup capital. 1. Since company is now closed down what happens to Investor's money ? Do they just loose all or do owners have to return it ? ( sorry if this seems pretty noob but I would like to know it ) 2. What does 1 year maturity mean in convertible notes ? 3. Shouldn't the Net Operating Income be negative ? Since they had income of $280696 and Expense were $2,665,192.34 ? Did they count investor's money as income ? or how did they arrive at $2,384,224.67 ? Thank you for the reply.
- karangoeluw 13y ago
  I can answer the first one > 1. Since company is now closed down what happens to Investor's money ? Do they just loose all or do owners have to return it ? They lose it. http://en.wikipedia.org/wiki/Venture_capital http://en.wikipedia.org/wiki/Venture_capital
  - bidev 13y ago
    Thank you both.
- hedgehog 13y ago
  PG has an essay that covers a lot of how this works (2005): http://paulgraham.com/startupfunding.html http://paulgraham.com/startupfunding.html This Techcrunch article is about convertible notes but covers some of this stuff and has some good links in it (2012): http://techcrunch.com/2012/04/07/convertible-note-seed-financings/ http://techcrunch.com/2012/04/07/convertible-note-seed-finan... And a more lawyerly perspective (2010): http://www.saul.com/media/tool/997_PDF_2534.pdf http://www.saul.com/media/tool/997_PDF_2534.pdf
- teej 13y ago
  In a scenario where a company is being shut down and there is still cash in the bank, the remaining funds would be distributed to the investors.
  - deleted 13y ago
jkw 13y ago
This is a huge help the community, thank you! The completeness of this data is a testament to the team's diligence and in-depth understanding of startup metrics. Regardless of the outcome of Everpix, this analysis shows that the team has developed some good processes and best practices for their future ventures.
username223 13y ago
Interesting to see Bertrand Serlet (EDIT: shit, I confused my ex-Apple Frenchmen. Jean-Louis Gassé was BeOS), the guy behind BeOS, among the early investors. He seems to have an affinity for good products that just don't quite make it.
- kenferry 13y ago
  You're thinking of Jean-Louis Gassée. Bertrand is the former SVP of software at Apple, where the founder of Everpix worked.
wwayneee 13y ago
Everpix designer/cofounder here. This is pretty dense stuff. We're working on putting together a more extensive and user-friendly site to make sense of this heap of data. Stay tuned. :-)
- ameister14 13y ago
  Either way, thank you so much for putting this together and sharing it with us.
- rgovind 13y ago
  Wayne, Thanks a ton for sharing these documents. If you could also tell us which sources you used for market research, that would be great!
- RobPfeifer 13y ago
  We'll try not to be too judgey :)
- swisspol 13y ago
  No way, I'm a co-founder too! Were you at that office on 2nd street? We should totally have hung out :P
pistle 13y ago
So helpful. Thanks for all this. 6800 subscribers. 2,665,192.34 in expenses. 50000 users. $395 per subscriber per year. $35/mo. Convert 10% more of users.... 5000 and it's still $20/mo. Was this really $5/mo or $40/yr? There had to be a story about HR plateauing and subscribers increasing an order of magnitude in 12 mo. - and it's still under water for another 2 years. Who saw the writing on the wall and when did they start raising the warning flags? What happened from then on? What warning signs (talent leaving, investors glaring) showed up? When? How did they take form?
stevenwei 13y ago
These are very interesting numbers. Obviously the financials are not well suited to the VC-backed startup model, but I wonder if Everpix could have been successful as a small business run by a small handful of people.
douglee650 13y ago
thank you! so much thank you. wow.
hv23 13y ago
Awesome, thanks for sharing. The PR expenses (109,552.34) seem pretty high and I wonder what that line item entails. Did you guys use a PR firm or run any expensive marketing campaigns?
- barclay 13y ago
  I can speak from experience--a PR firms, even at a very light engagement, like lawyers, are bloody expensive. Shockingly so.
- swisspol 13y ago
  No marketing campaigns (we spent maybe ~10K on online ads mostly for testing). We did use a national PR firm though for several months and PR contractor for a couple months as well before that.
  - siverson 13y ago
    My message to all startups out there: despite Valley folklore, it is ok to have a marketing budget and spend money to advertise to users - especially initially. Not every successful company or service grows "organically".
  - pmorle 13y ago
    First - this is a brilliant gift to the startup community - thank you. I am interested to know more about the marketing strategy of the company. It looks like you had some very successful campaigns with CyberMonday and Daring Fireball but spent very little? http://pollenizer.com/everpix-have-open-sourced-their-startup-insights-to-make-us-all-better http://pollenizer.com/everpix-have-open-sourced-their-startu...
phreeza 13y ago
with all the lamenting about how hard running a consumer photo service is, I wonder how imgur does it. their traffic must be insane, and they have no subscribers, so how come they can do it and these relatively upmarket services can't?
- dreamdu5t 13y ago
  because imgur was focused on making a product people valued from day one while Everpix was focused on VCs, offices, hiring, blog writing, etc.
  - simonw 13y ago
    Everpix's product was loved by their users. They absolutely built "something people want". Unfortunately the promise they made their users was very expensive to deliver.
- bertil 13y ago
  Imgur is financed by advertising, and they offer pro accounts, admittedly subscribed by a sliver of users only. Revenue per user are orders of magnitude lower than for a for-pay service, but they have far more users. Their servers (and costs) are optimised to serve a limited amount of photo fast, host a little more and serve them not so fast; they most likely have far less photos, at far lower resolutions, than Everpix who hosts entire shooting sets for pro-am photographers.
rl12345 13y ago
I just read all their pitch decks and they never mentioned exactly how Everpix was - or could be - better than Dropbox, which IMO would be the first obvious competitor. The overall problem they were attacking is real, so maybe if they were more focused and had distilled better their solution, with a smaller and lest costy team, they could have made it. Just my opinion from a totally outsider perspective. Take it for what it's worth. I want to congratulate the team for trying and wish better luck next time.
jusben1369 13y ago
So one of the things that's interesting here is the Amazon component. And the anonymity of Amazon vs a smaller provider. Let's assume for a minute the founders actually wanted to keep it alive (I'm guessing they didn't but that's a whole other story) You're generating revenue of say $40,000 and your Amazon costs are $30K. If you went to a small or mid tier sized provider and said "Good news/bad news. We're generating $40,000 a month and growing (oddly revenue isn't which is again another story) You're costing us $30,000 a month. If we can cap you at $20,000 a month for 12 months that frees us up $20,000 and we can keep 3 employees on in the short term and still grow the business. We can get through the rough patch and continue to grow and in a year from now we can adjust this upward and be worth more. If you insist on $30K, which is your right, we shut the whole thing down because we can't keep the lights on. Now the provider is either looking at generating $240,000 for the next 12 months or losing everything from your account. He/she is probably doing the deal with you because much of their costs are fixed. But I don't know if/how you have that conversation with Amazon. EDIT: Oh and fantastic that they shared.
- zaidf 13y ago
  When I first read their story, I wondered exactly what you wrote: how much was their amazon hosting bill and could they have at least kept the lights on if they went with a smaller provider? I know when I was doing my music start up it would cost is many many times more to be on amazon than the two high power dedicated servers. I don't know the story in their case but I find it shocking how many high bandwidth start ups have never even explored the option of not using AWS. I mostly blame this problem to the easy availability of funding which encourages you to throw money at problems. The issue though is that the more you build out your infrastructure around AWS exclusively, the harder it will be to explore other options later.
