Docker just landed $105 million in new funding, and lead investor Bain Capital Ventures thinks the container pioneer is in line for its long-awaited IPO down the road.
The new Series C funding acknowledges Docker’s turnaround progress since its recapitalization and restructuring in November 2019, according to Docker CEO Scott Johnston. That’s when Docker ditched its enterprise software strategy with the sale of its Docker Enterprise platform business to Mirantis and refocused its product and marketing strategy on its developer roots.
The company, which marked its ninth year this month, has retrained its efforts on making application development easier for software developers with tools and services including Docker Desktop, software that helps developers build and share containerized applications and microservices, and the Docker Hub container image repository.
Docker didn’t seek out its latest financing round since the 2019 restructuring, which brings the amount raised since then to $163 million and values the company at $2.1 billion, according to Johnston. Enrique Salem, a partner at Bain Capital Ventures who’s joining Docker’s board, approached the company several months ago, Johnston said.
Salem counts Docker as one of the small number of companies that “matter broadly” in the developer ecosystem, he said. The others are Atlassian, which participated in Docker’s latest funding round and counts Salem as a board member, and Microsoft-owned GitHub.
Docker developed and popularized a developer-friendly, open-source format for using containers in 2013 that became a standard for application development as cloud computing adoption started to accelerate. Containers play an important role in speeding up software development by packaging together code and everything else needed to build and more flexibly deploy applications, without the overhead of an operating system.
Docker raised more than $300 million from investors over the next several years, and it became one of the first enterprise-tech “unicorns” privately valued at more than $1 billion. But expectations for a big IPO were dashed after Docker failed to find solid commercial footing.
Its expansion into container orchestration was thwarted by the success of the open-source Kubernetes project, and its plan to become an enterprise software and services company targeting Fortune 500 companies under former Concur CEO Steve Singh faltered.
Johnston, a longtime Docker executive, became CEO of the much-smaller, post-Mirantis company in 2019.
Turning the ship
Salem characterized Docker’s restructuring progress as “exceptional” and “unique.”
“There's really been a clear acknowledgement by developers that Docker is an essential part of software development,” Salem said. “We see an opportunity to really start with the core Docker Desktop product that is built on Docker Engine and really extend to a lot of adjacencies to help developers.”
Bain can help Docker think through how to continue to scale and prepare for an IPO, Salem said.
“As the company progresses, we think it has all the attributes [to go public],” he said. “The addressable market for Docker is just very, very big, and we see an opportunity to build one of the iconic companies.”
With the new funding, Docker will focus on further simplifying the developer experience around Kubernetes, providing tools for developing secure applications and further leveraging ecosystem partnerships. It also will use channel partners to expand outside its primary growth areas of North America and western Europe and sell Docker in regions including Asia-Pacific and South America.
“While cloud-native is super exciting, and [there’s] lots of new tech coming up, that tech can be intimidating or complex for development organizations to adopt,” Johnston said. “In particular, Kubernetes is everywhere. But writing applications for developers to deploy to Kubernetes is still somewhat complex. We're going to double down on making it easy for developers to build applications for and ship to Kubernetes whether it's on premises, whether it's in the cloud.”
Docker also will help developers build more secure applications to combat increasing supply chain attacks, Johnston said.
“That starts with providing them with trusted content out of the box that they know they can rely on, they know is being patched and maintained, and the vulnerabilities are being immediately addressed inside those images,” he said.
The year of the Linux desktop
Docker Desktop for Linux – the No. 1 most requested feature on Docker’s product roadmap for the last year, according to Johnston — is slated to come out of beta at the end of April, adding to a portfolio that includes Docker Desktop for Mac and Docker Desktop for Windows.
“The private feedback has been really exciting, because it just kind of unifies the experience, regardless of what laptop they're on — whether it's Mac, Windows or Linux,” Johnston said. “Linux developers are now getting a great kind of rich development experience, whereas before they just had the Docker Open Source project, which is great, but it's not a full desktop experience that Docker Desktop provides. We think it opens up another 25% of the market for us.”
Johnston also suggested that third-party partners will soon be able to add new features to Docker Desktop.
“You're going to see that manifestation of that very, very soon,” he said. “Docker Desktop today provides great functionality, but we have hundreds of partners that want to augment that functionality with their own and provide a great integrated developer experience.”
The path ahead
Docker last month reported its annual recurring revenue topped $50 million for the fiscal year that ended Jan. 31, its second full fiscal year since its restructuring. That’s four times better than the previous year.
That growth has been driven by the increased demand for new applications and new developers to build those applications, particularly since the coronavirus pandemic accelerated the shift of professional, personal and social activities online. At the same time, a surge in software supply chain attacks makes securing those applications paramount.
“The stats that we see from IDC are that there's going to be 500 million new applications developed in the next couple of years, and that is more than all applications that have been developed in the 40 years of the history of IT,” Johnston said. “There's a huge realization of the need for tools that help developers build apps quickly, help them build them securely and help them build them in a portable way that allows them to deploy them to any cloud, any infrastructure.”
Docker is chasing a nearly $50 billion annual developer market opportunity that’s growing 22% year over year, according to Johnston, who cited Dell Technologies Capital statistics. The number of developers is estimated to increase to 45 million in this decade, from the current approximately 25 million.
With interesting timing, on Wednesday former Docker founder Solomon Hykes launched his new startup, Dagger, with $20 million in Series A funding to help DevOps teams deploy modern applications.
“[There’s] massive amounts of budget being focused on developers to help developers be productive, to ship quickly, to have impact on the digital application environment that's exploding and to do so in a way that's more secure and more collaborative than ever,” Johnston said.
To better capitalize on that market, Docker last year updated its product subscriptions and pricing to a per-seat model that includes four tiers ranging from the free personal subscription to the newest business subscription for medium and large businesses at $21 per month, per user.
“Before the restructuring in 2019, the way we were monetizing was very much kind of an operator or a data center monetization, meaning we were monetizing on a per-core or per-node, per-CPU basis,” Johnston said. “But that's not how developers and developer teams consume [the] product, so we changed our pricing … to a per-seat pricing model.”
In just five months, Docker Business accounted for more than half of Docker’s growth and recurring revenue in the last fiscal year, according to Johnston. With the new momentum and funding, Johnston said he’s not worried about repeating mistakes of the past or Docker losing its focus.
“Anytime you take investment money, it's to achieve a return for those investors, and so the expectation is that, of course, we're going to continue to grow the business and scale our impact,” he said. “But the last 2.5 years and the results of those 2.5 years … give us confidence that we're on the right track. We're pretty excited about the road ahead.”