DigitalOcean scoops up some more cash, but that only tells half the story

A big pay day for cloud vendor DigitalOcean as it scoops up over $80 million in Series B funding.


Little-known but rapidly growing cloud vendor DigitalOcean is today announcing an impressive Series B funding round that will further help it grow market awareness for its readily consumed cloud infrastructure offering.

I've always wondered about DigitalOcean. The company is relatively unknown (at least in comparison to the big names in cloud hosting, Amazon, Google and Microsoft) and yet independent research suggests that it is the world's second largest cloud infrastructure provider targeting website and application developers. How does a company that was only formed three years ago grow to be such a powerhouse? And who pays for that incredible growth?

In the past, I've suggested (with perhaps a bit of conspiracy theory going on) that one of the global data center operators was funding DigitalOcean's growth. The logic in that was sound: many of the public cloud vendors are customers of the big data center providers, such as Equinix. As such, those data center providers can't be seen to publicly compete with their own customers. But a deal that sees them fund DigitalOcean's growth would be a nice way of achieving their objectives. Without denying my theory outright, DigitalOcean have been pretty emphatic in conversations with me stating that their growth is paid for through the smart use of leasing and good supplier relationships, and not through any back-room deals.

Either way, DigitalOcean's bank account got a boost this week with news that the company has raised a huge $83 million Series B funding round. Of course, the obvious response to that number, as impressive as it is, is that it is equivalent to perhaps a week of one of the big cloud vendor's capital expenditures on plant and equipment, so something is still missing. What it is, however, is a very real recognition of the stellar job that DigitalOcean is doing of creating a low-cost, easily understood and developer-friendly infrastructure offering.

The funding itself was led by Access Industries with follow-on participation from Andreessen Horowitz. Andreessen Horowitz needs little introduction; it is perhaps the highest-profile Silicon Valley venture capital firm at the moment and was founded by heavy hitters Ben Horowitz and Marc Andreessen. Access Industries is not as well-known, but it is a global strategic investor. It is also a good pick of investment bets if its portfolio is any indication – Access is an investor in Alibaba, Facebook, Spotify, Uber, Pinterest, Rocket Internet, and many others.

DigitalOcean promises to use this money to "aggressively work to expand its feature set, appealing to the needs of software developers and scaling startups running their distributed applications in production." What that means in terms of DigitalOcean's intentions to move up the stack and go beyond raw infrastructure is still an unknown, however I'd suggest that customers will start demanding higher-level services like those offered by the other cloud vendors. This will be an interesting point for DigitalOcean - how to maintain simplicity while still meeting the complexity of customers' demands. Time will tell how the maturing company deals with that issue.

For now, however, DigitalOcean will take a moment to celebrate its newfound wealth, before doubling down and carrying on that rocketship growth.

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