DigitalOcean Raises $83M in Series B Funding

https://www.digitalocean.com/company/blog/series-b-funding-writing-a-new-chapter-in-the-digitalocean-story/

by beigeotter • 11 years ago

328 185 11 years ago

icpmacdo• 11 years ago

I wonder if the this pushes there valuation over 1B, if so I think that means that Techstars is the first accelerator outside of YC to produce a unicorn.

Personally I hope so, Digital Ocean is a great product and I think one of the really smart things they did was be generous with there free credits as it was at least a great way for me to get on there platform and later on drop a fair amount into hosting with them.

seiji3• 11 years ago

Is unicorn just a billion dollar non-public startup? Isn't there some other magic sauce required like supernormal margins or superfew employees or exploiting toothless regulations?

DO seems to be almost a too straight forward business model (buy servers, rent servers in sub-units) to be considered in the modern startup pool of wishful thinking. I mean, it's not like they're an iPhone app for renting other people's idle server space on demand. Now that would be a game changer.

proksoup2• 11 years ago

DO's UX is a game changer, I personally think is why they have been so successful in what seemed like a crowded market with the "same" business model as the others.

contingencies• 11 years ago

+1: insightful. Honestly though, despite the sarcasm, that's not a bad idea.

timdorr• 11 years ago

Probably not. Their previous round was $37.2m on a $153m post, so about 25% equity. Hosting is very low margin, so valuations trend lower than other businesses.

I would say $500m valuation, tops. Most likely <$400m.

buckbova• 11 years ago

I've got two droplets now, one for email/owncloud and another for personal projects with automated backups. It's pretty easy to use, but I worry I don't have the sysadmin chops to keep it secure.

Edit: I followed tutorials on auto-updating packages through cron, securing ssh, and setting up ufw for only services needed when I set it up. It's been about 2 years now so maybe I shouldn't worry.

jdoss3• 11 years ago

Honest question. How much would you pay to have something that manages the updates and setup for you and give you the sysadmin help when you need it?

worklogin2• 11 years ago

That's what Rackspace does. I haven't used them in a while, but it looks like it's ALL they do now. (moved to DO, since it was half the cost and I /do/ have enough sysadmin chops to keep two linux servers patched).

http://www.rackspace.com/cloud/compare-service-levels

duggan• 11 years ago

Judging by the general implosion of the PaaS industry, not enough to make it worthwhile.

It's a much more complex problem than most people think.

mister_m• 11 years ago

You should check out some of the documentation on Linode's site. They have some great tips about doing some very basic security such as securing SSH, keeping things updated, etc. Worth a peek.

andrenotgiant• 11 years ago

This page is a good starting point https://www.digitalocean.com/community/tutorials/7-security-...

angersock2• 11 years ago

Would anybody be interested in esoteric hosting?

Think Linode, but specifically for FreeBSD/OpenBSD/Plan9/TempleOS/MinuetOS/etc.?

talloaktrees• 11 years ago

TempleOS has no networking :)

rafadc• 11 years ago

Digital Ocean supports FreeBSD ;)

arca_vorago2• 11 years ago

I've been thinking about using DFlyBSD as a host platform for such things, given some of it's awesome networking/virtualization features.

cgag2• 11 years ago

I want one where I can run Dragonfly. I'm using vultr at the moment but I had to do some manual stuff, I just want to choose Dragonfly like you choose ubuntu at digial ocean.

vruiz7• 11 years ago

The $83 million is going directly into growing our team and expanding our product offerings with networking and storage features.

Great to hear. Real private networking, object/shared storage and most importantly HA (IP failover/load balancing) is all DO is missing to start really competing with AWS for "big business".

brianwawok16• 11 years ago

I don't think HA is really on the needed list, seeing as you can roll your own load balancer in 5 minutes using provided tutorials. I mean I guess they could make an image for it to make it a little easier.. The AWS elastic load balancer is really nothing fancy.

Real private networking and object shared storage are both huge for sure though.

vruiz7• 11 years ago

Have they implemented IP failover already? I haven't heard anything. Having your own LB without being able to fail over the IP is not HA. If the LB does down so does your business.

