Question
Our startup is part of an incubator and we’ve been approached by a cloud provider which offered us a few thousand Euros in free credits if we go with their platform. Should we do it?
Short Answer
No. Choose whatever cloud provider is the most suitable for you on a technical level. Most commonly, that’s not the provider that throws around free credits.
Also: If you are seriously considering choosing your cloud provider based on free credits, your startup may already be screwed, see below.
Long Answer
Some cloud providers offer free credits for startups - the AWS Activate program is probably the most well-known one out there. The terms are quite similar everywhere: Sign up with them, get some ridiculous credits (e.g. 100k$) which must be spent within one year or so.
Should you do it?
Let me rephrase the question. You want to build a house and are looking for a suitable location to build it on. One city offers you a building lot and it’s free for the first year. Not looking any further, you build your house there. In the process, you realize that the building lot sucks because things are constantly breaking and there are earthquakes. Also, after your first free year, you suddenly noticed that the fees after are abhorrently high.
Was that a good decision?
So, the long answer here is that free credits should simply not play any role when you choose your cloud provider. You choose the cloud provider which is best for you, regardless of free credits.
Let’s look at how we did it with our software, Formwork. I’m a big fan of Ruby on Rails and I started out as a one-person developer team. That already made our requirements quite clear: We needed some sort of hosted container engine, Postgres and Redis. Ideally, we wouldn’t have to deal with setting up servers because, well, I was a one-person team.
That left us with Heroku, so that’s where we launched Formwork on. What would the alternatives have been? If we had chosen AWS because of the free credits, that would have meant spending a significant amount of time on figuring out how to set up our application on the AWS cloud (much more work than Heroku!). How much money would we have saved? Formwork gained free users fairly quickly yet we still were running it on 1-2 servers (“dynos” on Heroku), one database and one redis server. Our bill was maybe 50€ per month or so?
So.. how the hell do 100k$ cloud credits for one year help you if your cloud bill is only 50€ per month?
We later moved from Heroku to Scalingo because we were looking for a company in the EU for GDPR privacy; also, Heroku became a little bit more evil after having been acquired by Salesforce. Formwork is serving more than a thousand companies now and our cloud bill is, what, 100€ per month or so?
What’s the moral of the story here? Two things:
- Select your cloud provider based on technical considerations.
- Your cloud spend will be so low that free credits don’t make any difference anyway.
Now, if you think that #2 doesn’t apply to you because your cloud spend is going to be higher, I’d like to cautiously suggest that you are screwed because you’re either over-engineering your tech stack, or your startup is so cloud-expense-heavy that it’ll hardly become profitable.
If you were over-engineering: Why the hell are you planning to spend so much on cloud computing for simple medical software? Most medical app backends can run on a virtual server for 5$ / month. You don’t need a fancy Kubernetes host, horizontal scalability, cross-region failovers, etc., etc. Just deploy your damn backend.
If your startup is cloud-expense-heavy: Why the hell is your startup cloud-expense-heavy? You’ll have a terrible time becoming profitable. Consider: If you plan to spend 100k$ / year on cloud costs, you’ll have bring in a ton of revenue for that.
So, there you have it - don’t choose your cloud provider based on free credits.