Function as a Service (FaaS) Financial Model Template

Function-as-a-Service (FaaS) means saving money by eliminating over-provision of resources. This business model stands out in cloud computing for its efficiency, surpassing Infrastructure as a Service (IaaS) and Platform as a Service (PaaS). It offers scalable solutions ideal for growing customer needs. FaaS focuses on function execution, allowing developers to concentrate on coding without managing code execution / scaling problems. This template aligns with industry standards, offering a streamlined financial forecasting environment with clear business logic and unit economics. Prospective cloud service providers now have a way to test various pricing / capacity / capex strategies and see what is financially feasible.

$75.00 USD

After purchase, the template will be immediately available to download. A lite version and full version are included. The lite version has a single customer cohort. This is also included in the SaaS financial models bundle.


Template Features:

  • Forecast up to 6 years of activity
  • Configure up to 6 customer types with up to 6 retention patters / contract lengths.
  • Account for capital expenditures, compute pricing, customer activity, retention, and more.
  • Price based on a flat rate subscription and/or pay per use based on requests per customer / seconds a function takes to complete, and GB-second pricing.
  • Option for free tier where customers get their first 'x' amount of requests filled for free and  first 'x' amount of GB-seconds used for free.
  • Dynamic curves for customer function usage over their tenure (to account for customers that use more capacity over time).
  • Includes configuration options for data transmitted per request and pricing / costs.
  • A wide range of variable costs that can be defined on a per customer per month basis and a per request basis.
  • Outputs a 3-statement model (Income Statement, Balance Sheet, and Cash Flow Statement with monthly and annual views)
  • Includes KPIs like customer lifetime value, churn rate, LTV to CaC Ratio, CaC, and average revenue / gross profit per user.
  • Includes IRR, DCF Analysis, Equity Multiple, and options for outside investor financing.

I'm captivated by the logic that underpins this financial model. It shares similarities with the Data-as-a-Service and subscription box models, particularly in terms of new customer acquisition configuration and their duration of engagement. However, what sets it apart is my approach to correlating the customer base's longevity with their ongoing activity (function usage).

With FaaS, the business model is selling computation (function execution) and charging customers based on their usage. This means modeling things like function usage per customer (and how that changes over the life of a customer), how long the average function takes to execute, and the amount of GBs a given customer uses. The GB usage is a primary billing method which is denominated in the unit per seconds. For this model I did the billing based on cost per GB-seconds used and that is simply the total runtime of function activity x GB used (a customer may use 1.5GB or 5GB or what have you and pricing should vary based on the level of power.

Function as a Service takes data storage out of the equation and just focuses on providing users (mainly developers) with a scalable and efficient way to run their code. Functions may or may not transmit data into/out of the system and that can be configured and priced out for potential revenue. This also comes with a cost (bandwidth).

General Overview of How Function as a Service Works

Function-as-a-Service (FaaS) is a cloud computing service that allows developers to execute code in response to events without the complexity of building and maintaining the infrastructure typically associated with such processes. Here's a general overview of how FaaS works:

  • Event-Driven Execution: FaaS is primarily event-driven. Events can range from HTTP requests to file uploads in a storage service, to triggers from other cloud services. When an event occurs, it activates a specific function.
  • Stateless Functions: The functions in FaaS are stateless. Each function call is treated as an independent event, and the system does not retain any state between function executions. This statelessness simplifies scaling and deployment.
  • Code Execution in Containers: When a function is triggered, the FaaS provider executes the code inside a container or a similar isolated environment. This execution is managed entirely by the provider, abstracting the underlying infrastructure from the developer.
  • Scaling: FaaS automatically scales the number of function instances based on the number of incoming events. If there are more events, more instances of the function are automatically created to handle the load. This scalability is a key feature of FaaS, enabling high efficiency in handling varying loads.
  • Short-Lived: Functions in FaaS are designed to be short-lived, often running for just a few milliseconds to minutes. They are ideal for small, quick tasks that need to be executed in response to an event.
  • Billing Based on Usage: Billing in FaaS is based on actual usage — the number of function executions and the duration of each execution. This granular billing model can lead to cost savings compared to traditional models where servers are paid for continuously.
  • Managed Environment: The cloud provider manages the server infrastructure, runtime environments, and the orchestration of the function execution. Developers only need to focus on writing the function code.
  • Integration with Other Services: FaaS often integrates well with other cloud services, allowing functions to interact with databases, messaging services, and other cloud resources.

In summary, FaaS offers a highly flexible, scalable, and efficient way to run code in response to events, with the added benefits of a pay-per-use billing model and reduced complexity in managing infrastructure.

More Recurring Revenue Business Models: