Nov 21, 2018 · 20m · top-founders
1215 Cloudability CEO: We're Past $20m in ARR, 11% of Total AWS Spend
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of The Top Entrepreneurs Podcast, host Nathan Latka interviews Cloudability CEO Matt Ellis to discuss how the company scaled past $20 million in ARR by optimizing over 11% of global AWS cloud spending.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 46% of the talking time here. How this is scored →
Nathan as informed peer 5.9 Guest teaching 4.4 Guest disagreement 2.3 Nathan pushing back 3.9
speaking balance: gold is Nathan, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 17:30 Matt bluntly refuses to disclose CAC
Matt firmly rejects Nathan's inquiry into customer acquisition cost, stating plainly that he will not disclose that figure publicly.
Hardest push from Nathan ▶ 6:46 Nathan refuses deflection on customer metricsNathan refuses to accept high-level AWS percentages and repeatedly presses Matt to share concrete customer numbers and specific direct competitors.
Biggest teaching moment ▶ 6:18 Matt breaks down cloud spend throughput mathMatt corrects Nathan's understanding of their scale by calculating how 11% of Amazon's quarterly revenue translates into half a billion dollars of managed spend.
Nathan holds their own ▶ 13:39 Nathan details debt provider terms and MRR leverageNathan displays authoritative industry knowledge by detailing standard venture debt multiples (4-6x MRR) and explaining how mezzanine debt layers on top to avoid dilution.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Nathan as informed peer | Guest teaching | Guest disagreement | Nathan pushing back | Why |
|---|---|---|---|---|---|---|
| Introducing Matt Ellis, Founder and CEO of Cloudability | 6 | 4 | 2 | 4 | Nathan probes into the nuances of Cloudability's pricing model, accurately deducing enterprise ACV ranges between $100k and $250k. Matt clarifies how their pricing transitions from percentage-of-spend reporting to modular software fees during optimization. | |
| Origin Story: From Medical Crisis to Cloud Automation | 4 | 5 | 1 | 1 | Matt recounts founding the company after emergency surgery and automated billing emails that broke during a vacation to Iceland. He reframes cloud cost management as an ERP supply chain challenge, which Nathan validates. | |
| Market Scale and Competitive Differentiation | 6 | 6 | 4 | 6 | Matt shares market share metrics based on AWS spend but deflects exact customer counts due to market competition. Nathan presses him on customer counts and competitors, prompting Matt to distinguish his data science approach from DevOps-oriented competitors. | |
| Retention Rates, Scaling Challenges, and Customer Churn | 5 | 4 | 2 | 3 | Nathan inquires whether customer retention is legally locked in or indicative of multi-year LTV cohorts. Matt candidly admits historical churn caused by infrastructure scaling issues during rapid data growth. | |
| Revenue Expansion Dynamics and Annual Growth | 8 | 4 | 2 | 4 | Nathan demonstrates significant financial expertise when Matt brings up non-equity funding, articulating how venture debt lenders like SaaS Capital or SVB provide 4-6x MRR leverage layered beneath mezzanine rounds. | |
| Scale Trajectory to $50M+ ARR and Long-Term IPO Vision | 6 | 5 | 2 | 4 | Matt outlines an aggressive path past $50M ARR towards an eventual IPO and roll-up strategy. Nathan challenges how Cloudability maintains platform neutrality when recommending public cloud providers without inherent bias. | |
| Customer Acquisition Payback and Team Distribution | 6 | 3 | 3 | 5 | When Matt declines to reveal absolute CAC, Nathan smoothly shifts to payback period and mathematically infers acquisition costs from earlier ACV data before closing with the Famous Five. |
Statements from this episode (19)
Cloudability typically reduces customer cloud bills by 20% to 30%
“We're actually reducing your bill typically by 20 to 30% a year on a unit cost.”
Cloudability's cloud bill stayed flat while the business grew 11x
“Our bill personally at cloudability in February was the same as it was in April, 2015, for a business of 11 times bigger.”
Cloudability reports typical annual contract values between $100,000 and $250,000
“Typically it's a hundred to 250 grand ACPs.”
Ellis: Cloud IT is a supply chain problem, not a maintenance problem
“The way you made technology work before was you had smart people to make it just work. That Ubuntu server wasn't going to stay working unless it's someone to keep it working. Now you buy it from Google for eight cents an hour. Now the problem is not making it …”
Cloudability processes 11% of total AWS revenue
“We have 11% of Amazon's revenue going through our system, and a fairly large amount of the other two big clouds going through our system.”
Cloudability serves fewer than 1,000 enterprise customers
“With some of those companies like Axio, we have, you know, under a thousand customers.”
Cloudability's first three customers from 2012 remain active in 2018
“And the first three customers who signed with us in 2012 are still customers with us today.”
Cloudability grew revenue 40x while its dataset expanded ten million-fold
“Well, we went through a period, we grew the business 40 times in revenue early on, and we grew the revenue the data set size ten million fold.”
Cloudability revenue growth is split evenly between expansion and new logos
“It's about fifty-fifty right now.”
Cloudability doubles or more than doubles its revenue year over year
“We are doubling or more than doubling every year.”
Ellis: Mezzanine debt adds leverage and reduces dilution ahead of next round
“There's a leverage limit to what the venture debt people will give you, and then you can generally get more debt from a mezzanine provider, and you'll pay a higher, much higher rate of interest, maybe three or four times what you pay on the venture debt, but y…”
Cloudability predicts exceeding $50 million in ARR by end of 2019
“We'll be double, double, double. So sometime I think by the end of next year we'll be over 50.”
Startups serving everyone early on will lose in every vertical
“But if you're trying to do all things to all people today, you're going to lose in every vertical. You've got to win in one vertical and then combine the winning vertical, the winning solutions. And that happens when the industry matures.”
Cloudability plans to IPO by 2023 to become a consolidation platform
“So sometime in the next five years or mature, we will probably be an IPO. We can use our currency to combine or join a combined entity and go out there and just become something akin to a new version of Cisco or SAP.”