DigitalOcean Raises $37.2M in New Funding to Build Cloud

What will the fast-growing cloud startup do with all the new money?

Fast-growing cloud startup DigitalOcean today announced that it has raised $37.2 million in a Series A round of funding.

The new funding round was led by venture capital firm Andreessen Horowitz and included participation from CrunchFund and IA Ventures. DigitalOcean had previously raised a $3.2 million seed round of funding in July 2013.

The new funding will be used to expand DigitalOcean's hardware and employee base as the company continues to scale.

"We're growing quickly, and we're focused on hiring engineers as we scale," Mitch Wainer, chief marketing officer at DigitalOcean, told eWEEK.

With the new funding, DigitalOcean will hire engineers, build out its community and add capacity throughout the world, Wainer said.

DigitalOcean first launched in October 2011, though it wasn't until 2013 that the company began to grow exponentially. According to Web survey firm Netcraft, DigitalOcean only had 100 Web-facing servers in December 2012. By June 2013, Netcraft reported that DigitalOcean had more than 7,000 Web-facing servers.

A key part of DigitalOcean's success has been its low pricing strategy, which has an entry point of only $5 a month for a server with 512MB of memory and a 20GB solid-state drive (SSD). DigitalOcean's top-end plan currently costs $80 a month and includes a server with 8GB for memory and an 80GB SSD.

The sweet spot for DigitalOcean, however, is its $20-a-month plan, which provides a server with 2GB of RAM and 40GB of SSD storage. DigitalOcean claims that its rivals, including Amazon and Rackspace, charge three to four times as much for the same type of cloud server.

Although DigitalOcean's customer roster grew rapidly in 2013, the company did face challenges.

At the end of 2013, DigitalOcean ran into some security issues when it was revealed that the company was not thoroughly scrubbing deleted user data from its cloud infrastructure. The risk was that a user could potentially get access to data that another user had attempted to delete. In January, DigitalOcean CEO Moisey Uretsky told eWEEK that his company now properly scrubs all data when it is deleted.

As DigitalOcean continues to grow, the company will face new challenges in the months and year ahead. Wainer told eWEEK that for him a key challenge is to keep it simple.

"We've continued to focus on building a product that we're passionate about because we know that if we're passionate about it, then our developer community will be too," Wainer said.

DigitalOcean's game plan is not necessarily about seeking out differentiators with its competitors, such as doing something faster or better, Wainer added.

"At the end of the day, everyone’s building with the same tools," he said. "What we want to focus on is user experience, similar to how Apple focuses on design. We want developers to have a sense of familiarity and joy while using our service that brings one word to mind: love."

Sean Michael Kerner is a senior editor at eWEEK and Follow him on Twitter @TechJournalist.

Sean Michael Kerner

Sean Michael Kerner

Sean Michael Kerner is an Internet consultant, strategist, and contributor to several leading IT business web sites.