Cloud Free Tiers for Startups: A Gift or a Trap?
When launching a startup, free cloud credits from AWS, Google Cloud, or Azure seem like a dream come true. They promise to cover infrastructure costs for the first year or two, allowing startups to focus on building their product instead of worrying about cloud expenses. However, what many founders fail to realize is that these credits often come with hidden costs that can create significant challenges down the road.
The Appeal of Free Cloud Credits
Cloud providers offer startups thousands of dollars in free credits—AWS Activate, Google Cloud for Startups, and Microsoft’s Founders Hub all provide substantial incentives. On the surface, this seems like an obvious choice: why pay for infrastructure when you can get it for free? These programs allow startups to experiment, scale quickly, and access enterprise-grade cloud services without upfront costs.
The Hidden Pitfalls
While cloud credits help in the short term, they often create long-term dependencies that become costly once the credits run out. Here’s why:
1. “Free” Tiers Aren’t Really Free
Many cloud providers advertise free tiers, but they come with severe limitations. For example, while AWS offers a free EC2 instance, it’s often underpowered for real workloads. Managed Kubernetes and managed databases are rarely included in free tiers, meaning startups still need to pay for critical infrastructure components.
- Managed Kubernetes: AWS EKS costs $72 per month per cluster just for the control plane. Google Kubernetes Engine (GKE) charges $74 per month per cluster, while Azure Kubernetes Service (AKS) offers a free control plane but still requires paid worker nodes.
- Managed Databases: AWS RDS for PostgreSQL starts at around $30–50 per month for minimal configurations, but production-ready setups with high availability can quickly exceed $300–500 per month.
Even when included, quotas are so restrictive that they don’t support real-world applications. As soon as usage exceeds the limits, startups are forced to pay, often without realizing the cost impact beforehand.
2. Locked into Proprietary Tech
Startups build their infrastructure around proprietary services from AWS, Google Cloud, or Azure, making it difficult to switch later. By the time credits are exhausted, companies are deeply integrated into the ecosystem, and moving workloads to more cost-effective solutions becomes nearly impossible without significant effort and downtime.
3. Unexpected Cost Spikes
Credits mask the true cost of cloud infrastructure. Many startups scale aggressively without realizing how much they will eventually pay. Once credits expire, companies are hit with massive bills they can’t afford, forcing them to cut costs, optimize inefficient workloads, or even seek additional funding just to cover cloud expenses.
4. Over-Provisioning
With free credits, startups tend to overprovision resources, leading to inefficient spending habits. Teams don’t optimize workloads or look for cost-effective solutions because they don’t feel the financial impact—until it’s too late.
5. Vendor Lock-in Challenges
Cloud providers push startups toward managed services like AWS Lambda, Google’s BigQuery, or Azure’s Cosmos DB. While these services are convenient, they are highly proprietary. Migrating away from them later can require costly rewrites, making startups more dependent on a single cloud provider.
6. The Multi-Provider Credit Hopping Trap
To extend their free usage, some startups try to “credit hop” between cloud providers—starting with AWS credits, then moving to Google Cloud, then Azure, and so on. While this seems like a clever way to maximize free infrastructure, it comes with its own set of problems. Each provider has different configurations, networking models, and managed services, making migration complex and time-consuming. Instead of focusing on product development, startups spend months reconfiguring infrastructure for each new cloud environment. The result? Wasted time, increased complexity, and higher long-term costs.
A More Sustainable Approach
Instead of relying on cloud credits and risking vendor lock-in, startups should consider a more independent and cost-efficient cloud strategy:
1. Choose Open-Source Technologies
Avoid cloud-specific managed services that create lock-in. Unmodified versions of Kubernetes, PostgreSQL, and other open-source provide flexibility to migrate workloads as needed.
2. Use Cost-Efficient Cloud Providers
Rather than defaulting to AWS, Azurfe or GCP, startups can leverage more affordable cloud providers like Hetzner, DigitalOcean, OVH, or other alternatives that provide lower pricing without sacrificing performance. Of course, compared with the TOP-3 clouds, they have limitations. But do you really need all of this shiny hyperscaler’s stuff for your MVP?
3. Plan for Long-Term Cost Optimization
From day one, startups should build infrastructure with cost efficiency in mind. Using tools like automated cost monitoring and right-sizing workloads can prevent sudden cost spikes once credits run out.
4. Consider Multi-Cloud or Hybrid Strategies
By designing infrastructure that can run across multiple cloud providers or even on-premise, startups gain flexibility and reduce dependency on any single vendor. Instead of struggling with manual migrations, using a platform that simplifies multi-cloud portability can save time and effort.
5. Leverage Neterial to Simplify Credit Hopping
While we were writing this post, an idea came to mind… If your startup is looking to maximize free cloud credits by switching between providers, Neterial can help. Our platform already allows you to move workloads created with Neterial from AWS to Hetzner with minimal effort. Soon, we’ll add support for Google Cloud and Azure. Instead of rebuilding your cloud setup from scratch each time, we can migrate your dev infrastructure and help you maximize free cloud credits.
Conclusion: Think Beyond the Free Credits
While cloud credits seem like a great deal, they can create long-term financial and technical burdens. Startups should take a strategic approach to infrastructure from the beginning, ensuring they don’t become trapped in an expensive ecosystem once the credits expire.
Instead of falling into the cloud credit trap or wasting time on complex migrations, take control of your infrastructure from the start. We help startups build cost-efficient, portable cloud infrastructure that doesn’t tie them to a single vendor. Your future self – and your budget – will thank you.
