DigitalOcean on a stratospheric growth path, scoops up cash

Little-known, but rapidly growing cloud platform DigitalOcean succeeds by making it as simple as possible.

DigitalOcean on a stratospheric growth path, scoops up cash
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DigitalOcean is a confusing sort of a vendor. Every time the list of leading public cloud vendors comes out, Amazon Web Services (AWS) is #1, with Microsoft Azure, Google Compute Platform and IBM SoftLayer fighting for the bridesmaid slots. We never hear of DigitalOcean in those reviews. That is partly because some people argue about what constitutes cloud and whether DigitalOcean should really be there.

While these semantic arguments about "true" and "false" clouds go on, however, DigitalOcean has quietly (and not so quietly) been building scale. The company is growing rapidly, indeed, two years ago there had been around 1.5 million Droplets (its term for cloud servers) launched. Today, that figure has grown some 800 percent to 13 million. The company has around 700,000 all-time users and is adding 20,000 customers per month.

That huge level of growth is something of an enigma. You see, building a cloud infrastructure provider is expensive. Very expensive. And while DigitalOcean has raised a fair amount of cash to date ($123 million over three rounds, led by Access Industries and Andreessen Horowitz), that pales in comparison to the billions of dollars of investment that the large public cloud vendors are putting into infrastructure build-out.

That led me to suggest in the past that DigitalOcean is, in fact, being funded by a large data center provider that doesn't feel comfortable outwardly competing with its public cloud customers. I suggested that Equinix could well be the party, a suggestion no one is prepared to verify.

Anyway, growth notwithstanding, DigitalOcean has bought itself some more time with the announcement of a $130 million credit facility that it just secured. On top of the $83 million Series B funding the company raised less than a year ago, the new funding is designed to fuel ongoing growth for the company. And when you consider that DigitalOcean was founded only in 2012, that's a pretty impressive growth record to date—a validation of its founder and executive team and the start they were given through TechStars Boulder.

“These financing transactions contribute to our goal of building the next generation cloud for software developers,” said Ben Uretsky, CEO of DigitalOcean. “We’re excited to release new products and features in the upcoming months that will enable larger production environments to scale on our cloud infrastructure.”

The funding comes in the middle of a bit of a downturn in the investment landscape. It is interesting, therefore, to see the composition of the lenders. KeyBanc Capital Markets Inc. led the financing as Joint Lead Arranger and Joint Bookrunner, and KeyBank National Association is the Administrative Agent and a lender. The other banks participating in the deal include Barclays Bank PLC, Pacific Western Bank, East West Bank, Opus Bank, Webster Bank and HSBC Bank USA.

DigitalOcean may be, as Winston Churchill famously opined about Russia, a riddle wrapped in a mystery inside an enigma. But despite the head-scratching aspects of this story, the company seems to be executing flawlessly.

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