Cost-management startup CloudZero raises $32M

Innovius Capital and Threshold Ventures led CloudZero’s $32 million Series B funding round.

CEO Erik Peterson says the tranche will expand CloudZero’s platform and scale its go-to-market efforts, focusing on savings insights and self-service analytics.

“The pandemic accelerated digital transformation for many companies, which increased software development and spend in the public cloud, while the broader tech slowdown increased the focus on profitability and unit economics and drove a shift away from innovation at all costs,” Peterson told in an email. CloudZero has benefited from both trends, and with this recent fundraising, we are positioned to accelerate our growth as demand for our platform is at an all-time high.”

Peterson co-founded CloudZero with Matt Manger nearly ten years ago after discovering an “intrinsic” link between efficient architecture and cost-effective cloud solutions. Peterson believes that every cloud engineering decision is a buying decision, but the cost discussion often bypasses engineers.

CloudZero gives engineering teams cost data and business- and system-level telemetry in a single dashboard to address this. CloudZero uses cloud billing data to answer questions about product and feature prices.

CloudZero’s AI algorithm alerts engineers of “abnormal” cloud spend events using hourly cloud spend data. The platform normalizes cloud, platform, and software-as-a-service spending.

“Cloud adoption is now widespread across sectors, but digital businesses struggle with a lack of visibility, control, and optimization of their cloud costs, which impacts their ability to manage cloud spending,” Peterson said. “With up-to-the-minute monitoring, our platform identifies cost drivers and anomalies instantly, enabling engineers to proactively address cost spikes or inefficiencies and avoid cloud waste.”

CloudZero’s “instant” and “up-to-the-minute” platform is debatable. Cost-effective cloud solutions are needed.

55% of cloud buyers surveyed by IDC say inflationary pressures have hurt their ROI. In fact, those organizations say the cloud now accounts for 32% of their IT budgets, and 25% are looking internally for cloud cost reductions.

Given the massive FinOps market, CloudZero isn’t alone in cloud cost optimization. ProsperOps, which optimizes cloud resources to save money, raised $72 million in February. VMware, Apptio, Xonai, Vantage, Cast AI, and Zesty are also players.

CloudZero has more than 100 customers. Since 2021, Peterson said revenue has increased 10 times.