Aaqib Gadit is the Co-founder and CEO of Cloudways. Cloudways offers SMBs and digital agencies a simple but powerful managed cloud platform to host their open-source content and ecommerce applications on top of the best of breed infrastructure, so they can focus on their core business while leaving all infra/hosting management hassles to Cloudways.

Aaqib and his co-founder launched the Cloudways platform in 2014 and bootstrapped it to more than $15M ARR while staying cash flow positive.

He is a hands-on leader with strong execution and analytical skills. Aaqib loves technology, open-source and solving complex/abstract problems. His hard work stems from his mindset of staying proactive and evolving through continuous learning/improvement.

Aaqib is also engaged in academia advisory and mentoring/advising startups.

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AMA Transcript

Talk us through the decision to bootstrap. Were you against raising capital? Did you raise a small friends-family round to get off the ground? Are there dynamics unique to the cloud services business that made bootstrapping more possible?

A humble beginning, I and my Co-founders invested in total around 60K$, then over the period of time we personally invested 20K$ more. Tried very half-heartedly a couple of times to go for fund-raising but think we were really enjoying building and the default was to focus on customers and do creative things to fuel the growth than spending months on fundraising. We had to severely cut on extra expenses, our engineering team was in Karachi so we had the economic advantage, no personal salary for ~ 2 years, cutthroat execution, creative ways towards growth and then of course (the most important one) we were lucky as the timing was perfect, a lot of pull, the product was really good. Within 3 years recurring revenue started doing great for us.

Can you enlighten us as to your decision-making process when choosing to make investments in systems and processes as you scale? How did you prioritize? What were the most critical things that needed your investment as you scaled? Can you share a little bit how you structured your Chart of Accounts to produce a set of financials (P&L and Balance Sheet) that speak to both GAAP fundamentals and managing and monitoring the financial health of a scaling SaaS Company?

Thanks, there were two kinds of broad aspects, attracting growth and be able to digest it. We tried to assess which is the biggest constraint, is it missing management/middle management, missing systems/processes or lack of financial muscle to pour more gas for marketing. There were times when we were really customer acquisition focused before we realize that we will blow-up if we don’t fix some foundational stuff and we switched gears. Now, as we have finally placed a 3-year kind of high-level roadmap, we know the constraints and trying to focus there.

Do you consider yourself a SaaS company, or a hosting company? If SaaS do you consider all hosting companies to be SaaS? Are your margins more similar to to a SaaS company or a hosting company? Big picture, I’m curious on how and where we all should draw the lines on what SaaS actually means.

Good question, we are not a pure SaaS play as Support is a deep component of our offering. In this sense, we are a mix of SaaS and service but the service part is not one-off and included in subscription price. Potential investors see us as SaaS, and we are focusing to bring economies of Scale for the service part.

What we essentially offer = Managed Cloud infra + Very simple but powerful DiY “Software” layer to manage multiple aspects of your apps and workflows + 24/7 expert Suppot. Gross margins are not as lucrative as pure SaaS, but they are still > 50%. Our first marketing copy introduced us as “PaaS” (Platform-as-a-Service), and in one sense or other, the outcome of this “PaaS” is your “WordPress as a Service”.

Hey Aaqib, thanks for doing this AMA. If I understand correctly, Cloudways both b2b and b2c, yes? If so, how do you think about straddling both customer bases?

Thanks, expectations, and capabilities get different when dealing with high-end SMBs and Mid-Market (we don’t have many Mid-Market customers though). Our ideal customers are SMBs, we are not a great fit for Enterprises and high-end mid Market.

Our greatest challenge in dealing with b2c and b2b is Support. That’s where you can easily end up doing everything for everyone and therefore end up being mediocre. We have started setting the right expectations for “Great” Support for ALL customers and “Partner” kind of experience for businesses with critical workloads who need much deeper Support.

Hey Aaqib - Thanks for taking the time to do this AMA! Cloudways seems to have a really robust partnership/affiliate system and I was wondering if you could share a bit about how effective thats been for you all. Can you attribute a fair % of your revenue and customers to it?

Thanks, think we still have a long way to go both for reaching more Affiliates (especially who can bring ideal cohorts to us) and better Affiliate systems to manage them. We started focusing on it in 2018 but the channel exists since 2015. More than 30% of MRR comes from Affiliate. Still lot to do.

Many of our good affiliates refer Cloudways because they love it and they promote. In fact the founding affiliates were mostly like those. We really hadn’t have much to offer at that time when comes to hefty commissions. We were giving them a passive income kind of % revenue every month. I can’t thank enough to them for their trust.

Tell us the founding story, journey, and timing. Why get into cloud in 2014?

Thanks, it’s a long story, let me try to summarize quickly. Before Cloudways, I was doing another Product and some freelancing Projects along with my other Co-founder. We used to hunt projects on freelance.com kind of websites to pay bill for the product. One good day, I found a guy from Catalan asking for Project around which our Product was built. We started working, engaged in the Project for 2 years before deciding that we should do something together. We met in Bangkok for the first time in 2 years and boom. Cloudways born! We knew the pain points of server management and cloud was booming at that time.

that was in 2012. Initial offering was completely customized. One customer, One problem, One solution, so service model, soon we realized its not scaling and we have opportunity to automate much part of it make it a product after long search for the right solution, we built our own and launched in 2014 as “Cloudways Platform”.

The first partner was AWS, then we integrated Digital Ocean and were able to piggyback

Since you had no investors, did you build out your own network of third party advisors?

Yes we have a couple of great advisors. Santi Costa from Spain and Ben Kepes from New Zealand. One of my big regret, should have done this much much earlier

Have you considered venture debt as a financing option in the future?

Not yet! :)

What was your biggest challenge in establishing Cloudways in it’s first couple of years?

Thanks. There were many, hard to pick the greatest. Making sure we survive quarter through quarter, acquiring customers, and being very agile with the product, hiring good people are few.

Earlier answer you say you’re not pure SaaS play. Tell us what metrics you care about?

When I say not a pure SaaS, it’s because of two reasons mainly: gross margins, service part.

Key metrics we care about #1) Churn in general and in particular of customers who pay more than 100$ a month 2) NPS 3) LTV 4) Net MRR retention 5) Support KPIs …

Those are all solid metrics to focus on. What specific Support KPIs?

Most important is % of Bad rated interactions across all channels and different customer groups, then average queue time, response time, SLA breaches, Migration KPIs etc.

Thank you everyone for the great questions! I appreciate it. If you have any other, plz ping me on Slack. Happy to be a part of this Awesome SaaS community!