CoachRufus873• 11 years ago

How is their current private networking offering not 'real'?

3pt14159• 11 years ago

expanding our product offerings with networking and storage features

I'm so excited for this. I'd previously commented about how the lack of non-SSD storage meant I had to screw around with S3 when I really just wanted to keep everything on DO.

Great company. Been with them for two years now, and couldn't be happier. Combined with Cloud66 I worry less about deployments and servers and backups, and more about just getting the code out.

gshakir• 11 years ago

If all goes well, looks like they might be competing directly with AWS soon.

TodPunk• 11 years ago

AWS doesn't target the same audience or have the same product line. They're related, but not at all the same product market. To illustrate this, AWS is infrastructure management tools, and DO is infrastructure management. The fact that AWS has infrastructure management as well (built on top of their own tools) is only relevant for the people that build out the rest of their infrastructure. DO is for folks that don't want to have to learn and understand infrastructure much at all. That's very doable these days for a lot of aspects of development, but it's also not at all what AWS is going for.

DO is closer to competing with just Elastic Beanstalk and maybe RDS (from the standpoint of a managed RDBM service, not the feature set).

wspeirs• 11 years ago

DO is closer to competing with just Elastic Beanstalk

Hu? DO is like EC2, a box on the net with an IP address. Elastic Beanstalk is a PaaS that will auto-scale for you.

brianwawok16• 11 years ago

But do they want to? AWS is going for a high price for a super super deep stack of 600 little services. I kind of like that DO focuses on their core VM thing.

Obviously you can't fake some things with just VMs (rolling your own VPC for example is kind of hard to do), but a lot of people don't need Redshift or SQS or any of the amazon SAAS things...

nosequel• 11 years ago

They aren't even in the same ballpark. Hell, Google isn't even in the same ballpark as AWS and Google made $83million in the time it took me to read the article. DO is great, but doesn't belong in the same sentence as AWS.

brianwawok16• 11 years ago

Azure is closest I think. Enterprisey cloud hosting.

neom2• 11 years ago

AWS is basically software defined enterprise/software defined business at this point. Their products and services are amazing, and they will certainly dominate the fortune with GOOG and M$, etc. I'd imagine the push down into the SMB will more a bit more difficult, the push up into the SMB with a more b2c(dev) product offering and community approach seems to be the the better game here, think Microsoft and Apple in the early days. These are still multi-billion dollar addressable markets, there is a lot of room to play in cloud.

dotBen• 11 years ago

DO has really benefitted from Linode stalling over the past few years. I admire Linode for remaining a bootstrapped business but it feels as though the owners lost their fighting spirit and energy... Perhaps because the small pool of Linode owners felt they made enough money already.

DOs announment talks about a storage product, which is strategically important and crucially something Linode has sorely needed for a long time. And yet the biggest development in recent years at Linode has been a proprietary stats and monitoring system built as an upsell, which doesn't really do anything distinctive that Nagios or another package couldn't provide.

Instead Linode is now switching their entire platform from Xen to KVM, a curious move which will create risk and cost velocity that could have been spent on product development.

I have been a huge supporter of Linode over the years, and the startup I co-founded is one of their biggest customers, but at this point DO seems like the winning horse to back.

astrodust6• 11 years ago

For all the money Linode has on hand, and the size of their technical team, it's absolutely insulting they haven't made any tangible improvement to their management front-end in at least five years, if not more.

The way it's behaving it's as if it was acquired and kept on life-support.

seunosewa• 11 years ago

Perhaps users don't have any complaints about their management interface? Do you?

Perhaps users mostly want performance and value which have been greatly improved by their substantial infrastructure upgrades?

Mahn2• 11 years ago

For what is worth, I've been a Linode customer for a few years and never really felt their management front-end was in urgent need of an update. It's solid and does the job for us. My only complains to be honest are 1) the lack of storage dedicated nodes, as OP points out, and 2) the price, it gets very expensive very fast as you scale and spin more nodes.

