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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

#171

Post by scarface74 »

treis wrote: post #163
notyourday wrote: post #60

Earlier quoted context omitted.

> 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.

Code rarely last decades without maintenance and complete rewrites over time - unless you’re the government.

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

#172

Post by jerryoftheyear »

realmod wrote: post #112
staller wrote: post #104

Earlier quoted context omitted.

Did you continue to get DDoS after moving to AWS? I figure that AWS would take similar steps if you are not using Shield or one of their other products that would help mitigation. I'd like to know if anyone has experience there.

All instances use shield by default IIRC.

There are two levels of AWS Shield, "Standard" and "Advanced". You are correct that all instances receive "Standard" protection from Shield by default.

https://aws.amazon.com/shield/

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

#173

Post by gonational »

raiyu wrote: post #99
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…

Our original business was bootstrapped with no outside investment so we know that growth model very well. In fact that bootstrapping allowed us to build DigitalOcean when no VCs were interested in funding us by self-funding through the profits from our original business. The problem with the approach you detailed is that it is based on growth rate. If you have more customers coming to you than you have cash on hand t…

> raise capital or turn away customers

If you have to borrow $100MM to provide the same basic service that you’ve been providing for 8 years, then aren’t these “customers” less customers and more recipients of free services?

Perhaps, that’s the point, no? Buy the remaining VPS market with unsustainable pricing, and then raise the price...

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

#174

Post by muse900 »

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…

ye I agree, it feels impossible to penetrate that market unless you have many billions and the actual engineering knowledge behind it.

I think DO is good for the small/average player that doesn't wanna invest time into having his team learning the AWS quirks because his business isn't in heavy need of it.

If AWS or even google ever goes after the small/average user by creating an easier to understand/navigate service for the user that doesn't need all that overhead and time investment of that bizarre learning curve just to setup a simple application, then its just gonna kill DO and other services like that out there.

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

#175

Post by chii »

scarface74 wrote: post #170
gruglife wrote: post #24

Earlier quoted context omitted.

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,…

> 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.

but does a company have to be "honest" about such depreciations? What if the asset isn't actually losing value at the stated depreciation rate? Then at the end of the depreciation period, the company may still extract the residual value by either selling or continue using the asset. Does that somehow then count as revenue? Or did they just magically managed to tax dodge using a fake depreciation schedule?

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

#176

Post by muse900 »

cj wrote: post #168
raiyu wrote: post #141

Earlier quoted context omitted.

"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 ente…

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

I'll agree on that.

I won't agree with the rest though, I don't think DO can compete in an enterprise level.

Actually in the longrun I don't see DO ever being viable. AWS and google are going to become simpler as the time passes and they are going to take over that margin that is left on services like DO, ovh etc. I think the only viable business plan for them right now would be to focus on their simplicity and continue building on it hoping they will get bought out by the big players. Obviously thats not good for us -> amazon and google owning everything on the web but unless there is some crazy law that limits them from doing so, they are going to do it.

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

#177

Post by scarface74 »

chii wrote: post #175
scarface74 wrote: post #170

Earlier quoted context omitted.

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,…

> 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. but does a company have to be "honest" about such depreciations? What if the asset isn't actually losing value at the stated depreciation rate? Then at the end of the depreciation period, the company may still extract the residual value by either selling or continue us…

The asset will eventually have to be replaced. In the long term, it doesn’t make a difference - ignoring the time value of money.

Theoretically, the only reason we have depreciation expenses at all instead of just expensing the entire cost at once (cash accounting) is that we decided that accrual accounting was more representative than cash based accounting.

I am not an accountant. I’m an MBA dropout after almost finishing.

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

#178

Post by nathan11 »

chii wrote: post #175
scarface74 wrote: post #170

Earlier quoted context omitted.

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,…

> 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. but does a company have to be "honest" about such depreciations? What if the asset isn't actually losing value at the stated depreciation rate? Then at the end of the depreciation period, the company may still extract the residual value by either selling or continue us…

Accounting was a decade ago for me, but as I recall if you sell an item you've depreciated to $0, you will incur a "Gain on Item Sold" which is taxable.

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

#179

Post by mattste »

dkersten wrote: post #154
raiyu wrote: post #92

Earlier quoted context omitted.

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…

What I really wish for is a simple way of running docker containers (like AWS Fargate, or at least ECS), because I want to run docker containers across multiple droplets, but I don't want the full complexity of Kubernetes. Also something akin to auto-scaling groups. If DO had those, I'd use it a whole lot more than I do (currently I only spend use approx. $140/month on DO).

I just led a migration for my small team from Zeit Now to Render (https://render.com/). It has filled this need pretty well. There are some features that I wish existed but overall the simplicity has been great for our use case. They do not have auto-scaling but it's planned (https://feedback.render.com/features/p/autoscaling).

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

#180

Post by nine_k »

sdesol wrote: post #161
raiyu wrote: post #92

Earlier quoted context omitted.

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 prov…

DO used to have referral credits. A $5 of referral credit could feed a $20 instance for a week, of the smallest instance for a month.
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