Selling on Cloud Marketplaces, Explained
I recently switched jobs. I worked at Clazar, a Series A Cloud Sales platform, where I led Implementation and Support. I was there for 2+ years and set up the team, tools, processes and got the team up and running. This was my second foray into the world of startups, and it was different from my first stint at Chargebee.
The market, briefly Clazar is in a market that is still forming. There are companies that have figured out how to sell on cloud marketplaces (AWS, Azure, GCP) and are making billions of dollars, while a long tail of companies are sceptical of the channel. Clazar sells to companies that have figured out the motion or are planning to invest in their cloud marketplace journey.
So what exactly is a cloud marketplace? Think of your go-to shopping app, Amazon, but for software built and sold on the cloud. The promise is that companies can buy, run, and pay for their software through a single consolidated bill that AWS sends them every month.
Hyperscalers (massive cloud service providers that operate global data centres), the three giants I referenced above, want to make the cloud marketplace motion work. They are investing heavily in incentivising companies to list and sell on the marketplace. The cash performance incentives are big, and they partner with companies like Clazar to drive results.
The money engine: cloud commit These hyperscalers created a thing called “cloud commit”. If you are a large company that uses AWS for all your infrastructure, you are paying Amazon millions of dollars. AWS then tells you that if you commit to spending X dollars on the marketplace to buy products, it will give you a good % discount. These companies negotiate heavily and get their AWS bills reduced. Now they have this commit that needs to be spent; otherwise, the discounts won’t show up at renewals. Similar to the Amazon Pay wallet balance you have, which you need to spend before the money expires.
The ecosystem believes that this cloud commit is a huge reason why a startup should list itself on the marketplace. Imagine the who’s who of the tech world at a fair, with their commits overflowing, looking for products to purchase. It would be a disaster if you don’t offer your product at the fair. Like in any ecosystem, the belief is exaggerated, but the thought does have some merit. Another belief that supports the argument is that developers look for marketplace directories and prefer to buy software directly from AWS for a trial. I’ve seen this in practice, and it does work, but I am not sure what % of sales can be attributed to this self-serve motion. I would guess it happens less because AWS has been promoting “Buy with AWS” fervently in the last few years.
A seller, in addition to gaining access to cloud commit, can improve their receivables, outsource the tax headache, and increase confidence in getting paid through a hyperscaler guarantee. I’ve seen how AWS hounds the buyer into paying the bill by threatening to cut off infra access. It works every single time. All this comes with a 3% transaction fee, which decreases as the contract value increases.
Who should list, who shouldn’t If you ask me, it’s a no-brainer to have a motion with these hyperscalers, as long as you are selling a product that fits well within the cloud ecosystem. If you are selling musical instruments or insurance, it is best to avoid these marketplaces. If you have any product that is used by a developer at a company, you should list it on the marketplace. One other reason you should be on a marketplace: that is where most buyers are. Buyers with deep pockets and, more importantly, a cloud-specific wallet that they are incentivised to spend, failing which they will not get heavy discounts.
How a small team actually runs it Companies tend to hire someone to lead partnerships, and then that person hires a few more people to run the motion. The whole premise of companies like Clazar is that you don’t need large teams to run the cloud marketplaces. You can purchase Clazar, set up and automate workflows, and remain the human in the loop, handling responsibilities such as developing a partnership with AWS. This is largely true, and I’ve seen companies of different sizes do this. Once the initial setup is done with the help of RevOps and Engineering, the Partnership team can go solo and achieve the results.
Hyperscalers do help you navigate the landscape, but you need to be someone who can generate significant revenue for them. However, there is a small group of consultants who can also get you up and running in a few months and help formulate the strategy. I would actually recommend hiring a consultant for 3-6 months, see if the channel fits, try for 6 more months and then double down or exit altogether.
Here's what I’ve seen I’ve seen an AI company go from $0 to $10M+ in less than six months after launching on three marketplaces simultaneously. I’ve seen developers sign up for a product when the listing was made live only for testing. I’ve also seen companies get thousands of trial signups within days of listing.
On the other end of the spectrum, if your company does not have a “better together” story with hyperscalers and has not invested properly in the partnership, you will not see impressive results, even after years in the marketplace. One mistake I see most companies make is listing on a marketplace and expecting leads and buyers to show up unannounced. That is never going to happen unless you are OpenAI or Anthropic. There is work that needs to be done.
The person who runs all this (and why they keep getting fired) The customer persona Clazar sells to is Partnership. I’ve seen this role be the least understood in product companies and face the not-so-unique problem of the highest attrition.
Usually, a form of this happens at companies:
Founders realise the cloud partnership channel is key to growth; they want someone who has been there, done that, to come and set up the channels and expect to see ROI in a year or two. Every partnership exec worth her salt knows that partnership, among other things, is a long game, and that to see early signs of ROI, you need 3+ years. Founders do not have that kind of patience, and hence, when they review the performance of the partnerships team at the end of year 1 or 2, they do not see clear value. They assume this role can be someone’s additional responsibility and let go of the exec.
For example, you are a new AI startup on the block and want to co-sell to AWS customers and see a good fit for going to market with AWS. To make this work, there is a lot of pre-work you need to do both technically and in forming the partnership. It is a maze, and without a blueprint, it is hard to succeed. Hence, companies like Clazar, Suger, Labra, Saasify, and Tackle exist.
If you are a product company with a product that touches developers, infra, and the like, you should have a motion for cloud marketplaces. I think we are past the point where it is safe to ignore the channel.