Powerset Taps Amazon's EC2
Amazon Elastic Compute Cloud (Amazon EC2) is a web service that provides resizable compute capacity in the cloud. It is designed to make web-scale computing easier for developers. Pay only for what you use.
How EC2 Helps Powerset Compete with Large Scale Search Providers
For Powerset, EC2 represents the opportunity to create a large scale search infrastructure without paying the upfront capital costs. The advantages for Powerset are the following:
- Grow to large scale quickly
- Focus on our core business (Natural Language and AI)
- Replace huge upfront fixed costs with controllable variable costs
- Increases our optionality
Until now, startups trying to compete with Google had a fundamental challenge - its really expensive to build out the datacenter to have a complete index and be able to serve millions of users.
Until now the landscape of options were very limited:
Why these options limit Search Startups ...more
Using Equity Financing
Using equity financing is bad for a number of reasons. It dilutes the ownership of the founders and employees of the company. It reduces the capital you can spend on your core business. But perhaps most importantly, it reduces optionality.
Using Debt Financing
Using debt financing increases the load in future years for debt financing and decreases capital spend optionality. Imagine debt financing millions of dollars in datacenter charges and then having to service the debt beginning within one year. Typically that puts startups in debt servicing mode right around Series B financing. Now imagine raising Series B with investors knowing that a large % of their money is going toward past expenditures. While this won't necessarily stop a financing event, it may make it more difficult or more time consuming (which time is always the most costly factor for startups)
Imagine going into year 2 of your company with 30% of your monthly burn being dedicated to servicing debt. That's like having a huge credit card payment every month that prevents you from having the flexibility of doing what you like best.
Building a Smaller Datacenter
Building a smaller data center will either impact the size of the index or the capabilities of run-time and both of these areas effect product quality. This one is the worst option of all, but is also, the one that most search startups are forced to choose.
So What is Powerset Doing with EC2?
That's where we have to draw the line. I wish I could tell you, but we do have stay secretive at some level.
Look for more declassified Powerset stories to come...