  - jasonwatkinspdx 13y ago
    I think some people only see one side of the trade-offs here. A counter example would be a start-up I worked with that started out on a smaller provider. When we launched a beta of the application, we unexpectedly got invitations for national TV coverage with less than 24 hours notice. We asked the provider for everything they could give us, but they only had a limited amount of unused capacity themselves so there was little they could do. Of course we couldn't come near to soaking up the traffic spike, and lost a huge potential number of positive user experiences. That sort of thing doesn't happen to you on Amazon or the other largest on demand providers.
notastartup 13y ago
I wonder why they didn't simply downsize on the hosting. I mean if that's a huge part of the operating cost, so much you need to shut down the entire operation, doesn't it make sense to go with a different host? even resorting to a dedicated box or choosing a different cloud provider? It's really hard to believe because I bet the end user didn't really give a damn about whether it was hosted on amazon or elsewhere. It's also hard to believe why not just outsource the generic stuff. I really don't see anything unique about everpix that a North American can only do and not some guy across the ocean. Was it absolutely necessary to have in-house talent for everything when it was a threat to the continued operation of the company? I wonder if they were simply bootstrapped and grew as a small business focusing on net profit, would they have made a better decision.
- swisspol 13y ago
  I keep reading comments from this angle, so I'll throw in my 2 cents as an Everpix founder :) I can assure you that without the facilities of AWS, which saved us a ton of time and development overhead early on, there would have been no Everpix. Period. Actually, the very first Everpix was on Google App Engine, but that's a different story. As an early stage startup, whose core business is not building infrastructure, do you really want to be in the business of managing for instance your own S3 type storage with the same performance and reliability at 200+ TB scale? We never lost a single user photo or account. Never lost a database server either. When your users trust you with their life photo collection, that does matter. Then of course, if your company starts gaining traction, your bills increase so things change. As a matter of fact, post Series-A, our plan was to switch out of AWS, concurrently to our infrastructure's redesign to go from managing 100s of million of photos to billions. Doing the switch earlier would have been premature IMO: there was no one the team with such experience, even less bandwidth. The opportunity cost would have been significant on all the other aspect of the company. Let's not forget the required upfront capital which takes some time to recoup so savings would not kick in from day 1. Finally there's also the fact our infrastructure was still rapidly evolving (type of EC2 machines used, database architecture, etc...), so even buying reserved instances was very difficult as there was a good chance of buying machines we would not need anymore 6 months down the road ultimately wasting money (it did happen). So what we did instead what focusing on driving continuously driving down AWS costs through various optimizations - if you were to look at our dashboard graphs, you would notice AWS costs were growing slower than users / photos, which reflected that work. Long story short, the infrastructure was paying for itself through subscription revenues. The real "killer" was payroll. I use quotes because in this type of business, it's expected to have payroll your largest expense - there was no surprise. BTW note that the team was already 1 person = 1 entire product component like iOS or infrastructure so quite lean and highly productive. For a VC backed consumer business, you pretty much need the VC money to cover these fixed costs until you reach profitability.
akbar501 13y ago
This is absolutely amazing information. Thank you so much for sharing.
bobjordan 13y ago
Great material for a business school case.
lancewiggs 13y ago
Fantastic. I went through an exercise to recast the numbers as a bootstrapped company here in New Zealand. we don't, for example, have any healthcare costs, and items like legal fees, rent and salaries (including taxes) are substantially lower. I have 3 Questions for the founders, if possible: How much did you play with pricing to try to drive revenue per customer up? e.g. Did you consider/test no free customers, higher pricing and gold tiers? The consultants cost of $272k seems very high - what sort of consultants was this spent on? If you did it again as a bootstrap (i.e. founders are in control), what are the to 3 things that you would you do differently that would impact on costs and revenue?
spullara 13y ago
Absolutely incredible transparency.
pkrein 13y ago
I did some spreadsheet-ing to look at the "profitability" of their userbase. If the business were sustainable, then Monthly Recurring Revenue [1] would be higher than the cost to service the customers [2]. If not, then growing the userbase just increases total monthly losses (assuming a steady freemium conversion rate). In Everpix's case, it appears they were growing unsustainably. Their data shows that all the way up until February 2013, they were spending $3 on AWS for every $1 of MRR. That's scary, because it means that a new customer bringing $1 MRR was actually increasing their monthly losses due to usage costs! Things got better though. In March and April 2013, a surge in premium users seems to have shifted the balance in the right direction. But still, for May 2013 until the shutdown they were spending $1.20-1.40 on AWS to service every $1 MRR. So growth in their userbase was actually increasing their total burn rate, which makes growth unsustainable. You can see the spreadsheet analysis here: https://docs.google.com/spreadsheet/ccc?key=0Ap7fmpANG_0QdHVUbGdudnhCaFdVSlVnOEJpUXBVUVE&usp=sharing https://docs.google.com/spreadsheet/ccc?key=0Ap7fmpANG_0QdHV... [1] https://github.com/everpix/Everpix-Intelligence/blob/master/Internal%20Metrics/Subscriptions%20and%20Revenues%20(Revenues%20in%20Sales%20Recognition%20Basis%20-%20Minus%20Processing%20Fees%20and%20Refunds).csv https://github.com/everpix/Everpix-Intelligence/blob/master/... [2] https://github.com/everpix/Everpix-Intelligence/blob/master/Internal%20Metrics/System%20AWS%20Costs%20(Monthly%20Spending).csv https://github.com/everpix/Everpix-Intelligence/blob/master/...
- swisspol 13y ago
  Your analysis is certainly logical, but with all due respect relies on the faulty assumption that Everpix's infrastructure, responsible for almost all of variable costs, was somehow "frozen". The reason we were getting closer and closer to being positive on variable costs (looking at revenues on a sales recognition basis, since from the sales volume perspective, things were already positive in the last few months) is, yes, improved monetization, but more importantly AWS optimizations. We had squeezed a lot out of S3, then EC2 and our last step, the one we were working on before shutting down, was RDS where there was a ton of room. Looking at our trajectory, I'm pretty confident we would have been positive even on AWS (but unlikely much). You can even compound that with AWS discounts which apparently even startups can get looking at other comments in this thread. To re-iterate, you would not build a freemium business like Everpix, with intense computing and storage requirements, at scale on AWS. Large photo platforms have their own storage and servers. Everpix was never intended to grow out of AWS either and you know you can cut your infrastructure costs to at least half. That was the plan post Series A. Most CTO / CEOs of large established photo companies I talked to said they were doing much better than this 1/2X, so that's conservative (I've been told ranges of 3-8X in savings vs S3 for instance). Anyway, Everpix was bringing about $6 revenue / user / year IIRC, which is the part that really matters considering the denominator, infrastructure costs, is something you know you can really bring down. One relevant reference point is 500px for instance which is doing about $1 revenue / user / year [1]. I would be surprised if they were growing "sustainably" too ;) [1] http://techcrunch.com/2013/08/07/500px-scores-8-8m-series-a-from-andreessen-horowitz-harrison-metal-to-build-a-photo-marketplace-expand-consumer-reach/ http://techcrunch.com/2013/08/07/500px-scores-8-8m-series-a-....
