jon cooper

What's happening in the sub-scale neocloud world is concerning I'm seeing a lot of startups who raised money from VCs basically pivot into being neoclouds; the issue with that among many other things which I'll highlight in a minute is that neoclouds are not a natural fit for VC money. There is no 100x on the end of the magic rainbow for small cloud teams, at best they'll grow quickly but it's still a business limited by physics to a large extent and even the best teams will not scale valuations like true venture companies (not even close) They're pivoting into the neocloud space because it requires capital (which they have from their investors) and it seems like a good business (rental rates keep going up), and maybe their original business plan isn't finding crazy traction A lot of these teams doing this however are not equipped to handle the execution required to actually bring capacity online when it was promised to off-takers It's "idea guy" meets the real world, and "idea guy" vs "local electrician" is not exactly a great matchup for ideaguy I see a lot of small teams "becoming a cloud" because it sounds good, but they're not close to being ready to really invest everything to ensure the RFS (ready for service) date they committed to their off-takers will be met by any means necessary. As a result I suspect there will be many lawsuits which actually will lead to the "Guppy Level Death" that Elon spoke about last week For off-takers, it's a dangerous environment at the moment - a lot of bad supply in the market, and "providers" who are inevitably going to let them down. Same for lenders. I suspect the financing constraints will continue to tighten on smaller providers unless they're able to put the puzzle together in a way that sufficiently de-risks the counterparties involved (not so simple). Something we're very focused on at @computeexchange To sum it up - Elon is probably right in that Guppy Level Death is on the horizon for many of the current sub-scale providers in the market. and what will force their demise imo will likely be lawsuits based on missed RFS dates and other forms of recourse. There will always be demand to work with smaller providers because 1. they can facilitate an RFS date that can actually support your business, and 2. they are more flexible on price than the big boys (which really matters) So the long tail of providers will ultimately still be there, it's just a question of who in this batch is going to survive. My guess is not a ton, because execution despite what people say, is still not a commodity at least when it comes to physical processes (like bringing a cluster online). Many aren't up to the challenge, but those who are are worth their weight in gold to off-takers and lenders alike