I just got through reading this and here's my perspective on DigitalOcean's latest round of investment:
500,000 developers
6 million droplets deployed (total probably ever - which I probably deployed 100+ alone)
$83 million investment
With these numbers, per customer the current investment would be $166 per developer.
$83 million divided by 6 million droplets = $13.83 per.
Pricing remains stuck at $10/GB. We are speaking of selling 8.3 million GB's of RAM to cover the investment.
But... from their press, says they run over 10k servers at current.
If we say investors believe the company is worth just this latest round:
83,000,0000 / 10,000 server = $8300 income per server. That doesn't work out whatsoever. Even if extended to a year (8300 / 12 = $691 income per month).
Big issues with 10k servers. That's just a ton. Hundreds of racks.
More likely to run ~ $300+ income per month. $300 x 10000 = $3 million a month and $36 million a year.
Do the numbers jive though? 10k servers even at mere 32GB size = 30 containers~ per server. 10,000 servers x 30 containers = 300,000 containers live or 1/20th or 5% of all droplets ever created. Even if all 512MB instances they have 600k containers at 60 containers per server or 10% of all droplets active.
If we take VC divided by high containers currently 83,000,0000 / 600,000 = $138 per droplet. To make $138 per droplet they would have to sell at 1GB for 16+ months to customers to break even just on VC vs. income with a bit thrown on top to cover clearing fees. Realistically with costs accounted for we are talking 2+ years.
They are rolling a snowball down a mountain. Even with the spectacular growth the income is marginal. Company is going to have to mass invest in humans in real life which is very expensive where they are operating. Even if they do the impossible and expand to 1 million "developers". The per customer cost vs. this round of VC alone would be $83 per developer/customer. To recoup that with their pricing would take nearly 1 year at 1GB level and 18~ months at 512MB level. If customers are mass multiple containers live buy in isn't clear and if true means container counts realistically are goofy and low customer retention / active paying. Right now at best they are running 1-1.2 customer to container ratio. (500k customers vs. maybe 600k containers).
As grand as these numbers sound, to accomplish this they have prior VC funding and a big leasing line and still couldn't make it work well enough that had to hit VC very hard again.
Last but certainly not least, we would like to thank you, our community! Thank you for growing with us and for challenging us to be better every day. We wouldn’t be here without you.
A nice touch. Fact is DO wouldn't be where they are if it wasn't for VC investors. Remember these guys aren't new to this business. Been involved in multiple prior shuttered companies that closed in less that wonderful ways or experienced life ending incidents. Whole company is an accounting formula with good top dressing "community" that they paid to have created.
It's a VC play to disrupt the market, in case you haven't yet deduced such. Easy to achieve these numbers with credit giveaways (total customers + all time deployed containers) and monopoly money. But will those customers stay and pay? Probably not. Better hurry up and flip the place. Problem is, who has the deep pockets for such a buyout and wants to own a market disrupter?
