Many Cloud startups have built their business models assuming that the cost of acquiring a customer can be recouped in a reasonable amount of time through recurring revenue. These calculations based on Customer Acquisition Costs (CAC) and Long Term Value of the customers (LTV) have omitted a major factor in running a recurring revenue business – Customer Management Costs (CMC). As a result, a lot of the Cloud Startups are overvalued because investors incorrectly assume there will be little or no marginal cost to maintain recurring revenue from existing customers.