EricMayo 13y ago
$30K/month and ~100 servers seems like a huge waste. I'm in the business of managing similar services. I handle, not photos, but video streams. My work is for one of the largest companies in the world (Fortune-5) and I deal with things like superbowl traffic spikes, etc... Everything is handled in house but for spiky loads, we look to things like Akami. I realize managing at Fortune-5 is different than 100% oursourcing but the cost constraints, I have to imagine, are very similar. For example, I have to imagine Amazon gets similar price breaks from Cisco as my company - I know Amazon has custom built servers and all so there may be some advantages but at $30K/month, I think any hosting company would happily take 1/2 or 1/4 of that. I'd be curious to know what kind of bandwidth loads you were pushing through AWS and how much of the AWS cloud can be made redundant per client.
- JoachimSchipper 13y ago
  Note that they were apparently doing very fancy image processing, not just pushing bytes; that does make things more difficult/expensive.
  - EricMayo 13y ago
    Yes, I took that into account in mulling things over. We do very similar stuff with video streams (post processing) before pushing to Akami. We also use SAN backed storage and Cisco CSM load balancers. All of our equipment is in the US and we use VMWare for everything. I know little about AWS and their virtualization technology but where I work, it would appear we pay a little bit more of a premium for VPS nodes if I assume Amazon rolls their own - the $30K just seems outrageous in this regard. And to top things off, we don't host just one web site; we have a myraid of applications spanning our data centers to deal with all sorts of stuff (many product lines each with their own web site with streaming, flash, user accounts, etc...)
jot 13y ago
Do startups at a similar stage usually measure things as diligently as Everpix seem to have done? If they kept an eye on of all this on a monthly or weekly basis while they were still running would they have been doing too much or too little? I've worked with some organisations that are reluctant to invest in this level of analysis. Some of them might even now say "It didn't help Everpix to spend time on that stuff."
- patio11 13y ago
  Commenting because you asked me to on Twitter: Do startups at a similar stage usually measure things as diligently as Everpix seem to have done? Frequently, no. There exist companies with revenue in the $X0 million range who have less numbers floating around the company. You'd be surprised. If they kept an eye on of all this on a monthly or weekly basis while they were still running would they have been doing too much or too little? I'm going to respectfully decline to answer counterfactuals about someone else's business. In general, software businesses have two tasks: Make software. Sell software. Analytics is a very useful thing to have if it lets you accomplish one of those two tasks. There are many software businesses at which it does. There are some at which it does not.
joelthelion 13y ago
What a waste...
bayesianhorse 13y ago
To me it looked like Everpix expected the kind of growth usually seen with free services from a paid-subscription model. On the one hand, paid subscriptions "make more sense economically", on the other hand, as long as we are talking about high risk capital anyway, a free service model might have made more sense "financially".
pixi02139 13y ago
Was your competition a big part in this demise? Pixable does similar things for free....
neil_s 13y ago
This is very interesting, thanks for taking the time to compile it all. What I'm wondering now is whether you plan on open-sourcing the technology built so people can potentially plug it into their own storage providers and take up the cost of storage, or adapt the photo analysis tech. You've built a wonderful base here, will it be put to some use?
FollowSteph3 13y ago
Why is the main focus on Aws costs when in comparison the HR costs are multiple of the Aws costs? Is it because were too technically minded here? Is it cause the charts in the article only showed the Aws costs whereas including the HR costs would have changed that perception. I don't know but i just keep seeing people focus on the Aws cost which was not the real problem in comparison. It makes me think of bad pre-optimizations ;)
- pistle 13y ago
  Note my other comment. It hints at this. You make the point clearer. The technical costs are not damning. Where is the concern about the other costs, which aren't being picked apart? If AWS was 0, it's still unsustainable growth until someone (swisspol?) dispels our concern there. Another big void is who was pulling the plug and how/what are the founders and direct employees feeling? I'd like to know if there were ship-abandoners, etc. What is the turning point and what were they decision makers watching that caused the shift? This doesn't look like a technical learning here. This looks like a business learning. So, while they're being transparent and it's still fresh :) share. We can A/B test buttons. How do you A/B test business decisions? It looks like a bunch of people can armchair this thing, technically, to the point where it makes me wonder if someone could NOT take on nearly the funding and make the $100M company on this idea with just some bootstrapping. Also... how was there not a pricing model that scaled with use?
inkaudio 13y ago
The elephant in the room that nobody is talking about here is they gave away too much. They could have adjusted their freemium model. Why not contact people using a lot of resources ? Let them know the best way to keep the services up at the current clip is for them to start paying.
- MasterScrat 13y ago
  That's my feeling t0o. I had been using it for a few months before it shut down and was amazed at the amount I could host for free. I recommended the service to a number of people and would have been willing to pay for it if I needed to. Also I don't get why it disappeared from one day to the next... Couldn't they massively restrict free usage? Or have some form of donation/fund raising à la Reddit Gold? people were attached to the product and it was disappointing to see it just go away /rant
leoplct 13y ago
Now do you still believe in "learning by failure"?
avitalp 13y ago
Thank you for taking the time to organise and post this, very interesting and educational.
hectoroftroy 13y ago
What was the roughly $300,000 in consulting fees for? How do the typically help startups? And did you find them yourselves or were they recommended by the VCs? Is it business/process consulting? Do you feel not having a non-programming founder was beneficial or a hindrance? This is awesome that you guys did this btw. Really eye opening. Thanks.
rl12345 13y ago
In the "About Everpix" part, the text make it seem like the app was doing ok and the reason they had to shut it down was because investors didn't want to invest in it anymore for whatever reason. Well, the lack of investors was surely a big symptom of their failure but the cause it was not. When you burn > $2 million in funding ($200k alone in PR and "Promotional Expenses" as their spreadsheet shows) and still can't get through the timid mark of 50 thousand users, then maybe there is something very wrong with your business model that you should think about. I'm confident that's something that crossed all the investors minds during the series A conversations. They didn't mention that fact directly because it could sound too harsh or rude and they wanted to keep the relationship in good spirits, obviously. The startup game is tuff, no doubt about it. I hope the Everpix guys learn their lesson and to better next time, they look like cool and competent people.
EGreg 13y ago
This is a REALLY useful treasure trove, thanks for posting Looks like the largest expenses were payroll and hosting. I wonder if tbis is the reason they shut down even as the number of subscriptions was rising.
deleted 13y ago
[deleted]