We are currently considering moving to dedicated machines but only because of 2), otherwise we would happily be their customer for life.

mpdehaan22• 11 years ago

Linode is good and simple if you have a not too large amount of nodes or complex need for extra bits, and I appreciate them for that.

I didn't really need anything shinier. Is it super-cloudy? Not so much, but also nice that you don't have to think about it.

EugeneOZ5• 11 years ago

If we talk about DO in comparison, then DO's interface is just ugly and almost unusable. Every time I use it, I want to leave their site as soon as possible.

riquito2• 11 years ago

I never felt the need of more polished interface. It just works.

petercooper2• 11 years ago

I'm not saying you're wrong but I disagree from my own POV. It's a common play in the hosting business to grow big quickly then sell out to a more enterprisey company (as happened with EV1Servers, Softlayer, Heroku) and if DO is taking such large amounts of funding, something will have to happen (IPO, acquisition, etc) and some companies don't make the transition well (I'm not saying DO wouldn't, but you never know).

Linode, on the other hand, can remain a company focused on just being a long term business forever. They might move a little more conservatively, but they have owners with skin in the game and customers to keep happy. I use both DO and Linode, but Linode for my most critical stuff simply because I "feel" they're more likely to remain basically the same in 5 years' time and I value that consistency as a business.

I think DO is superb, I have great admiration for them and I recommend them a lot, but I also feel they're the riskier horse to back even if the potential upside is so much greater.

bluedino• 11 years ago

> It's a common play in the hosting business to grow big quickly then sell out to a more enterprisey company (as happened with EV1Servers, Softlayer, Heroku)

And that's exactly what Slicehost did, years ago.

I wonder if Rackspace ever courted Linode. Slicehost always seemed to be the inferior one in price and performance.

austenallred2• 11 years ago

When people ask, "Why does HN/the tech industry pay so much attention to the companies that are raising money?" I'll point them to this.

There's absolutely nothing wrong with bootstrapping and making a good living, but the stuff that goes big and wants to scale quickly usually has to raise a bunch of money to get there.

petercooper2• 11 years ago

That's true, but IMHO hosting is not a service that benefits significantly from economies of scale beyond a certain (though reasonably high) point. Would Linode be any better for me as a customer if it were immediately 3x the size? I'm not sure. As a customer, would I prefer a Linode that were 10x the size and having to head for an "exit" of some kind? No way.

hudj1jcnapru38• 11 years ago

OTOH, taking money puts pressure on a bigger exit/revenue scaling plan. To me, that means more like GoDaddy and less like prgmr, which is not what I want from my service providers.

The pressure to expand is a negative indicator when I'm a user of a service.

jordanlev• 11 years ago

Funny... I remember when Linode first became really popular, it was right around the time Slicehost got bought (and subsequently shut down by) Rackspace. A lot of people moved over to Linode because Slicehost was no more (or when the writing was on the wall that it would soon become no more).

So perhaps you're correct that lack of funding is making Linode lazy now, but that doesn't mean that getting bought or accepting a bunch of money would solve the problem.

Side note: the original slicehost founders grew to regret their decision of selling to Rackspace, see: http://37signals.com/founderstories/slicehost

damoncali• 11 years ago

Also, look what happened to Slicehost after acquisition. Rackspace woke up, realized Slicehost customers are cheap, and drove them off by raising prices.

neom2• 11 years ago

https://angel.co/digitalocean

Jason sits on the board of DigitalOcean. :)

EugeneOZ5• 11 years ago

I disagree, Linode is much superior than DO. I can trust to DO only fault-tolerant services when to Linode I can trust any kind of service to run.

exacube• 11 years ago

Why?

threeseed4• 11 years ago

Could not disagree more. I would NEVER run anything serious on Linode.

They have a long history of withholding information from customers in the face of security incidents and outages. The last time they were hacked I found out from Reddit that it happened and even when they bothered to tell me they failed to say (a) what actually happened or (b) what steps they took to prevent it occurring again. And many, many outages had information communicated on the IRC hours before website was updated.

It is the culture and professionalism that differentiates one VPS provider from another. Linode gets a massive thumbs down for me.

