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Venture Capital Firm Andreessen Horowitz Secures $37 Million for DigitalOcean
DigitalOcean is a fast-growing startup that provides cloud hosting services to small developers at a cheaper rate than major cloud computing providers like Amazon Web Services and Microsoft Windows Azure. In August 2013, DigitalOcean raised $3.2 million. Already that $3.2 million investment has run dry and more employees and data centers are needed to keep up with growth. They contracted the services of Silicon Valley venture capital firm Andreessen Horowitz for another round of financing, this time bringing in $37 million.
DigitalOcean was founded in June 2011; they created their millionth cloud server in January 2014. The company found success attracting smaller, independent developers to rent out their digital servers at rates as low as $0.007 an hour.
“Before we came along, there was really no one else that occupied that space and was focused on the experience that a user would get,” DigitalOcean co-founder and CEO Ben Uretsky said in a recent interview with Forbes, remarking on how targeting lower-end users allowed the company to compete with Amazon and Microsoft and eventually turn a profit.
Although they focus on lesser known customers, DigitalOcean works with some big names as well. They run Beyoncé’s website and they have completed projects for Nike.
Andreessen Horowitz does not often work with companies outside the Valley, but they made an exception for the New York City-based DigitalOcean. Looking at the rate of growth the company has shown recently, it’s easy to see why Andreessen Horowitz was willing to make this exception. At the start of 2013 DigitalOcean has only 2,000 customers, now they have more than 150,000. DigitalOcean became profitable in the latter half of 2013.
DigitalOcean is not the only cloud computing startup to receive funding from venture capitalists. Dropbox, a cloud storage service, has raised more than $350 million in venture capital. Another company, Notion Capital, is a venture capital firm that focuses on internet services. Notion Capital solicited funds to expand BCSocial, a company that uses to cloud to help businesses collaborate, and Star, a UK-based cloud hosting provider with over 5,000 customers and $60 million in annual revenue.
Money doesn’t lie. Cloud computing has many useful features, such as being able to instantly increase bandwidth to meet business needs, simple and painless disaster recovery, and the ability to work and collaborate from anywhere with internet access. These features will continue to attract customers and draw investment. This is not just another passing tech fad; cloud computing is here to stay.
By Glenn Blake