597 points by jot 13y ago

Everpix team, thanks for being generous. These metrics and insights are a gift to the startup community. Thanks also for choosing SendGrid to deliver your transactional and marketing email. Judging by the different categories of email you sent, you put a lot of thought into your email program. Question: How essential was reliable email delivery to your business expansion? What lessons did you learn about using email effectively? (BTW, would you consider publishing more of your email metrics on GitHub? For example, SendGrid reports the type of email clients that read the mail you sent (e.g. desktop, mobile, webmail), and the mailbox providers that you sent the most mail to (e.g. Gmail, Yahoo, Hotmail, etc.) Here's where to find and download those reports: http://www.screencast.com/t/5mW9bm4Ueq http://www.screencast.com/t/5mW9bm4Ueq) Best wishes for your next gig!

minimaxir 13y ago

Per [1], the average cost of each user the month before closure was $0.56, and the average cost of each user with accessible photos was $0.75. Just one of the many important costs of a freemium business model. [1] https://github.com/everpix/Everpix-Intelligence/blob/master/Internal%20Metrics/System%20AWS%20Costs%20(Average%20Cost%20Per%20User).csv https://github.com/everpix/Everpix-Intelligence/blob/master/...

PaulHoule 13y ago

sugoi!

adventured 13y ago

Could Everpix have been run by a very small team at the end, rather than shut down? It looks like it was near adding a net 1,000 subscribers per month. Also, wouldn't it have been possible - with the understood pain points - to substantially reduce costs by moving off of AWS? Trading the ease of AWS for the critical cash for operations.

loceng 13y ago
This could have been beginning of a hockey stick growth too. You'd think this is where a VC would be willing to accept some risk.
- jmathai 13y ago
  If you read through the VC correspondence the hang up was that the space simply isn't big enough (>$100M). According to the VCs the hockey stick would have hit a ceiling too low for them to invest.
- pbiggar 13y ago
  Series A investors make very few investments that are time consuming and capital consuming. Often, a specific partner will make just 1 investment per year, and stick with that company for 7+ years. They'll also allocate ~$15m in capital to it (the $5m for the Everpix raise, plus another $10m for follow-on investments in future rounds). So they're not willing to take risks like this, it doesn't make sense with the model.
dreamfactory2 13y ago
Although AWS are continually cutting costs so probably worth sitting out and focussing on cost reduction elsewhere and growth.
jusben1369 13y ago
Yes they probably could have. I'm purely guessing here but I suspect the founders had a decision just like the VC's. Does anyone want to keep this alive and try and salvage it? It would be doable but a massive grind for 18 months and we're probably never going to build much more than a $5 to $10 million per year business even if we really do make it. Or do we just want to chalk this one up and walk away and use the experience to try and hit a home run next time?
accountoftheday 13y ago
Buried beneath a stack of preferences it makes little sense for founders to make any sacrifices to save the company (i.e. not take a salary for a while) since all money will go to investors first.

mbesto 13y ago

Amazing. This one piece is simply eye opening - https://github.com/everpix/Everpix-Intelligence/blob/master/Financials.md https://github.com/everpix/Everpix-Intelligence/blob/master/... And here it is - the side effects of the talent war in full effect: HR - $1,374,695.06 - or 52% of total costs And the real winners of the whole thing (the pick axe industry): AWS - $394,588.35 - or 14% of total costs

suyash 13y ago
how many full time employees? Also Consultant costs seem way too high..looks like they hired a bunch of contractors.
crystaln 13y ago
> HR - $1,374,695.06 - or 52% of total costs Why would it be unusual for the majority of costs to be salaries for a company that sells services and develops products? This has nothing to do with the "talent war." That's just the way things work. What else would they be spending money on? > AWS - $394,588.35 - or 14% of total costs How much higher would that number have been had Everpix built out their own infrastructure?
- mbesto 13y ago
  My points weren't criticisms, they were merely highlighting the sentiment that comes from outside "the bubble" that is SV. It is unusual to people outside SV* to see such a high number (the % was just an additional data point that signals to non-tech people how much salaries constitutes tech startups). This has everything to do with the talent war - the market dictates that an engineer's salary must be $foo because Facebook/Google/etc are willing to compensate that much. People are generally curious why that "that's just the way things work" who aren't familiar with it. > company that sells services and develops products Here is my criticism now - not all products and services are equal, yet the costs to develop them (in SV) are. FB/Google/etc.'s high revenues dictate that their products and services constitute a developer that costs $foo - they set the market rates. Talented developers are fungible, but their salaries are not - thus the disconnect. > How much higher would that number have been had Everpix built out their own infrastructure? I don't have the answer to that question, and probably very few people do. There are two points to be addressed there - (1) could they save money by building their own? mature companies deal with that question all of the time (2) this is a real life indication of how much a software services money can make on one client by "selling pick axes in a gold rush" - thereby singalling a reinforcement to that sentiment. *(note - I'm in SV)

badclient 13y ago

Would love a breakdown of the AWS cost.

pandemicsyn 13y ago
Its all there - https://github.com/everpix/Everpix-Intelligence/tree/master/Internal%20Metrics https://github.com/everpix/Everpix-Intelligence/tree/master/...
minimaxir 13y ago
From [1], the vast majority of the AWS cost was Storage ($9k in Oct 13), a large ECC instance from Feb-March 13 ($7k per month), and backups ($5k in Sept 13) [1] https://github.com/everpix/Everpix-Intelligence/blob/master/External%20Metrics/AWS%20Billing%20from%202012-10.csv https://github.com/everpix/Everpix-Intelligence/blob/master/...
swisspol 13y ago
This is the best data: https://github.com/everpix/Everpix-Intelligence/blob/master/Internal%20Metrics/System%20AWS%20Costs%20(Monthly%20Spending).csv https://github.com/everpix/Everpix-Intelligence/blob/master/...
siverson 13y ago
AWS costs seem reasonable to me and it is definitely the smart way to build a service like this. Saves a ton on time early and services like this can optimize later when they are much larger.

wheaties 13y ago

Thank you for this. Reading the VC letters was just so amazingly refreshing I can't begin to tell you. I love how they said "no" in almost all the same ways. I'd really like to know the two that were so standup, that they wouldn't fund a competitor or someone who could, eventually, be a competitor. In all honesty, those are the types of funds you want backing you. They've bought your vision and they're not going to do anything to undercut you.

