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

techcrunch.com

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

#161

Post by sdesol »

raiyu wrote: post #92
dcchambers wrote: post #87

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 thi…

You hit the nail on the head, we are best for SMBs and teams that want to get things done quickly and don't need the hyperscale and added complexity of AWS. Our focus has always been on simplicity and as our customer needs and our own internal needs have grown we've added additional products to continue to allow customers to scale with us. We launched with just Droplets in 2012 and have since added block storage, Spa…

On a somewhat related note, what is the best way for startups to work with DO to get free cloud computing? My product is a search and analytics engine for github and I would like to offer a free version for people to use and I would like them to use DO since I find it has the best bang for the buck.

I can see people that would like to use my solution to not need the bells and whistles of aws, azure, etc.

Does DO provide startup assistance like Microsoft, which gives free cloud computing? My goal would be to say something like try DO free for a week and if you like it, continue using them.

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

#162

Post by hnzix »

YourMatt wrote: post #149
WrtCdEvrydy wrote: post #126

Earlier quoted context omitted.

Heroku was really built for Web Apps (especially Rails)

Aren't they just a middleman for AWS anyway?

AWS is infrastructure as a service (IaaS). You need to worry about load balancers, backup scripts, firewalls etc. Ie you need a plausible sysadmin to run it. Even Elastic Beanstalk requires some sysadmin.

Heroku is platform as a service (PaaS). It abstracts away the complexity of AWS. The base cost is more expensive than raw AWS but you don't need to source and pay for a sysadmin.

AWS, Heroku and DO aren't "better" than each other, they serve different use cases.

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

#163

Post by treis »

notyourday wrote: post #60
cdolan wrote: post #30

Earlier quoted context omitted.

Thanks. I am not a financial professional but do run a medium sized business and have a lot of respect for being cash flow positive. I agree with depreciation and other non cash expenses obfuscating P&Ls, but can we agree that in an article focused on securing debt financing, which will incur real interest expense, the term “free cash flow profitability”, “loosely” meaning “profitability” is a little misleading?

> I agree with depreciation and other non cash expenses obfuscating P&Ls, but can we agree that in an article focused on securing debt financing, which will incur real interest expense, the term “free cash flow profitability”, “loosely” meaning “profitability” is a little misleading It depends on the industry. DO is in the capex heavy industry so depreciation is not a funky accounting cost, it is actually something t…

Software is not typically depreciated though. DO is writing code now that will last for decades but they have to take the accounting hit for it in one year.

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

#164

Post by nailer »

raiyu wrote: post #92
dcchambers wrote: post #87

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 thi…

You hit the nail on the head, we are best for SMBs and teams that want to get things done quickly and don't need the hyperscale and added complexity of AWS. Our focus has always been on simplicity and as our customer needs and our own internal needs have grown we've added additional products to continue to allow customers to scale with us. We launched with just Droplets in 2012 and have since added block storage, Spa…

Where's your serverless product? I don't want to manage Kubernetes any more than I want to manage instances.

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

#165

Post by mr_toad »

dcchambers wrote: post #87

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 thi…

> If I am an enterprise spending millions/year on cloud infra

They do more than just VPNs. They do object storage, containers and K8. They have command line an API based tooling.

A small enterprise could do a lot with that.

If you were talking a $100 million dollar budget and you needed bells and whistles like IAM Lambda or Glacier I could agree.

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

#166

Post by mr_toad »

djsumdog wrote: post #48
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…

Did they miss their window? Would this business make more sense during the 2001 dot-com craze? Are startups currently afraid to go with anyone who isn't AWS/GCE/Azure because they understand the cost of moving platforms is high?

> during the 2001 dot-com craze?

The x86 virtualisation tech just wasn’t up to it back then.

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

#168

Post by cj »

raiyu wrote: post #141
sdotsen wrote: post #136

Earlier quoted context omitted.

yeah I'm not sure about your last paragraph. when I interviewed at DO, the few business folks I spoke to were adamant on taking on AWS. I kind of scoffed but hey I'm not running DO.

"Business folks" :) But all kidding aside, the numbers just don't make sense. AWS is doing $30B in revenue and has tens of thousands of engineers. Google which many can argue has some of the best engineering on the planet is going after AWS investing billions in datacenters and again using thousands of engineers. So to think that DigitalOcean with a $300MM debt line and 250+ people in engineering is going to go after…

I don’t necessarily disagree with you, not sure I’d place a bet on DO taking on AWS realistically, but:

> So to think that DigitalOcean with a $300MM debt line and 250+ people in engineering is going to go after AWS just doesn't add up.

Lots of Money + Lots of People =/= Guaranteed Success

It’s more a matter of taking on the market from a slightly different angle.

One viable path I see is for DO to ramp up their enterprise appeal by offering services on par with AWS, while cutting down the operational complexity of managing AWS services (using AWS = incredibly high overhead with configuration and everything else).

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

#169

Post by mc3 »

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…

It's not 1999 anymore. There will be increasing demand for cloud services going forward. It's more of a bread and butter rush than a gold rush.

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

#170

Post by scarface74 »

gruglife wrote: post #24
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…

Regarding point #2, many in the finance world (which I work in) consider cash flow positive a better representation of actual profitability than the actual net profit/loss reported on the P&L. In short, cash flow shows if the actual core business is bringing in money or losing money, while the net profit includes a lot of "noise" (probably not the best word to use but can't think of how to phrase this). For example,…

Not counting depreciation as part of your loss in a business is about like all of the Uber drivers who don’t take into account the wear and tear on their cars when calculating how much money they are making. Depreciation is a real expense. If you depreciate an asset down from $1000 to $0 in 3 years, you’re accounting for the fact that in three years you are going to have to replace it.

There is a reason we have GAAP, to keep crap like WeWork’s “Community Adjusted Ebitda” and Uber from saying that their financials really aren’t as bad as they look if you ignore a dozen expenses.

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