Startups Venture

Want More Runway? Consider Your Infrastructure Costs

Illustration of liquid draining from paper money.

By Alex Flanagan 

As a founder going into a fundraising meeting, the best story you can tell is about growth — ideally exploding user figures with a credible path to revenue or exit.

If you haven’t figured out product-market fit yet, you need more time. Until you figure it out, it’s unlikely you’re going to be able to raise. The first place you should look is the place you have the most control: cash going out the door.

Alex Flanagan, founder and president of Rollup ID

Most companies start by trying to control staff costs. Layoffs are potentially reasonable if you’ve speculatively hired against an expectation of growth that didn’t materialize. This is what we’re seeing from Big Tech. The typical strategy here is to terminate more staff than you think you should, earlier than you think you should.

However, for most tech companies, staff actually represent a stock of intellectual capital and should be treated more like an asset.

You probably don’t want to unnecessarily create a situation where a high-performing team takes a morale hit. Before you find product-market fit, your team is why your business is valuable and you want to keep everyone happy.

So where can we look for other costs to cut?

Infrastructure, a variable cost

If you, like most startups, built in the cloud, every user walking in the front door represents an incremental cost to serve. That means, as odd as it sounds, infrastructure is actually a variable cost.

Moving to your own hardware is a good longer-term approach because it transforms a variable cost to serve into a fixed cost that decreases with volume. But this will likely require behind-the-scenes technical changes that are a bad combination of complex and not user-facing.

This means it’s a costly investment that is unlikely to help with product-market fit in the near term, so let’s strike that as an option.

Where infrastructure is user-facing is usually around SaaS tools that play a role in your customer journey. Take Stripe: We all know when we’re looking at a Stripe checkout page or invoice. Seeing a familiar screen leads to a better, more trusted user experience.

Using Stripe also lets you avoid the cost, complexity and compliance burden of maintaining your own payments infrastructure, while simplifying and standardizing your accounting and back-office reporting. It’s a win-win-win for your customers, your team and your investors.

What other parts of your product stack are like this? Where are you maintaining custom infrastructure that doesn’t relate to the mission of your business, your specific value prop? Notifications, analytics, storage, marketing comms, compliance scans, transactional messages, login?

If you turned off some of these systems would you free up an engineer to focus on your conversion funnel? Would your support team give better customer service? Would your users have a better experience? Where can you stand down internal infrastructure and stand up an off-the-shelf tool to reduce costs, standardize operations, simplify your stack and extend your runway?

What’s possible when you decide to unleash your team and instead take a hard look at your infrastructure?

Alex Flanagan is the founder and president of Rollup ID, where he’s building a plug-and-play distributed auth system that keeps credentials with users. Since the ’90s, Flanagan has developed games for Electronic Arts, provided technical consulting to large financial institutions, architected telecom systems and more. He holds degrees in computer science, accounting and film production and lives in Toronto.

Illustration: Dom Guzman

Stay up to date with recent funding rounds, acquisitions, and more with the Crunchbase Daily.

Copy link