
DigitalOcean raises $3.2M Seed Round - beigeotter
http://techcrunch.com/2013/08/07/fast-growing-cloud-hosting-service-digital-ocean-raises-3-2m-seed-round-led-by-ia-ventures/
======
badclient
From DigitalOcean's cofounder on Quora:

 _We applied to TechStars in NYC first because we were based in NYC and we got
in right before the early app deadline. After meeting David Tisch at TechStars
4 A Day he flat out told us he doesn 't understand our space so it would be
hard for him to pick us, because part of his decision is to determine how he
as the program director can help accelerate our growth._

 _We did become a finalist but weren 't selected and he recommended us to
TechStars Boulder. So we flew out there for TechStars 4 A Day and went through
the process again. _

Full post: [http://www.quora.com/Startups/If-youre-rejected-from-an-
incu...](http://www.quora.com/Startups/If-youre-rejected-from-an-incubator-is-
it-okay-reapply-after-youve-made-more-progress-on-your-product)

------
holdenc
Pretty amazing that a company like DigitalOcean can shake-up the market for VP
servers prior to even taking funding. Their $5 servers have changed the game
for nearly every hosting company that offers virtual servers. And to think
they've managed to offer this while bootstrapped, is incredible.

~~~
yapcguy
Not really. How did it change the game for service providers over at
LowEndBox.com, who have been providing VPS servers for $5 or less, before
DigitalOcean even existed?

~~~
dscb
Hourly Billing

Stored backups (for free) of servers that you can set up at a later date
instantly via an api

It's not about being a $5 vps for me, it's about being able to pay $0.014 when
I need a small vps for 2 hours.

~~~
jeffasinger
Hourly billing is huge for us.

Our service is mostly CPU bound, embarrassingly parallel, and so far, 90% of
usage is centered on a time slot that's about 8 hours per week long.

We will save a ton of money by scaling down during the off hours, which means
only Amazon, Rackspace, and a few others make any sense at all.

~~~
nthnclrk
I agree. This was massive for me. Being able to create a Droplet (from an
existing backup) within a minute, test out an installation for a day, and have
it cost almost nothing is huge.

------
memset
This is really neat. One question: How are these folks able to keep such low
prices?

For example, I run several servers on rackspace. Their least expensive option
(512MB RAM, 1 core, 20GB disk) is $16.00 per month.

DigitalOcean's is $5.00 per month. On the face of it, they are identical
offerings but triple the price.

Rackspace does offer other features (load balancing, cloudfiles, and other
useful things which integrate nicely with their servers.) Is that the value
proposition of AWS/Rackspace over these other companies, which only give you
vanilla servers?

~~~
snewman
I keep hearing great things about DigitalOcean, but the critical price
parameter for me is flash storage, and they don't seem to be beating AWS here.
The larger DigitalOcean plans are $1 / GB / month for flash. An EC2
hi1.4xlarge instance has 2TB of flash. At on-demand pricing, $3.10/hr x 24
hours x 30 days == $2232/month, which is slightly more expensive. But reserved
instances bring that down very quickly. A "Light Utilization" instance only
costs $3884 upfront for a three-year term. Even if you amortize that over just
12 months, it works out to $1152/month, almost 2x as cost-effective as
DigitalOcean. (Of course, with DigitalOcean you're getting a lot more CPU and
RAM per GB of SSD, but only compared to the h1.4xlarge which is deliberately
flash-heavy.)

This is not to run down DigitalOcean, but if you take reserved instances into
account then they don't necessarily beat EC2 pricing. Or am I missing
something?

~~~
rismay
For me, they are really good on the low end. I love the fact that they offer a
$5 per month instance size. Plus, since I joined during the beta period I get
unlimited bandwidth for free. This beats the $15 per month AWS instance sizes
or the lowest Google option of like $30 bucks. Also, it's like 2x faster than
AWS. Finally, for hacking you can easily use a $5 server to replace a service
like Cloudant as your backend during testing. I've had cases where I would
have been charged hundreds of dollars for API calls which a $5 DigitalOcean
server handled marvelously. Or you can use it host a high performance blog:
[http://jasonormand.com/2012/07/20/introducing-lempress-
super...](http://jasonormand.com/2012/07/20/introducing-lempress-super-easy-
wordpress-server-setup/)

~~~
Kudos
I thought the unlimited bandwidth thing was only until they start measuring
it?

~~~
jeffasinger
I think customers that signed up a long time ago get unlimited bandwidth
forever so long as they don't do certain things (Tor, Bittorents, run a CDN)

------
nikcub
One of my favorite startups. I signed up for a single server some time ago to
try them out and was amazed when I saw the control panel, API and the
ecosystem that has already built up around the service.

To those of you asking what is so special about DO compared to ExyExtraVps.is
running stock WHMCS[1] or whatever over at LEB it is that DO are providing the
type of features, flexibility and support that Rackspace, AWS and Azure
provide but at prices that are close to what the low-end VPS types offer.

If you imagine a Gartner-style quadrant for hosting with price on one axis and
then features/support/flexibility on another most providers today sit
somewhere along a very straight line - you either have a bunch of features and
flexibility and are expensive or you are very rigid and cheap. DO is right up
in high features but low price, and it seems so obvious in hindsight (Linode
were almost there).

I now have Vagrant setup with Digital Ocean as a provider[2] so setting up a
box is as easy as running 'vagrant up --provider=digital_ocean' and then
waiting a minute. There are tons of other tools already built up around their
API and the ecosystem is thriving. I have another script setup ready to fire
up additional instances of web apps.

I'm moving everything I can and that fits from AWS and recommending DO to
clients also where it would fit (staging servers, dev servers, backup servers,
etc.) There are still some features they need - like load balancing, multiple
IP's etc. but this funding means all of that is going to be built sooner.

There is a reason why they are one of the fastest growing hosts ever[3]. These
guys are destined to get really really big.

There is also a great effect wherever digital ocean is mentioned online you
find a comment thread with dozens of users saying how awesome they are. You
can't buy that type of love.

[1] Not to mention that all of that off-the-shelf VPS software running these
sites is an absolute security nightmare. The developers rely on hiding their
poor code behind ioncube encoding and this has been exposed recently with some
big name hacks.

[2] [https://github.com/smdahlen/vagrant-
digitalocean](https://github.com/smdahlen/vagrant-digitalocean)

[3] Netcraft: The meteoric rise of Digital Ocean:
[http://news.netcraft.com/archives/2013/06/13/the-meteoric-
ri...](http://news.netcraft.com/archives/2013/06/13/the-meteoric-rise-of-
digitalocean.html)

edit: forgot to include this earlier, but by way of a disclaimer I introduced
Digital Ocean to Crunchfund but don't have a financial stake.

~~~
mikevm
I've been out of the webdev loop for years so I've never used Vagrant, but
I've read a bit about it and I see it mentioned all the time. I understand
that Vagrant is used to quickly set up virtual machines (and all the required
software) to replicate a production environment so that you can test your web
app on it without having to clutter your own machine with that software.

I understand that you can have a Vagrant provider for VMWare and VirtualBox,
but what does it mean for you to have a DigitalOcean provider for Vagrant?

Also, maybe someone can drop a few words in on the typical usage scenario for
Vagrant? Other than automation, how else does Vagrant help a developer, and
how does it tie into the various VPS services (such as AWS, DO, etc...)?

~~~
sehrope
> I understand that you can have a Vagrant provider for VMWare and VirtualBox,
> but what does it mean for you to have a DigitalOcean provider for Vagrant?

Instead of spinning up a VM on your local machine it spins up a new droplet in
your Digital Ocean account (droplet is DO's term for a virtual server).

> Also, maybe someone can drop a few words in on the typical usage scenario
> for Vagrant? Other than automation, how else does Vagrant help a developer,
> and how does it tie into the various VPS services (such as AWS, DO, etc...)?

Vagrant lets you define a server environment that you can turn on with just a
simple "vagrant up". For apps that have server dependencies (who doesn't?)
like databases or MQ servers, you can isolate them into a standard VM. If
someone else is going to work on your app then they can get started
immeidately via "vagrant up". No need to manually setup the server
dependencies, it'll all automagically build itself.

Once you start using it you'll never go back to manually setting up server
dependencies for dev. It pays for itself in time savings the _first time_ you
use it.

Vagrant integration with AWS or DO is simply to have the server spin up there
rather than locally. Even cooler is the expermental Docker integration (as a
provider) as it lets you run many Vagrant VMs with minimal overhead.

~~~
mikevm
Thanks for the quick reply!

> Instead of spinning up a VM on your local machine it spins up a new droplet
> in your Digital Ocean account (droplet is DO's term for a virtual server).
> >Vagrant integration with AWS or DO is simply to have the server spin up
> there rather than locally.

Every droplet costs money, why would you want to create new droplets for
development, when you can spin up a VM locally? What are the advantages of
spinning up remote server instances over local ones?

~~~
mattbessey
The remote one is for production, not development. (Well, thats how I'm using
them anyway).

In my workflow I have two boxes in my Vagrant profile, one for development
(local VBox VM) and one for production (DO droplet). Using Chef for
provisioning, I can configure and test provisioning locally, then roll it out
in production with minimal effort.

Its a really nice workflow! Although all this Docker business lately looks
like it might make for an even better one.

~~~
Keyframe
What's the overhead of Vagrant for production purposes? Maybe I'm too old
school for all of this, but I still don't understand what docker is or what it
does.

~~~
rschmitty
There is no overhead for vagrant, it is just something that provisions/sets up
your server with chef/puppet/whatever

once the server is up, it is exactly the same as if you did it by hand

------
Oculus
Their support is absolutely amazing. I opened a ticket to ask a question,
submitted it, and before I could navigate away from their website, the ticket
had been answered (i.e. within 5 min).

~~~
sjs382
Agreed. I had a question answered in less than a minute earlier today (and it
was a dumb, non-critical question—I couldn't figure out where to enter a
coupon code)

------
trekky1700
I started with Digital Ocean after I saw them on here and have been nothing
but impressed. Seems like really good value, and it's great to have such cheap
dev environments to work/play with. Great for budding full stack devs. I'm
glad it seems they're here to stay.

------
jjoe
Congratluations to DO! Sadly there's so much hard work involved in this space
and so little money ($5/server/mo) to be made in "hosting" that founders
always eye an early exit. Also a $5/server strategy is proof this isn't
sustainable in the long run. Revenue isn't enough to cover capex.

And this kind of growth almost always means founders are looking for an early
exit. Yes it's all a happy ending for the founders but what will happen to the
end users?

~~~
pavs
I think you might be underestimating how cheap bandwidth and hardware has
become at scale. If anything, because of the nature of how VPS work, you can
make good money as server hardware gets faster and cheaper.

~~~
jjoe
There's the people aspect in all of this. What's reasonable pay for a good
sysadmin/programmer hybrid? 70k - 100k/yr? How many do you need to keep things
running smoothly and build new tools? How many do you need full time for
remote hands and provisioning?

Hardware prices don't drop so much at this scale unless you're buying in
extremely large quantities. Even then and they don't drop as much as bandwidth
(except for out of lease equipment and I doubt DO does this).

~~~
pavs
With newer, more powerful servers they can cram more VPS in to single server.
Usually users rarely have continuous CPU usage on small CPUs like that, so in
theory you can cram more VPS in a server, without causing any performance
issue to other VPS.

VPS in general is insanely profitable, if you know what you are doing.

