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DigitalOcean raises $100M in debt as it scales toward revenue of $300M

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Re: DigitalOcean raises $100M in debt as it scales toward revenue of $300M

#81

Post by loldigitalocean »

tonyedgecombe wrote: post #69
loldigitalocean wrote: post #58

Earlier quoted context omitted.

No. Compare Linode and DigitalOcean. Linode bootstrapped, took very few financial instruments to aid the journey, had a few missteps along the way, completely reinvented the entire business more than once, and still serves a niche that makes them a successful (and profitable, as in real profitable, not imaginary profitable) company. Their margins are quite good. Slicehost had a solid business when Rackspace bought th…

You may be right but it's hard to take throwaway accounts seriously.

Fine, ask lsc. I have tremendous respect for Luke given that he had, thanklessly and for years, tried to compete in this exact market singlehandedly. Even competing against him at Linode, that was remarkable to me.

I have receipts for my Linode employment and I am unconcerned about the veracity of my analysis (I’m actually paid for said analysis IRL). Think about that bar you’ve set for a minute: “this person doesn’t actively court a reputation on Hacker News, therefore the information is suspect.” If that sounds good to you, we are unlikely to agree on anything, and I’ve little interest in defending my methods to someone who values speaker over spoken.

I have other gripes with Linode, but it’s not exactly par for a ‘disgruntled’ former to speak positively about a business, no?

Re: DigitalOcean raises $100M in debt as it scales toward revenue of $300M

#82

Post by outworlder »

rsync wrote: post #26

"Spruill told TechCrunch that DigitalOcean will scale to $1 billion in revenue in the next five years, and it will become free cash flow profitable (something the CEO also referred to, loosely, as profitability) in the next two." I find this to be incredible. DO is not a speculative e-business ... they are not a social network. They are the proverbial sellers of picks and shovels during the gold rush: "The way to get…

> Here is a pick and shovel seller that can't make a profit and is going into debt ...

That's one way to see it. Another is that they need money to expand the business.

Re: DigitalOcean raises $100M in debt as it scales toward revenue of $300M

#83

Post by vikramkr »

texasbigdata wrote: post #72
danesparza wrote: post #28

Earlier quoted context omitted.

"consider cash flow positive a better representation of actual profitability than the actual net profit/loss reported on the P&L" Wow. What a sad indictment of modern accounting practices that its accepted practice to create 'noise' to prop up a P&L (or avoid paying tax). I suppose you could do this with household expenses, but if you don't look at P&L in a household you would be ignoring things like credit card debt…

It's perhaps not nefarious. A lot of GAAP and the standards came about when manufacturing was a lot more prevalent. Concepts like depreciation make a lot more sense when you mentally place yourself in the 1920s.

Depreciation still makes plenty of sense today. A company with very little capital equipment will simply not have a lot of depreciation. Digital ocean as a cloud hoster has a lot of capital equipment (servers etc) to worry about as well.

Re: DigitalOcean raises $100M in debt as it scales toward revenue of $300M

#84

Post by cdolan »

cortesoft wrote: post #59
cdolan wrote: post #15

This article had more detail and substance than I usually find on TechCrunch or startup coverage in general. I do want to point out two things that bothered me in the article: 1. Using the word “raise” when talking about financing via debt seems inappropriate and very start-upy. This is a low cost of capital line of credit, is it not (due to their infrastructure and broad customer base)? 2. Why in the world are state…

>Then call the CEO out, Alex Wilhelm (author), if you think its BS! Isn't that what the parenthetical is doing? Maybe subtly, but it seems pretty clear what the author is trying to convey.

I see what you are saying but I dont agree - the author is knowledgeable in financial terms and business, but is still parroting the CEO.

I suppose I’m just triggered on what feels like years of news-pieces being marketing pieces for established companies.

I would think if the author is well versed in financial speak, they would challenge (or omit) the positive spin the CEO is trying to push here?

