How DigitalOcean Went From A Small Cloud Startup To A Powerhouse Taking On Amazon and Rackspace

Posted Aug 10, 2013

DigitalOcean used to be a simple and small cloud hosting startup based in New York.  The team behind the company ended up participating in the summer 2012 class of the TechStars startup accelerator program and today they have over 225,000 cloud servers.  They are now the fourth fastest growing cloud hosting provider and is the second fastest growing cloud provider.

The best part of the company is that they have starter plans at a low price of $5 per month, which really benefits indie developers.  Not bad considering that developers likely spend more on coffee every day.  The $5 starter plan includes 512MB memory, 1 core, 20GB SSD disk, and 1TB transfer.  This is one of the reasons why many developers prefer DigitalOcean over companies like Rackspace and  Compared to their competition, DigitalOcean’s dashboard manager is easy to use.

“We have a 99.99% up-time,” stated DigitalOcean co-founder Mitch Wainer.  Wainer told me that when the company first joined TechStars, they had around 170 customers.  Throughout the three month period that the company was at TechStars, they did some major a/b testing and redesigned the website.  By the end of TechStars, they had around 400 customers.

In late 2012, DigitalOcean decided to disrupt the server market by doubling the memory offered with SSDs across the board.  DigitalOcean’s closest competitor was charging $20 for the same service while they charged $5.  The announcement of that new service was made in February 2013.  Today DigitalOcean has around 32,000 customers.  After an article about DigitalOcean’s bench tests went viral on Hacker News, many indie developers signed up.  Around 500 new subscribers are joining per day now.

When I asked Wainer how they are able to sustain their company by offering a low price, he told me that their “margins are reasonable and allows them to be competitive.”  DigitalOcean recently opened a data center in San Francisco and asecond NYC data center earlier this month in Google’s 111 Eight Avenue building.  The company has implemented an auto-scale system if the developer’s needs increase.

I asked Wainer if DigitalOcean has ways to easily implement a CMS.  “We have one-click installs for WordPress and one-click installs for Ruby-on-Rails.  We also have over 230 tutorials available for developers that need technical assistance.”

Seed Round: Earlier this week, DigitalOcean raised a $3.2 million seed round.  The funding was led by IA Ventures with participation from CrunchFund and TechStars.  DigitalOcean will be using the funding to hire additional marketing and engineering talent.  DigitalOcean has tripled their employee count from 12 employees to over 30 people today since this past January.  DigitalOcean is planning to add support for CDNs, loading balancing, and usage graphs sometime in the near future.

Disclosure: Pulse 2.0 is a Rackspace customer and we pay them every month for their services.  Our business with them has no influence on this article.