Lazare• 11 years ago

Clearly you haven't tried using their Fremont data centre.

It's been terrible for years. And it's not like you have a lot of choices when it comes to Linode data centre.

I'm sure your experience has been good, but there's a huge swathe of ex-Linode customers with pretty negative memories.

gukov• 11 years ago

Xen to KVM was nothing but smooth and my node is now flying.

jebblue4• 11 years ago

Same experience here, Linode did their homework and the transition was extremely smooth.

meesterdude• 11 years ago

fun fact about linode: if it says automatic backups are on in your control panel, they can still be off on linode's end. I went to go recover from a recent snapshot, only to find our latest backup was 11 months ago. That it would be "on" on our end, and be broken for 11 months for a service i'm not supposed to have to think about, that really blew me away. But, to their credit, DO does not offer the same level of backups.

jebblue4• 11 years ago

> Linode stalling over the past few years
> And yet the biggest development in recent years at Linode has been a proprietary stats and monitoring system
> Linode is now switching their entire platform from Xen to KVM, a curious move which will create risk
> I have been a huge supporter of Linode over the years

Uh huh, right.

curiousjorge• 11 years ago

it's pretty amazin what they've managed to do, what was essentially an over saturated market, they've managed to pull ahead of incumbents like linode.

pki• 11 years ago

how much do you think giving away huge amounts of free credits helped?

Killswitch• 11 years ago

Great work Ben and team! I've been a customer for 2 years now, absolutely love the service and see no reason to leave it.

alberth3• 11 years ago

Has anyone used Vultr.com?

I ask because they have all the same features as DO + way more (e.g. dedicated hosting w/ same great panel, BYO ISO, etc).

username• 11 years ago

I am also curious about this. The fact that Vultr accepts Bitcoin as payment further piques my interest. Can anyone shed some light on their performance and convenience vs. DigitalOcean?

Edit: Found this http://blog.due.io/2014/linode-digitalocean-and-vultr-compar..., which seems to portray it quite favorably.

alberth3• 11 years ago

This doesn't compare against DO but it does compare performance against Rackspace and AWS.

https://www.vultr.com/benchmarks/

dubcanada2• 11 years ago

I've used them. Their control panel is not as pretty, and their community is not as large. But the product is arguably better, they offer things that DO doesn't offer like DYO ISO, daily backups for the same cost as DO's weekly (seriously DO, only weekly backups???), and a ton more.

alberth3• 11 years ago

So if you had to choose between using DO or Vultr, which would it be and why?

kentor• 11 years ago

I've switched from DO to Vultr back when DO did not offer FreeBSD and DO's SFO network was pretty bad. I'm back on DO now because I've got my hands on some credits, but I would switch back to Vultr when I run out. DO's SFO network has improved I think, but for the $5 plan you get 50% more memory at Vultr (512mb vs 768mb).

nly• 11 years ago

I actually dislike DO's new control panel.

Veratyr• 11 years ago

I've used them and love them. I did some benchmarks a while ago (standard unixbench and such) and they outperformed DO on every metric. The extra features they have (particularly custom ISOs) are also really nice.

Definitely recommend them, although I use DO exclusively for the Github student credit.

Benchmarks:

Vultr: https://gist.github.com/bobobo1618/0972fc51f49d90fb37af

DigitalOcean: https://gist.github.com/bobobo1618/81aa3f413b99aaab1f0d

api• 11 years ago

I have, with absolutely zero problems. I recommend them often. Not sure I'd trust them with PCI compliance requirements or something that heavy but I'd certainly use them for commodity VPSes over many others. They seem to offer a lot better performance/cost than DO.

Vultr is a brand of this company -- https://www.choopa.com -- and they've been around for a while.

x0• 11 years ago

I have, I found their Sydney instances to lag for seconds at a time, completely randomly, while SSH'd in (I also live in Sydney, so it's not distance). I now have an instance with Digital Ocean in Singapore and I much prefer it.

inlinevoid• 11 years ago

Quick question: How's your ping from Sydney to Singapore?

corford3• 11 years ago

I'm a heavy Linode, DO and Vultr user. All three are great (with Linode being my preferred choice if cost isn't the overriding factor).

