DigitalOcean CEO Yancey Spruill, left, will speak at the Web Conference in Lisbon, Portugal, on November 6, 2019.
Sam Barnes | Sport File for Web Collection Getty Images
The market for cloud computing infrastructure to power applications has grown significantly since Amazon introduced its first cloud services in 2006, but U.S. investors have not had a good way to invest. -only in clouds.
That will change in the coming weeks when a company called DigitalOcean begins trading on the New York stock exchange under the symbol “DOCN.”
Buying shares of Amazon – or Alibaba, Google, IBM, Microsoft or Oracle – has resulted in a small percentage of exposure on the public cloud. DigitalOcean is different because it does nothing else.
The company will start with a much lower valuation than these other companies. In an update Monday to the outlook for its first public offering, DigitalOcean said it plans to sell shares at $ 44 to $ 47 per share, which would give it a market cap of about $ 4.8 billion at mid-range . DigitalOcean also said that Tiger Global and an affiliate linked to mainstream investor Access Industries are looking to buy up to $ 175 million in the company’s shares at the time of the IPO.
Unlike Amazon Web Services ’public cloud market leader, DigitalOcean is not profitable. It lost nearly $ 44 million in 2020, compared to a loss of $ 40 million in 2019. DigitalOcean is also growing slower than AWS, despite AWS generating 142 times more revenue. in. AWS revenues in 2020 totaled $ 45.37 billion, up 29.5%, while DigitalOcean accounted for 25% revenue growth.
Maybe that’s okay, because DigitalOcean has something special: Simplicity. It’s not terrible for new users, who end up increasing their spending on DigitalOcean services over time.
Simplicity is one of the four principles chosen by the founders when DigitalOcean started in 2012. “We embrace infrastructure technology and simplify it across all aspects of the product experience,” wrote CEO Yancey Spruill, former vice president of operations and head of finance at SendGrid. letter to investors in the guide.
A handful of results
Since 2006 AWS has introduced a wide range of services to take over software developers, and their customer list has grown exponentially, with big names like Apple paying hundreds of millions each year.
That’s not DigitalOcean’s path. It has only a handful of products, including virtual Linux-based tools called droplets, data storage options, network tools and three databases. Unlike Amazon, there are no machine learning services, application tools, database migration technologies or media transmission systems. It runs 6,000 tutorials designed to help people get going.
DigitalOcean also tries to stay simple with prices and the bills it sends each month to its nearly 600,000 customers.
DigitalOcean took a swipe at the major public cloud vendors in its forecast, saying their products are not intuitive enough for single developers and small businesses and that they “suffer from near-feature complexity. endless and have tea and billing habits that are often attached. large hidden costs. “As a result, the company said, small businesses are often unable to enjoy the benefits of cloud computing.
“Companies often need dedicated employees, price analysis tools or even specialized consultants to understand how their products are priced and how they manage their bills,” he wrote.
If DigitalOcean has found a sweet spot, it is with small businesses, rather than large enterprises, that the big clouds have been fighting in the last few years. It is a self-service business that does not rely heavily on a large group of retailers. That way it will be similar to website construction company Wix and e-commerce software maker Shopify.
The New York-based company also has foreign access. Instead of touting S&P 500 clients in its preview, DigitalOcean showcases customers such as Bunnyshell from Romania, Cloudways of Malta, Jiji from Nigeria, Vidazoo of Israel and Whatfix of India. In 2020 38% of DigitalOcean’s revenue came from North America; by comparison, 68% of Amazon’s 2020 revenue came from the U.S.
DigitalOcean has yet to take a leading role in the cloud infrastructure market, however, and some of its customers may switch to more complete cloud providers as their needs evolve.
But DigitalOcean is optimistic. In the forecast, the company said it expects more than 14 million SMEs to be created each year, and its founders may not come with sharp technical skills. “These people are able to accelerate simple and reliable development tools and widely available and significantly lower cost for cloud computing to start companies,” the company said.
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