MediaSquirrel 13y ago
Are you kidding? The "we can't fund a competitor" VCs are just saying "no" like everyone else. There's nothing particularly noble (or ignoble) about it.
- jchonphoenix 13y ago
  In the particular case of Everpix, I'm relatively certain I can guess who these VC funds are and who that competitor is. Given this information, it's not just some empty excuse for a VC to bow out.
ig1 13y ago
It's not uncommon for VCs to have policies of not funding competitive startups, it's in their own interests as well as the startups. If a VC has funded two competitors it means the startups become reluctant to share information with the VC, the founders of the first startup become unhappy with the VC and follow-on rounds become very messy and cause bad politics. Certainly it happens (in some cases due to pivots, etc.) but I imagine it's something that most funds would prefer to avoid.

carsongross 13y ago

What a hugely useful thing for you guys to do. Thank you, truly. The lesson I see from this: AWS hurts bad if you are using it heavily, but salaries... salaries kill. Automate, outsource and self-build as much and as long as you can possibly stand it, and then push on a lot longer than that.

nashequilibrium 13y ago
Is the AWS cost so high because they primarily stored pics? If so what can be done to reduce this cost in terms how to store the pics?
- danielweber 13y ago
  I'm currently someplace where we are treating AWS as a VM provider and it's freaking nuts how much it costs. (We might be looking at the problem wrong or failing to appreciate the fact that we can always scale with enough money.)
  - eli 13y ago
    AWS excels at scalability. There are certainly cheaper ways to have a bunch of VMs running 24/7.
  - sehrope 13y ago
    If you have a fixed workload (i.e. X servers always online) then take a look at reserved instances. The break even point is about 6 months for the light instances and a bit more for the medium ones. I don't recommend the heavy ones as the cost structure is different (you pay regardless of whether tt's on so ... if you later change your instance types you still have to pay hourly for the full term of the reserve). Even better is if you can plan your infrastructure on AWS around using spot instances. They can be really cheap (we're talking a 5x times cheaper then on-demand and 3-4x than reserved). If your instances are used in a stateless fashion with all persistent state saved externally (DB, S3, etc) then you can do some pretty cheap scaling with spot instances. One setup I've played with is a core set of non-spot instances phalanxed by a number of spot instances (at a couple different price points) for stateless web traffic. As long as the spot price stays below your bid you have significantly more instances available (which should give your users better response times). When the spot price rises your spot instances die and things slow down, but your app would still be alive thanks to the non spot instances. Again it takes quite a bit more engineering to get a setup like this but this is the kind of thing you need to do to take advantage of elastic computing.

dchuk 13y ago

The trend towards startup transparency is pretty damn awesome as a startup founder myself. Even with startups that have nothing to do with photo sharing, being able to see the guts of a (failed) startup is extremely insightful.

boggzPit 13y ago

Thanks pretty interesting insights for other startups!

rokhayakebe 13y ago

You know at some point we are going to have to sit back and ask "Where the F&*^K" does this $100M or $1B business number comes from. The minute I get the opportunity to put my money my mouth is, I will invest solely in lifestyle businesses: one to two guys/gals wanting to build a profitable business with a yearly dividend, one where if the team makes $500,000/year we are all extremely happy.

username223 13y ago
This is what separates you from the real movers and shakers: they just want to get in, get theirs, and get out, and they believe they're sufficiently smarter than the rubes to do it.
- deleted 13y ago
  [deleted]
ameister14 13y ago
You can already do that; invest in existing companies that pay a dividend. They're established and they understand that their investors value their continued profits more than risky behavior.
syntern 13y ago
VCs are probably skipping this small-scale opportunities because there are $100M / $B numbers too, and why go small, if they can go for the big show? We need to give these lifestyle business more spotlight, so that people who are aiming for such won't get embarrassed that they are not aiming for $B.
sorbits 13y ago
> "Where the F&^K" does this $100M or $1B business number comes from* Funding rounds that want to raise millions in VC are for companies that aim to eventually be a $100M business. A smaller business wouldn’t involve venture capital. And the bank is still a viable option if capital is needed to scale, as long as there is a realistic repayment plan.

grahamburger 13y ago

So is there another service that does what everpix did? I had it in the back of my mind to jump in because it's a service I've really wanted, but didn't get to it before the great shutdown. I've looked at Loom and I use Trovebox, but neither seem to support videos very well, Loom is iOS only, and Trovebox is moving to a different business model.

joshstrange 13y ago
After Everpix shutdown I looked around and found both Loom and Trovebox but I also found PictureLife. I tried both Loom and Picture life for a little over a month and settled on PictureLife. Check it out, I am very happy with it.

jmathai 13y ago

Amazing. Kudos for all the transparency around your shutdown. I'm still reading through all of this. I'm founder @ Trovebox and recently posted this which anyone doing a subscription consumer photo service should read. "Hello 2014, Goodbye Consumer Photo Service" - https://medium.com/p/b1234eaf75b https://medium.com/p/b1234eaf75b

bidev 13y ago

Hey Guys, Thanks for posting this. Could anyone please clarify for me following things? I have just started to learn about startup capital. 1. Since company is now closed down what happens to Investor's money ? Do they just loose all or do owners have to return it ? ( sorry if this seems pretty noob but I would like to know it ) 2. What does 1 year maturity mean in convertible notes ? 3. Shouldn't the Net Operating Income be negative ? Since they had income of $280696 and Expense were $2,665,192.34 ? Did they count investor's money as income ? or how did they arrive at $2,384,224.67 ? Thank you for the reply.