I've got Vultr instances in all of their EU locations and haven't had any issues (connectivity wise or uptime wise). One note for Vultr: new accounts are limited to max 5 VPS instances by default until you open a support ticket and request the limit be raised (which they were happy to do, at least for me).

tomassre• 11 years ago

I have used them for a side project, no issues. The big reason for me moving from DO to them that I didn't see mentioned is because they have actual private networking. And also the option for servers with HDD instead of SSD.

worklogin2• 11 years ago

Their ANTISPAM policy is draconian, but I like their interface. I like that root passwords are in the web interface instead of going through email. Finally, their presence in more datacenters is useful for someone in the middle of the country.

lsc• 11 years ago

hm. Interesting. From what I know of the industry, their size and pricing, I would have thought they would be profitable enough that raising this sort of money wouldn't be particularly interesting.

Does this mean that they are operating at a loss?

carbocation• 11 years ago

There are many reasons to raise money. They may be operating at a loss but with growth in recurring revenue such that they expect to become profitable in a few years. But I wouldn't be surprised if they are raising this money to fuel an already growing fire, either by enhanced sales teams or even building out new capital projects that will open new revenue channels or create barriers to future competition.

Mahn2• 11 years ago

I would be surprised if they didn't have a positive cash flow by now. It's probably more about growing faster than about having money per se.

ablation• 11 years ago

I'm pleased for DO. Seems like a decent company doing things well. I've never had a complaint with their services.

r0naa2• 11 years ago

I love DO, they are doing great work. The only thing I regret is the relatively poor choice of platforms they support.

For example, there have been a really big demand for NixOS for two years now but still no announcement whatsoever.

nailer2• 11 years ago

Really? Do you have some stats on NixOS growth to support that?

r0naa2• 11 years ago

https://digitalocean.uservoice.com/forums/136585-digitalocea...

One of the highest voted customer feedback on their official forum.

arca_vorago2• 11 years ago

Slightly offtopic, but I am curious if anyone has any insights into the legal side of hosting profit seeking services on top of VPS's in general. Is the boilerplate contract(s)/eula/tos good enough generally or do you seek to actually make changes to a custom one?

What about hosting websites vs reselling access for some other purpose (eg. similar to game hosting services that allow full customer control of the instance?)

It seems to me like there is a lot of room for a tool that can spin up an instance over multiple VPS providers, because sometimes one will have a colo close to where you want and sometimes another will.

Anyone aware of comprehensive location based benchmarking of all the VPS's?

muraiki• 11 years ago

There are some libraries you can use to abstract away differences between VPS providers:

https://jclouds.apache.org/

https://libcloud.apache.org/

https://developer.rackspace.com/blog/gophercloud/

http://www.openstack4j.com/

For playing with JVM stuff I found openstack4j easier to use from Scala and Clojure than jclouds.

I didn't downvote you, but I figure someone thought you were too off topic.

NiftyFifty• 11 years ago

My only question, is the investment rounds the new form of private equity bubble fixing? How diversified are these investments and how does the interoperations of a company get changes to meet the revenue influx to ROI? I never really got this jist and how culture DOES change by these rounds. The pitches must damn near printing money kind of stuff made of magic Mike XXL and pixie dust to stick.

chrismarlow94• 11 years ago

I used digital ocean for a while. My experience was bad reliability and random technical issues. I had various very experience ops people verify with me that it wasn't an issue I introduced into the systems running.

I went back to dedicated servers at a smallish provider and forgot how nice it can be to not have all the cloud virtualization stuff get in the way. It's just too fragmented among providers in the way they setup for me to use the service and not have a fear of lockin. Does it take me 3 or 4 days to get new boxes? Yes. Is it causing a massive headache for me? No, because I plan things and order them ahead of time.

Just my 2 cents, I know others who use DO and love it.

jdoss3• 11 years ago

Who do you use for a dedicated provider?

chrismarlow94• 11 years ago

joesdatacenter.com

I do not work for joes or have any affiliation. It's a very "non-automated" setup. You file a ticket with a rep to get new servers and describe what you want (I need 5 more servers just like X), no forms online to automate it or any of that. The plus side of that is you never get a canned response or ignored. Very quick and professional.

stephen-mw• 11 years ago

Why not just use AWS? Seems like you went from bad to slightly better.

