Why startups are early adopters of cloud software

What factors do product teams consider when making decisions about building or buying software?

I have found it to be some combination of the following. How can they launch the product and get to market quickly (time-to-market)? How can they stretch the dollar and do more within a budget constraint (reduce cost)? How can their product be reliable scalable robust and high quality from the word go (best-in-breed)? How can they focus on their core business and not worry about the rest (focus)?

Due to the low odds of winning and the fight for relevance startups look to score five out of five stars on each of these. They want the fastest time-to-market at the least possible cost to get the best-in-breed solution so they can completely focus on their business. It is perhaps for this reason that startups end up being the earliest adopters for cloud software-as-a-service (SaaS) products.

My new startup HyperTrack is half a year old and about to do its first public Beta release. When I look at my credit card bills we already pay to use Amazon Web Services, Github, Google Apps for Work, Heroku, Launchkit, Quickbooks, Readme.io, Sentry, Sketch, Stripe, Twilio, WordPress and Zeplin. Besides we use free versions of Codeship, Coveralls, Fabric, Google Analytics, Maven, Medium, New Relic, NPM, PyPI, Slack, Travis and Trello. This list does not include open source software which probably includes over a hundred (you read that right!) software libraries.

My previous startup Chalo (now Pay with OpenTable) built a mobile payments app for restaurants. Our engineering lead Tapan Pandita (now my co-founder at HyperTrack) picked Stripe as our payments rails. Even today we proudly brag about our patented payments technology that helps restaurants collect payments from diners. It is a beautiful integration between the restaurant’s point-of-sale system where the waiter opens and closes out the order and the consumer app where the diner views and pays the check complete with tips and taxes. The core offering and product value proposition is restaurants collecting payments from diners in a better way. Yet it uses a developer-focused third-party payments system to deliver this product experience to diners and restaurants.

After Chalo was acquired by restaurant reservations leader OpenTable in San Francisco instead of migrating to their payments system of choice or the dozens of other banks that lined our conference rooms to pitch exclusive deals we found ourselves continuing to use Stripe. Other new product initiatives at OpenTable found themselves using Stripe instead of the previous payments system. At every point in time we felt like we could switch out when we wanted. Yet at every point in time it was the fastest cheapest and best way for us to deliver our core product to the market.

My new company HyperTrack is building location tracking-as-a-service for businesses worldwide who want to monitor their operations and power a great customer experience. We think of ourselves as the Stripe for tracking. In the five months that we have been in private Beta we have received access requests from two types of companies (1) traditional enterprises with fleets and (2) startups doing pickups and deliveries. The contrast between the expectations of the two types of companies is quite telling. Enterprises expect vendors to participate in their buying process offer customization services and go through contract negotiations. Startups by contrast want to do things themselves control the product experience move fast and get the job done.

Traditional enterprises from retail logistics consumer services public utilities personnel services shipping and transportation have reached out for access. These are large and profitable public companies with tracking as an identified pain point that is critical for them to solve. Startups in the space of food & grocery delivery on-demand logistics ecommerce logistics on-demand services ride sharing and inter-city transport have reached out for access. Some of these include well funded startups growing at a fast pace to become market leaders in their respective geographies. Yet the quickest to integrate and deploy are not the companies with the biggest pain biggest budgets fewest developers and poorest technology infrastructure. The quickest to integrate and deploy are startups.

The early adopters are not the ones who stand to get the most value. The early adopters are the ones who want to optimize at once on all fronts – time-to-market reduce cost best-in-breed and focus.

Originally published in Inc42 on Jun 27 2016

This article is written in the spirit of open sourcing early learnings with other SaaS startup teams who might care. If you have benefited from this post please return the favor by open-sourcing your learnings with the community.