Amid the generative AI boom, companies are spending too much on cloud infrastructure and they're worried about it: According to a 2024 survey by cloud cost monitoring platform CloudZero, less than half of companies consider their cloud costs to be “healthy,” and 58% say they are too expensive.
Many public cloud providers, including AWS, Google Cloud, and Azure, offer savings plans and reserved instances that aim to incentivize enterprise infrastructure investments by offering discounts, but these discounts require signing multi-year contracts that not all customers can afford.
Aran Khanna, a former AI engineer at AWS, realized there might be a way around this problem.
Kana is CEO and co-founder of Archera, a startup that passes on the savings from cloud provider discount plans to customers while shortening contract terms to as little as 30 days. The company does this by “converting” cloud provider discount plans and reserved instances (specifically AWS plans and reserved instances) into short-term, guaranteed contracts and then billing the savings to customers.
“We benefit from clients choosing to use our insurance policies as part of their crowd buying strategy,” Khanna said. “We charge a variable premium per policy based on the risk we are underwriting. This is our secret sauce that we have developed over five years.”
During his time at AWS (and before that at Azure), Khanna struggled to get customers to buy long-term compute instance contracts, and he says he even tried to create a contract waiver program with AWS, but it ultimately didn't work.
So Khanna teamed up with his brother, Nikhil Khanna, who had worked in quantitative pricing at Uber and investment management firm DE Shaw, to start Archera. Alan and Nikhil founded the company in 2019 and spent the first three years developing an automated underwriting model before scaling the business.
Archera provides visualizations and dashboards that show your cloud usage and available discounts. Image credit: Archera
In addition to guaranteed commitments, Archera now offers consulting services to help build purchasing strategies to optimize customers' cloud usage. From the dashboard, companies can customize their commitment plans by including or excluding infrastructure and setting policies that automatically trigger renewals and purchases.
Allan claims Archera's products comply with “all service provider rules and guidelines” and that the company works “closely” with public cloud providers.
“For smaller organizations, Archera may serve as a primary cost optimization tool due to its low investment, high return model,” Aran said. “For larger organizations, Archera often serves as a secondary tool within a broader cloud cost management strategy, improving overall efficiency and savings.”
With about 400 clients, Archera brings in $7 million in annual revenue and expects that figure to more than double this year. Alan said the startup has been “net profitable” since mid-2023 and is now gearing up for a major expansion.
Archera announced on Thursday that it had raised $17 million in a Series B funding round led by High Sage Ventures, with participation from Ridge Ventures, Amplify Partners and PSL Ventures, bringing the company's total funding to $27.5 million. Alan declined to disclose Archera's valuation after the funding but said that its pre-funding valuation was in the “hundreds of millions of dollars.”
Concurrent with the fundraising, Archera secured a $100 million credit facility with reinsurance provider Relm to build new insurance-protected tools.
“The new capital will enable Archera to offer new products in crowd financing and commitment insurance,” said Aran. “These new products require partnerships with lending and reinsurance providers, and to partner effectively, Archera needs to strengthen its balance sheet. Raising capital now will enable Archera to meet these requirements and successfully launch innovative products.”
Alan said Archera will use its new cash and goodwill to build on its offerings that support AWS (including multi-cloud offerings) as well as Azure and Google Cloud, add to its Bellevue, Wash.-based 22 employees and expand its financial reporting services for enterprise clients.
“We're doubling our development organization and announcing the general availability of multi-cloud support this month, starting with the release of Azure cost management and insured commitments,” Aran said. “In addition, we plan to launch insured commitments for Google Cloud later this year, as well as new commitment insurance and financing products that are currently in development.”
Asked about competition in the cloud cost management (also known as FinOps) space, Allan said he thinks Archera is well positioned to beat its rivals. He acknowledged that many companies, including large tech companies, offer tools to help manage cloud costs. But he asserted that nothing beats the cost savings Archera offers.
“Despite the overall technology industry slowdown, Archera is seeing increased interest due to the global drive towards efficiency,” said Aran. “This strategic positioning gives us a strong defensive wall against startups and other competitors in the cloud cost management space and makes us well-equipped to weather potential headwinds.”