The employee aspect will always be there, DO can still make money by not
taking outrageous profit margin like AWS and Rackspace.

~~~
jjoe
I run a similar business (fully managed though). I know for certain that
hardware and bandwidth costs are the tip of the proverbial iceberg. Remember
there's also colocation, power, contracts, networking equipment (2x10G), and
DDoS costs.

You don't really charge a client for the bandwidth costs incurred during a
DDoS if you choose to absorb the attack. You don't charge a client when a RAID
controller fails and you need to restore xTBs of data (xx man hours). Oh and
you need to purchase backup nodes, which you're not getting any immediate
return on.

You need an office. You need to factor in travel costs. Overtime pay. Health
insurance, payroll costs, etc. Ads...

------
yapcguy
What about their security? Seem to have been quite a few issues recently.

From just two days ago, here on HN:

 _" Digitalocean.com has misconfigured their network in a way that allows for
anyone to monitor customer network traffic."_
[https://news.ycombinator.com/item?id=6157747](https://news.ycombinator.com/item?id=6157747)

~~~
zimbatm
Oversight happens. They responded quickly and sent an email to all their
customer explaining the problem and how to fix it.

~~~
btgeekboy
Hm? I was able to verify the submitter's claims (see thread for details), but
have yet to receive any email regarding it. I did receive an email earlier
about the duplicate Ubuntu host keys; perhaps that's what you're thinking of?

------
whitehat2k9
I really don't get why DigitalOcean is so special. The $5/month VPS is nothing
new, and in many, if not most cases you can do a lot better. I'm currently
paying $2/month for a 512MB OpenVZ VPS and $6.50/month for a 1GB Xen VPS.

~~~
zrail
In addition to what sibling comments say, DO uses KVM which a) gives better
isolation and dedicated RAM, and b) looks and acts much more like a normal
Linux machine. I've had issues re-using things like firewall rules on an
OpenVZ VM.

~~~
dorfsmay
Yes, with KVM you can load kernel modules and run things like kerberos which
you cannot with OpenVZ.

------
suhailpatel
Congrats to the DigitalOcean team. I moved my personal server from Linode
London to DigitalOcean Amsterdam-1 and haven't had any issues at all and
latency is only 2-3ms more from London compared to my old Linode box which is
completely acceptable for me. Support is also extremely responsive.

~~~
taf2
Interesting so I tried digital ocean and was at first pleased but with
constant network outages and no private network support it was not ready for a
production env as far as I could tell - for toy projects definitely nice and
if they get the private network up and resolve their stability issues I'd
definitely give it another go

~~~
raiyu
As we were scaling up our network we ran into a few issues and had to work
with our vendors to resolve them.

Quoted metrics for support for ARP and MAC addresses on devices didn't match
what we were seeing in production but we were able to get that resolved, so
you shouldn't see those issues recurring.

------
ksec
Great Now they can accelerate their long list of needed improvement.

1\. Private Back End Network. 2\. Auto Provision Droplet/Instance on different
hardware by default 3\. IPv6 4\. DC in Asia 5\. Something Similar to Amazon
Elastic IP.

Things i would like Node balancer More Powerful CPU Higher Quality Network (
Although it has gotten a lot better in recent months )

------
koa
I have two rails SaaS apps that generate increasingly fulltime income on
heroku.

combined costs currently at $140/month each app has 1 free web dyno, 1 worker,
starter postgres DB, ssl, plus a few extras

Looking at the new offerings like digital ocean, i'm really tempted to switch
over, but a voice in my head keeps telling me it makes no sense as I don't
really have strong linux-sysadmin type skills. Even getting rails to work on
new macs takes me 1-2 painful days.

Anyone have an eta of what it might take someone with limited sysadmin skills
to cut over to something like digital ocean from heroku?