Re: DigitalOcean raises $100M in debt as it scales toward revenue of $300M

#85

Post by wu_187 »

toast0 wrote: post #62
capableweb wrote: post #23

Earlier quoted context omitted.

I'm interested to hear how the reasoning is behind thinking that Amazon would be hit by any anti-trust issues and not Google or Microsoft. As far as I know, all three of them are in the cloud/hosting business.

Google and Microsoft don't have a dominant market position in cloud hosting; and their other dominant positions don't seem to be impacting the cloud marketplace (well, maybe Microsoft is doing some tying)

Google and Microsoft actually do have dominant positions in cloud hosting, just not in the "traditional" sense of webhosting.

Re: DigitalOcean raises $100M in debt as it scales toward revenue of $300M

#86

Post by porker »

Dirlewanger wrote: post #61
djsumdog wrote: post #50

Earlier quoted context omitted.

I wonder if they would have if they didn't have to cut prices to compete with Vultr.

First time I'm hearing of Vultr...they look like a carbon copy of DO. What does Vultr have that they don't?

> What does Vultr have that they don't?

According to multiple HN users, a more unreliable (internal) network.

Re: DigitalOcean raises $100M in debt as it scales toward revenue of $300M

#87

Post by dcchambers »

I have some personal stuff hosted on DO. I really like their options, service, their branding, UX/UI, etc...but they are kind of in a weird spot. Halfway between being good for cheap personal projets, and being good for enterprise.

If I want a simple VPS there are cheaper options.

If I am an enterprise spending millions/year on cloud infra I am probably only looking at AWS, Azure, GCP, etc.

How does DO get out of this spot? I want them to succeed and I will continue to support them as the big guys need the competition, but I fail to see how they compete against the likes of Amazon without undercutting significantly...and that won't bring profits. I think the margins on cloud infra is already pretty thin.

Re: DigitalOcean raises $100M in debt as it scales toward revenue of $300M

#88

Post by MuffinFlavored »

cdolan wrote: post #15

This article had more detail and substance than I usually find on TechCrunch or startup coverage in general. I do want to point out two things that bothered me in the article: 1. Using the word “raise” when talking about financing via debt seems inappropriate and very start-upy. This is a low cost of capital line of credit, is it not (due to their infrastructure and broad customer base)? 2. Why in the world are state…

> This is a low cost of capital line of credit, is it not (due to their infrastructure and broad customer base)?

How low cost? What interest rate, what fees, etc.?

Re: DigitalOcean raises $100M in debt as it scales toward revenue of $300M

#89

Post by bluedino »

hinkley wrote: post #52
patio11 wrote: post #42

Earlier quoted context omitted.

You might or might not be allowed to do that. US consumers generally expect there to be no pre-payment penalty. That isn’t a universal feature of all loans. As to particular features of particular loans ask the really expensive lawyers or investment bankers who negotiated them, but plausibly “I owe you $45M; here’s a new equity investor; we’re done after the wire clears right.” might lead to “We agree you owe us $60M…

I remember when I was just out of college, I was warned that there was such a thing as a mortgage that did not allow for extra payments, and that you should check for that when applying. If you couldn't, or even if you did the payment incorrectly, anything extra would just be treated as if you sent your payment in for the subsequent month a little early. I've heard of the latter happening to friends, but I've never s…

Many loans you have to be careful that you don't pay them like that. If you don't specify that you're paying down principal with the extra, it just goes toward next month's payment. So next month you might only owe $50 instead of $500.

Re: DigitalOcean raises $100M in debt as it scales toward revenue of $300M

#90

Post by dwild »

polote wrote: post #73

A lot of complains here but I don't understand why is that worse than raising the same amount of money from VC ?

A VC does the deal in exchange of a part of the company. They will make their money once you exit, either by becoming public, or by an acquisition. The deal can be different and could certainly include some kind of repayment, but that's not the norm for a VC deal.

A loan has to be repaid though, whether the company exit or not. The terms are fixed and you need to pay them. This can be quite hard when you get a few bad months, while a VC will just get sad if that happens.

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