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.

A 'Soho house for techies': VCs place a bet on community

Contrary is the latest venture firm to experiment with building community spaces instead of offices.

Contrary NYC is meant to re-create being part of a members-only club where engineers and entrepreneurs can hang out together, have a space to work, and host events for people in tech.

Photo: Courtesy of Contrary

In the pre-pandemic times, Contrary’s network of venture scouts, founders, and top technologists reflected the magnetic pull Silicon Valley had on the tech industry. About 80% were based in the Bay Area, with a smattering living elsewhere. Today, when Contrary asked where people in its network were living, the split had changed with 40% in the Bay Area and another 40% living in or planning to move to New York.

It’s totally bifurcated now, said Contrary’s founder Eric Tarczynski.

Keep Reading Show less
Biz Carson

Biz Carson ( @bizcarson) is a San Francisco-based reporter at Protocol, covering Silicon Valley with a focus on startups and venture capital. Previously, she reported for Forbes and was co-editor of Forbes Next Billion-Dollar Startups list. Before that, she worked for Business Insider, Gigaom, and Wired and started her career as a newspaper designer for Gannett.

Sponsored Content

Great products are built on strong patents

Experts say robust intellectual property protection is essential to ensure the long-term R&D required to innovate and maintain America's technology leadership.

Every great tech product that you rely on each day, from the smartphone in your pocket to your music streaming service and navigational system in the car, shares one important thing: part of its innovative design is protected by intellectual property (IP) laws.

From 5G to artificial intelligence, IP protection offers a powerful incentive for researchers to create ground-breaking products, and governmental leaders say its protection is an essential part of maintaining US technology leadership. To quote Secretary of Commerce Gina Raimondo: "intellectual property protection is vital for American innovation and entrepreneurship.”

Keep Reading Show less
James Daly
James Daly has a deep knowledge of creating brand voice identity, including understanding various audiences and targeting messaging accordingly. He enjoys commissioning, editing, writing, and business development, particularly in launching new ventures and building passionate audiences. Daly has led teams large and small to multiple awards and quantifiable success through a strategy built on teamwork, passion, fact-checking, intelligence, analytics, and audience growth while meeting budget goals and production deadlines in fast-paced environments. Daly is the Editorial Director of 2030 Media and a contributor at Wired.
Fintech

Binance CEO wrestles with the 'Chinese company' label

Changpeng "CZ" Zhao, who leads crypto’s largest marketplace, is pushing back on attempts to link Binance to Beijing.

Despite Binance having to abandon its country of origin shortly after its founding, critics have portrayed the exchange as a tool of the Chinese government.

Photo: Akio Kon/Bloomberg via Getty Images

In crypto, he is known simply as CZ, head of one of the industry’s most dominant players.

It took only five years for Binance CEO and co-founder Changpeng Zhao to build his company, which launched in 2017, into the world’s biggest crypto exchange, with 90 million customers and roughly $76 billion in daily trading volume, outpacing the U.S. crypto powerhouse Coinbase.

Keep Reading Show less
Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers crypto and fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Google Voice at (925) 307-9342.

Enterprise

How I decided to leave the US and pursue a tech career in Europe

Melissa Di Donato moved to Europe to broaden her technology experience with a different market perspective. She planned to stay two years. Seventeen years later, she remains in London as CEO of Suse.

“It was a hard go for me in the beginning. I was entering inside of a company that had been very traditional in a sense.”

Photo: Suse

Click banner image for more How I decided seriesA native New Yorker, Melissa Di Donato made a life-changing decision back in 2005 when she packed up for Europe to further her career in technology. Then with IBM, she made London her new home base.

Today, Di Donato is CEO of Germany’s Suse, now a 30-year-old, open-source enterprise software company that specializes in Linux operating systems, container management, storage, and edge computing. As the company’s first female leader, she has led Suse through the coronavirus pandemic, a 2021 IPO on the Frankfurt Stock Exchange, and the acquisitions of Kubernetes management startup Rancher Labs and container security company NeuVector.

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.

Enterprise

UiPath had a rocky few years. Rob Enslin wants to turn it around.

Protocol caught up with Enslin, named earlier this year as UiPath’s co-CEO, to discuss why he left Google Cloud, the untapped potential of robotic-process automation, and how he plans to lead alongside founder Daniel Dines.

Rob Enslin, UiPath's co-CEO, chats with Protocol about the company's future.

Photo: UiPath

UiPath has had a shaky history.

The company, which helps companies automate business processes, went public in 2021 at a valuation of more than $30 billion, but now the company’s market capitalization is only around $7 billion. To add insult to injury, UiPath laid off 5% of its staff in June and then lowered its full-year guidance for fiscal year 2023 just months later, tanking its stock by 15%.

Keep Reading Show less
Aisha Counts

Aisha Counts (@aishacounts) is a reporter at Protocol covering enterprise software. Formerly, she was a management consultant for EY. She's based in Los Angeles and can be reached at acounts@protocol.com.

Latest Stories
Bulletins