Cloud vendor DigitalOcean today announced that it has raised $83 million in a Series B round of funding led by Access Industries and with the participation of Andreessen Horowitz. The new funding, according to Ben Uretsky, co-founder and CEO of DigitalOcean, will help finance his company's growth, buying new servers and investing in the facilities and assets that are needed to move the company forward.
"We're trying to look two to three years ahead to understand what the capital needs of the business are," Uretsky told eWEEK. "When you go out to raise capital, what you're doing is balancing the valuation against the time horizon."
To date, DigitalOcean has raised $123.4 million in venture capital, with a $3.2 million seed round of funding in July 2013 and a $37.2 million Series A round in March 2014.
Uretsky said that DigitalOcean has been profitable but also has gone through periods where it is burning cash. Currently, the company is on track to return to profitability later this year; overall, the business is fundamentally solid with profit margins that exceed those of Amazon's Web Services (AWS) cloud business, he said. Uretsky declined to provide a specific figure for DigitalOcean's current profit margins.
DigitalOcean is achieving its profit margins with a mix of vendor hardware and its own infrastructure software. Some cloud vendors have chosen to embrace the Open Compute Project (OCP) as a way to build out cloud server infrastructure at a lower cost and greater operating efficiency, but that's not the model that DigitalOcean is taking.
"We're working with the big names that everyone is familiar with, including Dell, Supermicro and HP," Uretsky said. "We're just not seeing the economic margins with OCP, as we don't have specialized requirements."
Uretsky explained that the type of workloads that run on DigitalOcean are well-distributed in nature, making it difficult to optimize for a single specific purpose. DigitalOcean needs a blend of compute, memory, storage and networking that is well-represented in vendor offerings today, he said. Over time, as DigitalOcean becomes more sophisticated, it might make sense to look at purpose-built OCP designs for specific workloads, Uretsky added.
While much of the cloud computing world today is moving toward the open-source OpenStack infrastructure platform, DigitalOcean is not. Uretsky said that at this point it would be very difficult for his company to adopt OpenStack; plus, he doesn't believe that it would offer any significant advantage.
DigitalOcean's infrastructure is currently a purpose-built proprietary code base, but Uretsky is considering taking the software open-source, if it makes sense, at some point.
"At some point in the future, it would be good to see other open-source frameworks take a run at OpenStack, since today I feel like they [OpenStack] are the only game in town," he said. "We come from the open-source world and would like to be able to contribute a project that actually delivers real value."
Today, DigitalOcean users can run Docker or other container formats, including CoreOS' Rocket. Moving forward, Uretsky said that DigitalOcean is working on further enabling containers to make it easier for users to build and deploy container applications.
"We're fully supportive of the flexibility that containers provide, and hopefully next year we'll have some services come out to manage containers on DigitalOcean in a much more meaningful way," he said. "While an individual Docker container is great, where we still fall a little short is in the initial creation of the container, which can be challenging."
Another container challenge is in resource management when container use grows and scales out, Uretsky added.
A key challenge that DigitalOcean had to overcome in 2014 was a security issue related to data being properly deleted from its storage devices. The issue was that DigitalOcean was not by default "scrubbing" user data from its hard drives after a virtual machine instance was deleted by a user. Uretsky said that since the data scrubbing incident, his company has reinforced its security efforts and is forward thinking about the security implications of every aspect of the business. DigitalOcean now has a bug bounty program as well as full-time security engineers on staff who are embedded in the company's software development teams.
"Security is a huge concern for us," Uretsky said. "We now have even open data centers in different regions to comply with individual countries' data privacy laws, so I think we now take security a lot more seriously than when we were first getting started."
Sean Michael Kerner is a senior editor at eWEEK and InternetNews.com. Follow him on Twitter @TechJournalist.