~~~
SiliconAlley
My progression has been PaaS -> AWS -> Digital Ocean -> Dedicated and I
strongly feel that if you're going to make the leap from PaaS to VPS, it's not
a whole lot harder to go dedicated and there you'll find much sweeter value.
I'm currently on an OVH SP2 (Xeon + SSD + 32GB ram in a data center in Quebec
so not terrible latency to where I am in the northeast US) that I pay $90/mo
for ([http://www.ovh.com/us/dedicated-
servers/sp2.xml](http://www.ovh.com/us/dedicated-servers/sp2.xml)) and it's
just jaw-droppingly powerful. If you're going to go through the trouble of
migrating your app anyway, it's worth taking a good look at dedicated
offerings like that as well.

~~~
harshreality
OVH SP-series servers do not use ECC ram. This is unusual in the xeon server
space. Even most VPS server providers use it.

------
joeblau
I'm thinking about using them for my next project. I'm glad to hear the news
that they are getting funding. 3.2M is a pretty big seed round though right?

------
Einherji
Been using their services for a while now. Highly recommended, great hardware
for the money.

------
jbrooksuk
Really well deserved! These guys are awesome, very helpful and friendly, their
site is even fun to use.

------
jbarham
Anecdotally, I recently moved the primary web server for my DNS hosting
service ([https://www.slickdns.com](https://www.slickdns.com)) from AWS to
Digital Ocean and am getting much better performance at 1/3 of the cost.

------
ohashi
A lot of people keep asking/questioning what makes Digital Ocean special. I
can't speak for other people, but I do track what other people say. I've
collected ~1,300 opinions on them and people like them more than any other
major hosting provider I track (80% positive).

Feel free to read the comments for yourselves:
[http://reviewsignal.com/webhosting/company/101/digitalocean](http://reviewsignal.com/webhosting/company/101/digitalocean)

They are obviously doing something right and a huge congratulations for their
fund raise.

------
dcc1
No offence but why would I put my data on US hosted servers?

Privacy violations would make liable under the local (a western european
country) Data Protection act

no thanks

~~~
akx
Then use their Amsterdam data center..?

~~~
dcc1
Being a US company who is to say they havent been "leaned" on

------
bluedino
Are there features holding people back from going to DO from somewhere like
Linode? Load balancing, private backend network, etc?

~~~
sjs382
Lack of a private backend network is something that is keeping me using it,
for one of my projects. For my smaller projects, they're great.

------
hcarvalhoalves
I looked at Digital Ocean for an alternative and really liked the prices, but
it seems to be missing some pieces to cover more elaborate use-cases. For
instance, you can't scale _just_ storage, and they don't provide a CDN.

I hope they can add more features while staying price-competitive.

~~~
Kudos
Why do you need the CDN to be provided by DO? For instance, I host at Linode
and use Cloudfront for CDN.

------
dangerden
We use DO in our projects as a primary infrastructure. Switched to them from
Amazon. Very happy with their service.

BTW, I'm shocked that this round was SEED. What happens when they get Series
A. Will they continue to change game rules? I think yes.

------
tszming
I hope DO would consider have a special add-on like: $5 per month per node for
priority support (< 1hr response time), then I think more people would
consider moving more production systems to DO.

~~~
andrewmunsell
I've actually never had another company respond to support requests faster
than DO. Almost every ticket gets a human response in under a minute (often in
what seems like seconds), and for the small things (billing related), the
problem is usually solved in that minute.

------
bdz
(Oh how much I hate their ad
[http://www.youtube.com/watch?v=vHZLCahai4Q](http://www.youtube.com/watch?v=vHZLCahai4Q))

------
mattmaroon
I'm not sure seed round means what you think it means.

------
negamax
Very good. Just last weekend I migrated from AWS to DO. It is working
perfectly for my usage at ~25% of the cost.

------
yaldasoft
Ive only used DO for staging. Via Cloud66 deploying production to AWS and
Staging to DO. Works really well.

------
aforty
I know them, great group of guys. Congrats!

------
arek2
#1255 on my top list:
[http://5000best.com/tools/Cloud/](http://5000best.com/tools/Cloud/)

