DigitalOcean Rakes in $775M Via IPO, Takes Valuation to $4.5B

New York-based cloud solutions provider DigitalOcean solidified its presence in the cloud computing market by raising $775 million through an initial public offering (IPO) at NYSE last week. Now valued at $4.48 billion, the company aims to become the first-choice cloud provider for developers, startups, and small and medium-sized businesses (SMBs). 

DigitalOcean was raised in 2011 by ServerStack founders Ben and Moisey Uretsky as a one-stop cloud infrastructure solutions provider for small-scale businesses and developers who were not the focus market for the leading cloud providers of the time. Headquartered in New York, the company aims to create a niche for itself by enabling software developers to rapidly build, deploy, and scale applications on the cloud.

The company’s solutions stack encompasses cloud storage, networking, computing, application development, and managed databases, with a Kubernetes-based container service and small-scale virtual machines- called Droplets- serving as its flagships. Operating 14 leased data centers in the United States, Germany, Canada, the UK, India, the Netherlands, and Singapore, DigitalOcean recently clocked over 5 million unique monthly visitors.

While it did run into financial headwinds, DigitalOcean has been clocking increasing revenues year-over-year, driven by its low-cost cloud offerings for the small-scale sector and for individual developers, and also driven by the fast-paced adoption of cloud storage, networking, and computing solutions by organizations worldwide.

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The company earned a revenue of $203.1 million in 2018, $254.8 million in 2019, and $318.4 million in 2020, while also raising around $300 million through various fundraisings since 2016. These cash inflows helped it touch a valuation of $1.15 billion last year and helped it support increasing demand from entrepreneurs and SMBs worldwide, driven by the onset of the COVID-19 pandemic early last year.

Despite the increasing growth in revenues, DigitalOcean struggled to attain profitability in recent years. Its net loss touched $43.6 million last year, up 7% from 2019- indicating that the funding rounds since 2016 did little to help it absorb operating costs even though revenues jumped in the period. However, 2021 could prove to be a turning point in the company’s decade-long financial history.

Last week, DigitalOcean underwent a highly-publicized initial public offeringOpens a new window at NYSE, raising 775 million and boosting its valuation to an impressive $4.48 billion. However, the final valuation fell short of an expected $5 billion as its stock price closed at $42.50, 10% lower than the initial listing price of $47. Nevertheless, the fresh cash inflow and its acquisition of Nanobox in 2019 should help DigitalOcean modify its solutions stack with cloud analytics tools and acquire new data centers to service a larger customer pool in the future.

Despite the cloud solutions market focusing on hyper scale computing and edge networking, DigitalOcean plans to keep it simple and stay attuned to individual developers and smaller businesses’ needs. “Our mission is to simplify cloud computing so developers and businesses can spend more time creating software that changes the world. Simplicity is a core value to us,” says CEO Yancy Spurill.

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The company, however, does not intend to compromise on the quality of performance and user experience for the sake of simplicity. In February, DigitalOcean unveiled Premium Droplets- small-scale virtual machines featuring high-performance processors supplied by the likes of AMD and Intel.

The Intel variant comes with built-in AI acceleration and Intel mesh architecture, offering a base frequency of 2.50 GHz and max turbo frequency of 3.90 GHz. On the other hand, the AMD variant comes with 2nd Gen AMD EPYCâ„¢ processors that offer a base frequency of 2.0 GHz, a max boost frequency of 3.35 GHz, and support memory speeds of up to 3200 MHz.

“As our customers grow their businesses and test ideas with new applications, they need a variety of compute options to meet their needs. For those who want more power and control over their infrastructure, Premium Droplets offer a highly performant, faster central processing unit (CPU) option without having to upgrade to one of our dedicated compute plans. 

“This is the perfect solution for startups and SMBs who are launching new products and want to keep costs down without compromising performance,” said Apurva Joshi, VP of Product, DigitalOcean.

Do you think DigitalOcean’s focus on developers and SMBs is the right approach in the competitive cloud computing market? Comment below or let us know on LinkedInOpens a new window , TwitterOpens a new window , or FacebookOpens a new window . We’d love to hear from you!