
DigitalOcean gets $130M credit line because servers are really expensive - alpsgolden
http://xn--http-k69x://techcrunch.com/2016/04/14/digitalocean-gets-130-million-credit-line-because-servers-are-really-expensive/
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alpsgolden
I can understand the SaaS business model where you lose money in the short
term to acquire customers, because that customer will be worth money over the
next four to six years. If you are expanding aggressively, you will be losing
money as a company for sales and marketing in order to acquire many long-term
customers.

But I don't understand why Digital Ocean should be losing money. Unless I am
mistaken, they do not seem to be spending on sales in order to acquire long-
term customers. If they are losing money on operations, then doesn't that mean
their business model is broken?

Perhaps they lose money on small-scale hosting as a marketing expense in order
to acquire big long-term customers? Or perhaps they have big capital
expenditures for data centers? Otherwise, this doesn't look good for Digital
Ocean.

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neom
They said right in the article that the credit facility will be used to deploy
additional capex...

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alpsgolden
It doesn't seem like the author of the original article knows what they are
using the credit facility for, note the "maybe":

 _This new credit line means two things. First, DigitalOcean is sill investing
heavily in its infrastructure. Maybe existing users will get a performance
upgrade with new servers replacing existing servers. Or maybe DigitalOcean
will expand its product offering._

And if they have to take out a credit line simply to upgrade existing
customers, without bringing in new revenue, that is bad news. That means they
are losing money simply to maintain their current position.

