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.<p>Now the provider is either looking at generating $240,000 for the next 12 months <i>or losing everything</i> 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.<p>EDIT: Oh and fantastic that they shared.
What a <i>hugely</i> useful thing for you guys to do. Thank you, truly.<p>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.
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).<p>In Everpix's case, it appears they were growing unsustainably.<p>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!<p>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.<p>So growth in their userbase was actually increasing their total burn rate, which makes growth unsustainable.<p>You can see the spreadsheet analysis here:
<a href="https://docs.google.com/spreadsheet/ccc?key=0Ap7fmpANG_0QdHVUbGdudnhCaFdVSlVnOEJpUXBVUVE&usp=sharing" rel="nofollow">https://docs.google.com/spreadsheet/ccc?key=0Ap7fmpANG_0QdHV...</a><p>[1] <a href="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" rel="nofollow">https://github.com/everpix/Everpix-Intelligence/blob/master/...</a>
[2] <a href="https://github.com/everpix/Everpix-Intelligence/blob/master/Internal%20Metrics/System%20AWS%20Costs%20(Monthly%20Spending).csv" rel="nofollow">https://github.com/everpix/Everpix-Intelligence/blob/master/...</a>
Amazing. This one piece is simply eye opening -<p><a href="https://github.com/everpix/Everpix-Intelligence/blob/master/Financials.md" rel="nofollow">https://github.com/everpix/Everpix-Intelligence/blob/master/...</a><p>And here it is - the side effects of the talent war in full effect:<p>HR - $1,374,695.06 - or 52% of total costs<p>And the real winners of the whole thing (the pick axe industry):<p>AWS - $394,588.35 - or 14% of total costs
Everpix designer/cofounder here.<p>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. :-)
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.<p>Just one of the many important costs of a freemium business model.<p>[1] <a href="https://github.com/everpix/Everpix-Intelligence/blob/master/Internal%20Metrics/System%20AWS%20Costs%20(Average%20Cost%20Per%20User).csv" rel="nofollow">https://github.com/everpix/Everpix-Intelligence/blob/master/...</a>
So helpful. Thanks for all this.<p>6800 subscribers. 2,665,192.34 in expenses.
50000 users.<p>$395 per subscriber per year. $35/mo.<p>Convert 10% more of users.... 5000 and it's still $20/mo.<p>Was this really $5/mo or $40/yr?<p>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.<p>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?
Fantastic.<p>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.<p>I have 3 Questions for the founders, if possible:<p>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?<p>The consultants cost of $272k seems very high - what sort of consultants was this spent on?<p>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?
Amazing. Kudos for all the transparency around your shutdown. I'm still reading through all of this.<p>I'm founder @ Trovebox and recently posted this which anyone doing a subscription consumer photo service should read.<p>"Hello 2014, Goodbye Consumer Photo Service" - <a href="https://medium.com/p/b1234eaf75b" rel="nofollow">https://medium.com/p/b1234eaf75b</a>
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.
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.<p>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.
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.<p>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.
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.<p>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.
$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.<p>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.<p>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.
Hey Guys,
Thanks for posting this.<p>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.
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.
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.
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.<p>Well, the lack of investors was surely a big symptom of their failure but the cause it was not.<p>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.<p>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.<p>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.
Awesome, thanks for sharing.<p>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?
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.<p>It makes me think of bad pre-optimizations ;)
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.
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?<p>(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: <a href="http://www.screencast.com/t/5mW9bm4Ueq" rel="nofollow">http://www.screencast.com/t/5mW9bm4Ueq</a>)<p>Best wishes for your next gig!
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?
I just read all their pitch decks and they never mentioned exactly <i>how</i> Everpix was - or could be - better than Dropbox, which IMO would be the first obvious competitor.<p>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.<p>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.
Do startups at a similar stage usually measure things as diligently as Everpix seem to have done?<p>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?<p>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."
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.
This is very interesting, thanks for taking the time to compile it all.<p>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?
To me it looked like Everpix expected the kind of growth usually seen with free services from a paid-subscription model.<p>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".
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.
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.
This is a REALLY useful treasure trove, thanks for posting<p>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.
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?<p>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?<p>I wonder if they were simply bootstrapped and grew as a small business focusing on net profit, would they have made a better decision.