4 months ago
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Amid the generative AI boom, companies are spending a lot on cloud infrastructure — and they’re concerned about it. According to a 2024 survey from cloud cost monitoring platform CloudZero, less than half of companies think that they have “healthy” cloud costs, with 58% saying their costs are too high.
A number of public cloud providers, including AWS, Google Cloud and Azure, offer savings plans and reserved instances designed to incentivize companies to spend on infrastructure by passing along discounts. But unlocking these discounts requires committing to multi-year agreements, which not every customer is in financial a position to do.
Aran Khanna was an AI engineer at AWS when he realized that there might be a way around this.
Khanna is the CEO and co-founder of Archera, a startup that passes along savings from cloud providers’ discount plans but cuts the commitment term to as few as 30 days. It does this by “transforming” cloud providers’ savings plans and reserved instances — specifically AWS plans and reserved instances — into short-term, insured commitments and charging customers a fee when they save.
“We make money by customers opting in to use our insured commitments as part of their cloud purchasing strategy,” Khanna said. “We charge a variable premium per commitment based on the risk we are underwriting; this is our secret sauce developed over more than five years.”
While working at AWS (and, prior to that, Azure), Khanna struggled to get customers to buy long-term compute instance commitments. He even tried to get a commitment forgiveness program created at AWS, but it ultimately didn’t go anywhere, he says.
So Khanna teamed up with Nikhil Khanna, his younger brother, who previously worked in quantitative pricing at Uber and the investment management firm D.E. Shaw, to found Archera. Aran and Nikhil started the company in 2019 and spent the first three years developing an automated underwriting model before scaling up the business.
Archera provides visualizations and dashboards to show cloud usage and available discounts.Image Credits: Archera
Today, in addition to insured commitments, Archera provides consulting services to help build purchasing strategies for customers to optimize their cloud usage. From a dashboard, companies can customize commitment plans, including or excluding infrastructure and setting policies to trigger renewals and purchases automatically.
Aran claims that Archera’s offerings 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 the primary cost optimization tool due to its low-investment, high-return model,” Aran said. “In larger organizations, Archera often functions as a secondary tool within the broader cloud cost management strategy, enhancing overall efficiency and savings.”
Archera, which has around 400 customers, is making $7 million in annual revenue and anticipates that number more than doubling this year. The startup has been “net profitable” since mid-2023, according to Aran; and now, it’s gearing up for a major expansion.
Archera on Thursday announced that it raised $17 million in a Series B funding round led by Highsage Ventures with participation from Ridge Ventures, Amplify Partners and PSL Ventures, bringing the company’s total raised to $27.5 million. Aran wouldn’t give Archera’s post-money valuation but said that the startup was valued in the “hundreds of millions” of dollars pre-money.
Coinciding with the fundraising, Archera secured a $100 million credit line with reinsurance provider Relm to build new insurance-backed tooling.
“The new funding will enable Archera to offer additional cloud financing and commitment insurance products,” Aran said. “These upcoming products require partnerships with lending and reinsurance providers, who require Archera to have a stronger balance sheet to engage effectively. Raising funds now ensures that Archera can meet these requirements and launch their innovative products successfully.”
Aran says that Archera will put its new cash and credit toward products that support Azure and Google Cloud in addition to AWS (including multi-cloud products), growing its 22-person Bellevue, Washington-based workforce and expanding its financial reporting services for enterprise clients.
“We’ve grown our development organization twofold, and are announcing the general availability of multi-cloud support this month, starting with the release of cost management and insured commitments for Azure,” Aran said. “Additionally, we plan to launch insured commitments for Google Cloud later this year, along with new, in-the-works commitment insurance and financing products.”
Asked about competition in the cloud cost management space, also known as FinOps, Aran said that he thinks Archera is well-positioned to head off rivals. He acknowledged that a number of firms, including big tech companies, provide tools to help manage cloud costs. But he asserted that they can’t beat the savings Archera delivers.
“Despite the broader slowdown in the tech industry, Archera has experienced increased interest due to the global shift towards efficiency,” Aran said. “This strategic positioning creates a substantial moat against upstarts and other competitors in the cloud cost management space, ensuring that we are well-prepared to weather potential headwinds.”