karangoeluw 13y ago
I can answer the first one > 1. Since company is now closed down what happens to Investor's money ? Do they just loose all or do owners have to return it ? They lose it. http://en.wikipedia.org/wiki/Venture_capital http://en.wikipedia.org/wiki/Venture_capital
- bidev 13y ago
  Thank you both.
hedgehog 13y ago
PG has an essay that covers a lot of how this works (2005): http://paulgraham.com/startupfunding.html http://paulgraham.com/startupfunding.html This Techcrunch article is about convertible notes but covers some of this stuff and has some good links in it (2012): http://techcrunch.com/2012/04/07/convertible-note-seed-financings/ http://techcrunch.com/2012/04/07/convertible-note-seed-finan... And a more lawyerly perspective (2010): http://www.saul.com/media/tool/997_PDF_2534.pdf http://www.saul.com/media/tool/997_PDF_2534.pdf
teej 13y ago
In a scenario where a company is being shut down and there is still cash in the bank, the remaining funds would be distributed to the investors.
- deleted 13y ago

jkw 13y ago

This is a huge help the community, thank you! The completeness of this data is a testament to the team's diligence and in-depth understanding of startup metrics. Regardless of the outcome of Everpix, this analysis shows that the team has developed some good processes and best practices for their future ventures.

username223 13y ago

Interesting to see Bertrand Serlet (EDIT: shit, I confused my ex-Apple Frenchmen. Jean-Louis Gassé was BeOS), the guy behind BeOS, among the early investors. He seems to have an affinity for good products that just don't quite make it.

kenferry 13y ago
You're thinking of Jean-Louis Gassée. Bertrand is the former SVP of software at Apple, where the founder of Everpix worked.

wwayneee 13y ago

Everpix designer/cofounder here. This is pretty dense stuff. We're working on putting together a more extensive and user-friendly site to make sense of this heap of data. Stay tuned. :-)

ameister14 13y ago
Either way, thank you so much for putting this together and sharing it with us.
rgovind 13y ago
Wayne, Thanks a ton for sharing these documents. If you could also tell us which sources you used for market research, that would be great!
RobPfeifer 13y ago
We'll try not to be too judgey :)
swisspol 13y ago
No way, I'm a co-founder too! Were you at that office on 2nd street? We should totally have hung out :P

pistle 13y ago

So helpful. Thanks for all this. 6800 subscribers. 2,665,192.34 in expenses. 50000 users. $395 per subscriber per year. $35/mo. Convert 10% more of users.... 5000 and it's still $20/mo. Was this really $5/mo or $40/yr? There had to be a story about HR plateauing and subscribers increasing an order of magnitude in 12 mo. - and it's still under water for another 2 years. Who saw the writing on the wall and when did they start raising the warning flags? What happened from then on? What warning signs (talent leaving, investors glaring) showed up? When? How did they take form?

stevenwei 13y ago

These are very interesting numbers. Obviously the financials are not well suited to the VC-backed startup model, but I wonder if Everpix could have been successful as a small business run by a small handful of people.

douglee650 13y ago

thank you! so much thank you. wow.

hv23 13y ago

Awesome, thanks for sharing. The PR expenses (109,552.34) seem pretty high and I wonder what that line item entails. Did you guys use a PR firm or run any expensive marketing campaigns?

barclay 13y ago
I can speak from experience--a PR firms, even at a very light engagement, like lawyers, are bloody expensive. Shockingly so.
swisspol 13y ago
No marketing campaigns (we spent maybe ~10K on online ads mostly for testing). We did use a national PR firm though for several months and PR contractor for a couple months as well before that.
- siverson 13y ago
  My message to all startups out there: despite Valley folklore, it is ok to have a marketing budget and spend money to advertise to users - especially initially. Not every successful company or service grows "organically".
- pmorle 13y ago
  First - this is a brilliant gift to the startup community - thank you. I am interested to know more about the marketing strategy of the company. It looks like you had some very successful campaigns with CyberMonday and Daring Fireball but spent very little? http://pollenizer.com/everpix-have-open-sourced-their-startup-insights-to-make-us-all-better http://pollenizer.com/everpix-have-open-sourced-their-startu...

phreeza 13y ago

with all the lamenting about how hard running a consumer photo service is, I wonder how imgur does it. their traffic must be insane, and they have no subscribers, so how come they can do it and these relatively upmarket services can't?

dreamdu5t 13y ago
because imgur was focused on making a product people valued from day one while Everpix was focused on VCs, offices, hiring, blog writing, etc.
- simonw 13y ago
  Everpix's product was loved by their users. They absolutely built "something people want". Unfortunately the promise they made their users was very expensive to deliver.
bertil 13y ago
Imgur is financed by advertising, and they offer pro accounts, admittedly subscribed by a sliver of users only. Revenue per user are orders of magnitude lower than for a for-pay service, but they have far more users. Their servers (and costs) are optimised to serve a limited amount of photo fast, host a little more and serve them not so fast; they most likely have far less photos, at far lower resolutions, than Everpix who hosts entire shooting sets for pro-am photographers.

rl12345 13y ago

I just read all their pitch decks and they never mentioned exactly how Everpix was - or could be - better than Dropbox, which IMO would be the first obvious competitor. The overall problem they were attacking is real, so maybe if they were more focused and had distilled better their solution, with a smaller and lest costy team, they could have made it. Just my opinion from a totally outsider perspective. Take it for what it's worth. I want to congratulate the team for trying and wish better luck next time.

jusben1369 13y ago

So one of the things that's interesting here is the Amazon component. And the anonymity of Amazon vs a smaller provider. Let's assume for a minute the founders actually wanted to keep it alive (I'm guessing they didn't but that's a whole other story) You're generating revenue of say $40,000 and your Amazon costs are $30K. If you went to a small or mid tier sized provider and said "Good news/bad news. We're generating $40,000 a month and growing (oddly revenue isn't which is again another story) You're costing us $30,000 a month. If we can cap you at $20,000 a month for 12 months that frees us up $20,000 and we can keep 3 employees on in the short term and still grow the business. We can get through the rough patch and continue to grow and in a year from now we can adjust this upward and be worth more. If you insist on $30K, which is your right, we shut the whole thing down because we can't keep the lights on. Now the provider is either looking at generating $240,000 for the next 12 months or losing everything from your account. He/she is probably doing the deal with you because much of their costs are fixed. But I don't know if/how you have that conversation with Amazon. EDIT: Oh and fantastic that they shared.

zaidf 13y ago
When I first read their story, I wondered exactly what you wrote: how much was their amazon hosting bill and could they have at least kept the lights on if they went with a smaller provider? I know when I was doing my music start up it would cost is many many times more to be on amazon than the two high power dedicated servers. I don't know the story in their case but I find it shocking how many high bandwidth start ups have never even explored the option of not using AWS. I mostly blame this problem to the easy availability of funding which encourages you to throw money at problems. The issue though is that the more you build out your infrastructure around AWS exclusively, the harder it will be to explore other options later.
- jasonwatkinspdx 13y ago
  I think some people only see one side of the trade-offs here. A counter example would be a start-up I worked with that started out on a smaller provider. When we launched a beta of the application, we unexpectedly got invitations for national TV coverage with less than 24 hours notice. We asked the provider for everything they could give us, but they only had a limited amount of unused capacity themselves so there was little they could do. Of course we couldn't come near to soaking up the traffic spike, and lost a huge potential number of positive user experiences. That sort of thing doesn't happen to you on Amazon or the other largest on demand providers.