There's no reason to fear virtualization, and the automation is definitely one of the best aspects of running in a major cloud.

chrismarlow94• 11 years ago

Because I prefer a set of simple and basic tools used in combination to accomplish something instead of a "push this button and it does everything" approach. It's the *nix pipe mentality of combining simple well built tools to build solid and reliable things that you can adapt any way you please.

I also build things that are heavy on the network side, and virtualization drops networking performance a great deal (this may be changed these days, not sure).

Don't get me wrong. I don't fear virtualization. I use virtualbox and vmware heavily for development, and yes they do have a purpose, but it's a bad fit for the type of projects I build.

I just find that anything in life that just continues to add features for the sake of adding features, and create more and more "magic" push buttons to solve your problems eventually goes to crap and becomes a fragmented dependency hell that I would rather not deal with. And yes, I do love Golang.

vinceyuan• 11 years ago

DO is much cheaper than AWS.

wooyi• 11 years ago

Same experience here. A few of my developers migrated our servers to DO 2 years ago to "save" a few hundred dollars. Turns out DO has planned downtime every other month and its cost us 100x more in staff and headache dealing with them. You can't run a SaaS or anything that requires uptime reliability (ie, any sizable business) . I've transferred our main site back to AWS. Also AWS dedicated pricing is now almost the same as DO, and much more reliable.

But congrats to the DO team. They will only get better.

joshburgess• 11 years ago

So, Digital Ocean doesn't have great reliable up time then? I've been using OpenShift's free hosting tier to host a Ghost blog, and it goes down CONSTANTLY, making it unusable. I was about to start paying the $5 a month plan with Digital Ocean, but I'm not going to if it also goes down frequently.

chrismarlow94• 11 years ago

Heh. Nearly the same thing here but on a personal projects level, no company stuff. I really wanted it to be something I did or for there to be a solution because migration is never fun, but I finally had to bite the bullet.

EDIT: had no idea about the planned downtime. Maybe that explains the random chaos issues I had.

ape4• 11 years ago

I'd like a harddrive option. To get a large amount of storage is way too expensive.

bpg_92• 11 years ago

Well to be sincere, DO is implementing features most people actually care about. Working charms, it still has a long way to go :)

joeyspn• 11 years ago

I've been with many VPS providers: KnownHost, RackSpace Cloud, OVH, Linode, etccc and DO has been a pleasure to work with because of all the integrations and tooling it has due to the increasing popularity/community.

I think this is a great step for a transition from a "developers cloud" to a "production cloud". I hope they continue to go in the same direction and soon offer multi-container blueprints as easy to deploy as their pre-built images.

0.02

usaphp• 11 years ago

I've been using RackSpace for couple years before moving to DigitalOcean, I've had a good experience with Rackspace when I started but my bills kept growing and server started to have constant issues every now and then, so I've decided to move to DigitalOcean couple years ago. My traffic since then grew quite a lot from 100K/month to around 1 million visitors/month and my bills from DigitalOcean are still not much higher than they used to be at the later stages on RackSpace, and performance is much better for me with DigitalOcean.

The only thing I dont like about DigitalOcean droplets is the requirement to shut off the server before resizing, Rackspace allowed me to do it without a need to shut it off.

rayalez• 11 years ago

I love DO.

I'm a novice/intermediate programmer, and when I knew nothing about what VPS even was I started using Linode(due to many great recommendations).

Linode is a great service, but recently I've switched to DO and I like it so much more. As a person who just needs a simple and straightforward way to put several django projects online - DO offers me a simple and beautiful interface, cheaper prices, and a lot of great and extremely useful tutorials.

It is much nicer to use and a droplet price starts from $5/mo, which is freakin' awesome, and all I need from VPS service at this point.

Thank you guys, you are great, keep it up!

DigitalOcean Raises $83M in Series B Funding

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