Enterprise

Newly public, DigitalOcean still wants to be a boutique cloud

With Wednesday's IPO, DigitalOcean raised $775 million to expand its developer-focused cloud infrastructure services for smaller customers around the world.

DigitalOcean CEO Yancey Spruill (center) rings the opening bell at the New York Stock Exchange on Wednesday, March 24, 2021.

DigitalOcean CEO Yancey Spruill (center) rings the opening bell at the New York Stock Exchange on Wednesday, March 24, 2021.

Photo: New York Stock Exchange

If you can't beat 'em, do something they can't.

That might as well be the mantra for DigitalOcean, which competes against enormous companies like AWS, Microsoft and Google in the lucrative market for cloud infrastructure services.

The company, which made its debut on the New York Stock Exchange Wednesday, emphasizes simplicity, affordability and customer support tailored to the needs of smaller organizations that can get lost inside enterprise-oriented cloud providers, said Yancey Spruill, CEO of DigitalOcean.

"Our founders ... nailed the fact that small businesses, startups [and] entrepreneurs have historically been underserved by big technology solutions," Spruill said in an interview with Protocol. "They need a simple, narrow and easy set of solutions."

That group doesn't have nearly as much money to spend on information technology as the large enterprise customers of the world, but Spruill said DigitalOcean generated cash in the fourth quarter of 2020 and should also generate cash from its operations every quarter in 2021. On a GAAP basis, the company lost $43.6 million in 2020 on revenue of $318.4 million, a 25% jump in revenue compared to 2019.

DigitalOcean CEO Yancey Spruill on the floor of the New York Stock Exchange. DigitalOcean CEO Yancey Spruill on the floor of the New York Stock Exchange on the day his company's shares started trading.Photo: New York Stock Exchange

DigitalOcean didn't see the big first-day pop in its stock price that other enterprise tech IPOs over the last six months have gotten. The company sold shares at $47, but trading started at $44.15 and stayed below the offering price all day, closing at $42.50. That left the company worth around $4.5 billion, including some unissued stock compensation — about 10% short of the value it would have held at the offering price.

Whereas companies like AWS offer hundreds of cloud services, including many that those providers manage for customers, DigitalOcean keeps it basic, with virtual machines running chips from Intel and AMD, block storage and networking. The company added a managed Kubernetes service in response to demand for the container orchestration technology, Spruill said, and also offers three managed open-source databases, but that's mostly it.

As a result, DigitalOcean doesn't have to invest nearly as much in hardware — servers, hard drives and networking equipment — to serve its customers. For comparison, DigitalOcean spent just $98 million in computer equipment during 2020, according to its S-1 filing. AWS spends billions each quarter on new computing equipment.

"Our investment is narrow in the sense that we don't have to invest for a broad set of use cases that you have to do in the enterprise," Spruill said.

AWS itself started out life as a small, developer-oriented service 15 years ago and ballooned into one of the biggest providers of information technology services on the planet, with Microsoft and Google following suit. Spruill and DigitalOcean believe that there is plenty of demand from companies that want to test new ideas or build new lines of business on the internet, but can't get the level of support the Big Three lavish on their largest clients.

"Early-stage businesses or two-person startups, they don't have the expertise or the time to spend figuring things out on their infrastructure on their application; it needs to work." Spruill said.

Still, the big cloud providers spend a lot of time and energy courting startups, dangling credits for limited amounts of free services and recounting the stories of now-massive companies that have scaled on the back of their infrastructure. DigitalOcean's long-term bet is that as the cloud matures, the customer and developer experience offered by cloud providers will become just as important as the hardware and the services.

"They recognize that the silicon, network, and other components are commodities, and it is their ability to provide a simplified developer experience that differentiates them," Peter Levine, a partner with Andreessen Horowitz and early investor in DigitalOcean, wrote in a blog post Wednesday.

Fintech

Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

The ways Zia Faruqui (right) has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster.

Photo: Carolyn Van Houten/The Washington Post via Getty Images

“Cryptocurrency and related software analytics tools are ‘The wave of the future, Dude. One hundred percent electronic.’”

That’s not a quote from "The Big Lebowski" — at least, not directly. It’s a quote from a Washington, D.C., district court memorandum opinion on the role cryptocurrency analytics tools can play in government investigations. The author is Magistrate Judge Zia Faruqui.

Keep Reading Show less
Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

The financial technology transformation is driving competition, creating consumer choice, and shaping the future of finance. Hear from seven fintech leaders who are reshaping the future of finance, and join the inaugural Financial Technology Association Fintech Summit to learn more.

Keep Reading Show less
FTA
The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.
Enterprise

AWS CEO: The cloud isn’t just about technology

As AWS preps for its annual re:Invent conference, Adam Selipsky talks product strategy, support for hybrid environments, and the value of the cloud in uncertain economic times.

Photo: Noah Berger/Getty Images for Amazon Web Services

AWS is gearing up for re:Invent, its annual cloud computing conference where announcements this year are expected to focus on its end-to-end data strategy and delivering new industry-specific services.

It will be the second re:Invent with CEO Adam Selipsky as leader of the industry’s largest cloud provider after his return last year to AWS from data visualization company Tableau Software.

Keep Reading Show less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Image: Protocol

We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

As of today, we will not publish any more stories. All of our newsletters, apart from our flagship, Source Code, will no longer be sent. Source Code will be published and sent for the next few weeks, but it will also close down in December.

Keep Reading Show less
Bennett Richardson

Bennett Richardson ( @bennettrich) is the president of Protocol. Prior to joining Protocol in 2019, Bennett was executive director of global strategic partnerships at POLITICO, where he led strategic growth efforts including POLITICO's European expansion in Brussels and POLITICO's creative agency POLITICO Focus during his six years with the company. Prior to POLITICO, Bennett was co-founder and CMO of Hinge, the mobile dating company recently acquired by Match Group. Bennett began his career in digital and social brand marketing working with major brands across tech, energy, and health care at leading marketing and communications agencies including Edelman and GMMB. Bennett is originally from Portland, Maine, and received his bachelor's degree from Colgate University.

Enterprise

Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

As companies expand their use of AI beyond running just a few machine learning models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

Photo: artpartner-images via Getty Images

On any given day, Lily AI runs hundreds of machine learning models using computer vision and natural language processing that are customized for its retail and ecommerce clients to make website product recommendations, forecast demand, and plan merchandising. But this spring when the company was in the market for a machine learning operations platform to manage its expanding model roster, it wasn’t easy to find a suitable off-the-shelf system that could handle such a large number of models in deployment while also meeting other criteria.

Some MLops platforms are not well-suited for maintaining even more than 10 machine learning models when it comes to keeping track of data, navigating their user interfaces, or reporting capabilities, Matthew Nokleby, machine learning manager for Lily AI’s product intelligence team, told Protocol earlier this year. “The duct tape starts to show,” he said.

Keep Reading Show less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories
Bulletins