notastartup 13y ago

I wonder why they didn't simply downsize on the hosting. I mean if that's a huge part of the operating cost, so much you need to shut down the entire operation, doesn't it make sense to go with a different host? even resorting to a dedicated box or choosing a different cloud provider? It's really hard to believe because I bet the end user didn't really give a damn about whether it was hosted on amazon or elsewhere. It's also hard to believe why not just outsource the generic stuff. I really don't see anything unique about everpix that a North American can only do and not some guy across the ocean. Was it absolutely necessary to have in-house talent for everything when it was a threat to the continued operation of the company? I wonder if they were simply bootstrapped and grew as a small business focusing on net profit, would they have made a better decision.

swisspol 13y ago
I keep reading comments from this angle, so I'll throw in my 2 cents as an Everpix founder :) I can assure you that without the facilities of AWS, which saved us a ton of time and development overhead early on, there would have been no Everpix. Period. Actually, the very first Everpix was on Google App Engine, but that's a different story. As an early stage startup, whose core business is not building infrastructure, do you really want to be in the business of managing for instance your own S3 type storage with the same performance and reliability at 200+ TB scale? We never lost a single user photo or account. Never lost a database server either. When your users trust you with their life photo collection, that does matter. Then of course, if your company starts gaining traction, your bills increase so things change. As a matter of fact, post Series-A, our plan was to switch out of AWS, concurrently to our infrastructure's redesign to go from managing 100s of million of photos to billions. Doing the switch earlier would have been premature IMO: there was no one the team with such experience, even less bandwidth. The opportunity cost would have been significant on all the other aspect of the company. Let's not forget the required upfront capital which takes some time to recoup so savings would not kick in from day 1. Finally there's also the fact our infrastructure was still rapidly evolving (type of EC2 machines used, database architecture, etc...), so even buying reserved instances was very difficult as there was a good chance of buying machines we would not need anymore 6 months down the road ultimately wasting money (it did happen). So what we did instead what focusing on driving continuously driving down AWS costs through various optimizations - if you were to look at our dashboard graphs, you would notice AWS costs were growing slower than users / photos, which reflected that work. Long story short, the infrastructure was paying for itself through subscription revenues. The real "killer" was payroll. I use quotes because in this type of business, it's expected to have payroll your largest expense - there was no surprise. BTW note that the team was already 1 person = 1 entire product component like iOS or infrastructure so quite lean and highly productive. For a VC backed consumer business, you pretty much need the VC money to cover these fixed costs until you reach profitability.

akbar501 13y ago

This is absolutely amazing information. Thank you so much for sharing.

bobjordan 13y ago

Great material for a business school case.

lancewiggs 13y ago

Fantastic. I went through an exercise to recast the numbers as a bootstrapped company here in New Zealand. we don't, for example, have any healthcare costs, and items like legal fees, rent and salaries (including taxes) are substantially lower. I have 3 Questions for the founders, if possible: How much did you play with pricing to try to drive revenue per customer up? e.g. Did you consider/test no free customers, higher pricing and gold tiers? The consultants cost of $272k seems very high - what sort of consultants was this spent on? If you did it again as a bootstrap (i.e. founders are in control), what are the to 3 things that you would you do differently that would impact on costs and revenue?

spullara 13y ago

Absolutely incredible transparency.

pkrein 13y ago

I did some spreadsheet-ing to look at the "profitability" of their userbase. If the business were sustainable, then Monthly Recurring Revenue [1] would be higher than the cost to service the customers [2]. If not, then growing the userbase just increases total monthly losses (assuming a steady freemium conversion rate). In Everpix's case, it appears they were growing unsustainably. Their data shows that all the way up until February 2013, they were spending $3 on AWS for every $1 of MRR. That's scary, because it means that a new customer bringing $1 MRR was actually increasing their monthly losses due to usage costs! Things got better though. In March and April 2013, a surge in premium users seems to have shifted the balance in the right direction. But still, for May 2013 until the shutdown they were spending $1.20-1.40 on AWS to service every $1 MRR. So growth in their userbase was actually increasing their total burn rate, which makes growth unsustainable. You can see the spreadsheet analysis here: https://docs.google.com/spreadsheet/ccc?key=0Ap7fmpANG_0QdHVUbGdudnhCaFdVSlVnOEJpUXBVUVE&usp=sharing https://docs.google.com/spreadsheet/ccc?key=0Ap7fmpANG_0QdHV... [1] https://github.com/everpix/Everpix-Intelligence/blob/master/Internal%20Metrics/Subscriptions%20and%20Revenues%20(Revenues%20in%20Sales%20Recognition%20Basis%20-%20Minus%20Processing%20Fees%20and%20Refunds).csv https://github.com/everpix/Everpix-Intelligence/blob/master/... [2] https://github.com/everpix/Everpix-Intelligence/blob/master/Internal%20Metrics/System%20AWS%20Costs%20(Monthly%20Spending).csv https://github.com/everpix/Everpix-Intelligence/blob/master/...

swisspol 13y ago
Your analysis is certainly logical, but with all due respect relies on the faulty assumption that Everpix's infrastructure, responsible for almost all of variable costs, was somehow "frozen". The reason we were getting closer and closer to being positive on variable costs (looking at revenues on a sales recognition basis, since from the sales volume perspective, things were already positive in the last few months) is, yes, improved monetization, but more importantly AWS optimizations. We had squeezed a lot out of S3, then EC2 and our last step, the one we were working on before shutting down, was RDS where there was a ton of room. Looking at our trajectory, I'm pretty confident we would have been positive even on AWS (but unlikely much). You can even compound that with AWS discounts which apparently even startups can get looking at other comments in this thread. To re-iterate, you would not build a freemium business like Everpix, with intense computing and storage requirements, at scale on AWS. Large photo platforms have their own storage and servers. Everpix was never intended to grow out of AWS either and you know you can cut your infrastructure costs to at least half. That was the plan post Series A. Most CTO / CEOs of large established photo companies I talked to said they were doing much better than this 1/2X, so that's conservative (I've been told ranges of 3-8X in savings vs S3 for instance). Anyway, Everpix was bringing about $6 revenue / user / year IIRC, which is the part that really matters considering the denominator, infrastructure costs, is something you know you can really bring down. One relevant reference point is 500px for instance which is doing about $1 revenue / user / year [1]. I would be surprised if they were growing "sustainably" too ;) [1] http://techcrunch.com/2013/08/07/500px-scores-8-8m-series-a-from-andreessen-horowitz-harrison-metal-to-build-a-photo-marketplace-expand-consumer-reach/ http://techcrunch.com/2013/08/07/500px-scores-8-8m-series-a-....

EricMayo 13y ago

$30K/month and ~100 servers seems like a huge waste. I'm in the business of managing similar services. I handle, not photos, but video streams. My work is for one of the largest companies in the world (Fortune-5) and I deal with things like superbowl traffic spikes, etc... Everything is handled in house but for spiky loads, we look to things like Akami. I realize managing at Fortune-5 is different than 100% oursourcing but the cost constraints, I have to imagine, are very similar. For example, I have to imagine Amazon gets similar price breaks from Cisco as my company - I know Amazon has custom built servers and all so there may be some advantages but at $30K/month, I think any hosting company would happily take 1/2 or 1/4 of that. I'd be curious to know what kind of bandwidth loads you were pushing through AWS and how much of the AWS cloud can be made redundant per client.

JoachimSchipper 13y ago
Note that they were apparently doing very fancy image processing, not just pushing bytes; that does make things more difficult/expensive.
- EricMayo 13y ago
  Yes, I took that into account in mulling things over. We do very similar stuff with video streams (post processing) before pushing to Akami. We also use SAN backed storage and Cisco CSM load balancers. All of our equipment is in the US and we use VMWare for everything. I know little about AWS and their virtualization technology but where I work, it would appear we pay a little bit more of a premium for VPS nodes if I assume Amazon rolls their own - the $30K just seems outrageous in this regard. And to top things off, we don't host just one web site; we have a myraid of applications spanning our data centers to deal with all sorts of stuff (many product lines each with their own web site with streaming, flash, user accounts, etc...)

jot 13y ago

Do startups at a similar stage usually measure things as diligently as Everpix seem to have done? If they kept an eye on of all this on a monthly or weekly basis while they were still running would they have been doing too much or too little? I've worked with some organisations that are reluctant to invest in this level of analysis. Some of them might even now say "It didn't help Everpix to spend time on that stuff."

patio11 13y ago
Commenting because you asked me to on Twitter: Do startups at a similar stage usually measure things as diligently as Everpix seem to have done? Frequently, no. There exist companies with revenue in the $X0 million range who have less numbers floating around the company. You'd be surprised. If they kept an eye on of all this on a monthly or weekly basis while they were still running would they have been doing too much or too little? I'm going to respectfully decline to answer counterfactuals about someone else's business. In general, software businesses have two tasks: Make software. Sell software. Analytics is a very useful thing to have if it lets you accomplish one of those two tasks. There are many software businesses at which it does. There are some at which it does not.

joelthelion 13y ago

What a waste...

bayesianhorse 13y ago

To me it looked like Everpix expected the kind of growth usually seen with free services from a paid-subscription model. On the one hand, paid subscriptions "make more sense economically", on the other hand, as long as we are talking about high risk capital anyway, a free service model might have made more sense "financially".

pixi02139 13y ago

Was your competition a big part in this demise? Pixable does similar things for free....

neil_s 13y ago

This is very interesting, thanks for taking the time to compile it all. What I'm wondering now is whether you plan on open-sourcing the technology built so people can potentially plug it into their own storage providers and take up the cost of storage, or adapt the photo analysis tech. You've built a wonderful base here, will it be put to some use?

FollowSteph3 13y ago

Why is the main focus on Aws costs when in comparison the HR costs are multiple of the Aws costs? Is it because were too technically minded here? Is it cause the charts in the article only showed the Aws costs whereas including the HR costs would have changed that perception. I don't know but i just keep seeing people focus on the Aws cost which was not the real problem in comparison. It makes me think of bad pre-optimizations ;)

pistle 13y ago
Note my other comment. It hints at this. You make the point clearer. The technical costs are not damning. Where is the concern about the other costs, which aren't being picked apart? If AWS was 0, it's still unsustainable growth until someone (swisspol?) dispels our concern there. Another big void is who was pulling the plug and how/what are the founders and direct employees feeling? I'd like to know if there were ship-abandoners, etc. What is the turning point and what were they decision makers watching that caused the shift? This doesn't look like a technical learning here. This looks like a business learning. So, while they're being transparent and it's still fresh :) share. We can A/B test buttons. How do you A/B test business decisions? It looks like a bunch of people can armchair this thing, technically, to the point where it makes me wonder if someone could NOT take on nearly the funding and make the $100M company on this idea with just some bootstrapping. Also... how was there not a pricing model that scaled with use?

inkaudio 13y ago

The elephant in the room that nobody is talking about here is they gave away too much. They could have adjusted their freemium model. Why not contact people using a lot of resources ? Let them know the best way to keep the services up at the current clip is for them to start paying.

MasterScrat 13y ago
That's my feeling t0o. I had been using it for a few months before it shut down and was amazed at the amount I could host for free. I recommended the service to a number of people and would have been willing to pay for it if I needed to. Also I don't get why it disappeared from one day to the next... Couldn't they massively restrict free usage? Or have some form of donation/fund raising à la Reddit Gold? people were attached to the product and it was disappointing to see it just go away /rant

leoplct 13y ago

Now do you still believe in "learning by failure"?

avitalp 13y ago

Thank you for taking the time to organise and post this, very interesting and educational.

hectoroftroy 13y ago

What was the roughly $300,000 in consulting fees for? How do the typically help startups? And did you find them yourselves or were they recommended by the VCs? Is it business/process consulting? Do you feel not having a non-programming founder was beneficial or a hindrance? This is awesome that you guys did this btw. Really eye opening. Thanks.

rl12345 13y ago

In the "About Everpix" part, the text make it seem like the app was doing ok and the reason they had to shut it down was because investors didn't want to invest in it anymore for whatever reason. Well, the lack of investors was surely a big symptom of their failure but the cause it was not. When you burn > $2 million in funding ($200k alone in PR and "Promotional Expenses" as their spreadsheet shows) and still can't get through the timid mark of 50 thousand users, then maybe there is something very wrong with your business model that you should think about. I'm confident that's something that crossed all the investors minds during the series A conversations. They didn't mention that fact directly because it could sound too harsh or rude and they wanted to keep the relationship in good spirits, obviously. The startup game is tuff, no doubt about it. I hope the Everpix guys learn their lesson and to better next time, they look like cool and competent people.

EGreg 13y ago

This is a REALLY useful treasure trove, thanks for posting Looks like the largest expenses were payroll and hosting. I wonder if tbis is the reason they shut down even as the number of subscriptions was rising.

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