The Exchanges

Q And I think with this initial positioning, you talked about the power of constraint on the business and how that creates the discipline that you need. Do you want to elaborate?

A Yeah, absolutely. And I think this is very universal. Whenever you're trying to, uh, attack a hard problem, sometimes it's great to really List out the constraints that you want to apply to that problem. So, you know, in our case, we had an up and running business, and we wanted to build a better company. So what is, what does that actually mean? And, ah, we said we wanted to have a monthly recurring revenue subscription model, because that would build a great revenue base for the business. We wanted to have a unique position in the market, and that was extremely difficult to figure out Uh, how do you enter the cloud market that was essentially dominated by AWS? And it turns out simplicity was that, um, kind of differentiation. We wanted to stay within the domain expertise that we had around networks and servers and just the data center. And, um, Feel like I'm forgetting one other thing, but the point is, it's counterintuitive in terms of you're really placing these constraints, and so solving for a smaller problem can actually, ah, lead to a more abstract and kind of general solution that will scale much better over time, rather than making something very complex and specific to a, you know, a, a point in time, and then what typically happens is, as that solution starts to scale, it can actually break down And won't really deliver on the test of time. And, you know, it's reall…

AI assessment note: “using these constraints, we were able to build a business that's extremely scalable.”

Q And the, the positioning was around the lower tier of the market in terms of size. Is that correct?

A Well, we definitely wanted to be an entry level place for, uh, creation for these, uh, businesses and developers that are building something new. And so obviously naturally you're going to start from, from nothing. But the good news is that we've been able to scale with our customers. Some of our largest accounts are spending over A million dollars a year with us. They're using thousands and at times tens of thousands of virtual machines plus, you know, a slew of other services that we offer today. But the idea was to help that initial moment of creation get people back on their path of building their application, building features and functionality, rather than trying to figure out how to manage their servers and their infrastructure.

AI assessment note: “we definitely wanted to be an entry level place for, uh, creation”

Q Yeah, and at a very practical level, do you want to talk about some of the hacks you use for bootstrapping, you know, server leasing, deferred payment plans, that, that type of thing, debt, any, any useful thing that people could use?

A I mean, just figure out how to use other people's money, really. A great, a great example. Uh, we had our launch, um, kind of event at the New York Tech Meetup here in New York, another big event similar to this one, and there was a law firm there, Gunderson Depmer, that was a sponsor of, of the evening, and they basically said, hey, come pitch us your startup idea. If we like it, we'll provide you with all the legal services, and we'll defer payment until, you know, in the, in the, in the future. And so, I had no idea, by the way, how much legal work you actually need to do, but I took them up on their offer. They thought we had a good enough idea, and so we started working with them, and I'm super thankful we went down that route. So, I think the idea here is, you know, how can you find sources of capital that aren't your own, and so, you know, debt is another really good, um, example where, You know, we, we've raised more debt than, than venture capital and venture. We've raised one hundred and twenty three million. And I think we've raised roughly like three hundred million in debt because we use, and we still to this day use debt to buy all of our servers and storage, um, and, and networking equipment, all the capex for the business because it just, it's that much cheaper rather than taking on the dilution and bringing on an equity investor. So I'd encourage everyone to re…

AI assessment note: “we've raised roughly like three hundred million in debt because we use... debt to buy all of our servers”

Q It's pretty incredible. I want to go back to the very beginning. You mentioned, uh, you have been doing, uh, you started the company seven years ago. What is the origin story? I think you had a company before this, right? Is that correct?

A Yeah, that's right. So DigitalOcean is actually my second business. I started my first company in 2003, also here in New York City, and it's just a kind of a passion project because I love servers and networking. I've been in a data center Uh, kind of bleeding there, you know, installing servers since 99. And by 2003, I had the chance to start my own managed hosting company, similar to what Rackspace does. So, uh, dedicated server, managed support services on top of it, everything from web database, security, backup, and, uh, so on. And by 2011, um, you know, two things really became clear in that first business. Uh, the first is, it was really painful to lose deal after deal to Rackspace, because they had this great position in the market. Their tagline was fanatical support. Um, but even more important, Amazon Web Services had started to become mainstream, and so virtualization and cloud computing was starting to really dominate the landscape, and we became very concerned about a five-year outlook for that business, Uh, it seemed like dedicated servers were going to die, so we knew we had to really reinvent ourselves and had the luxury of some, you know, cash flow and profitability. That was a bootstrap business, so not outside investors, and we took this, uh, really big leap of faith, decided to step back from what we were doing and really analyzed the landscape, uh, but als…

AI assessment note: “DigitalOcean is actually my second business. I started my first company in 2003”

Q But in 2011, as you mentioned, AWS was already a thing, right? That, uh, was going super fast. So you guys decided to start a competitor to AWS? Well, what was The thinking, I guess.

A Yeah, so on one hand, yes, that's exactly what we did. More importantly, I think we really put the customer first and really understood what they were looking for, so we basically targeted the, ah, the developer and more specifically a modern web-based, you know, kind of using a modern framework or a modern language and thought about what are the challenges and difficulties that they have In getting their job done, and it turned out that while AWS is a great tool, there's a pretty big steep learning curve. It's difficult to use, as I said. We actually ran a little group, ah, study one time, and we had a few, ah, comp sci students come in. One of them was from MIT, and he wasn't actually able to get a server launch from the AWS wizard, and so we knew that the problem definitely was, was real, and what we wanted to do is enable These people to, to build more, to build faster, you know, just see what they can produce, because obviously software is starting to eat the world. There are more and more companies every single day, and when you're small, you don't necessarily need to choose an AWS. They may not be the best fit, so we wanted to make sure that, you know, we were the best in terms of user experience and our, our core values around simplicity and ease of use,

AI assessment note: “while AWS is a great tool, there's a pretty big steep learning curve.”

Q you sell to developers, right? And I guess as developers gain more and more prominence in the enterprise, there's more and more companies trying to sell to developers, but there seems to be a wide spectrum of success, and some companies seem to magically capture the hearts of developers, others completely fail. Anything that you learned there in terms of what to do to get developers to love your product?

A Yeah, I think it's about choosing a side, if you will. You know, we obviously chose the developer side. We're much stronger there. You can also choose to go into a more enterprise oriented solution. And, uh, I think there's a big difference between the two. So with developers, what made us unique is once again, putting their needs first and, you know, developers love solving problems, but also when there is a problem, they need to learn and figure out what's going on. So one of the things that we did very different is we built a community of Content. We've written a couple thousand tutorials on how to leverage open source, and chances are you've read some of these articles, ah, searching for different solutions, and we write about databases, we write about different data storage, ah, engines, but we also write about, you know, web servers and, and so on, and we get about three million visitors a month, and I think it was this concept of giving back to developers, enabling them, accelerating their education, Helping them solve problems that really helped us to resonate with this community, and so we have a really high NPS score of nearly 70, which means that people really love this service, and so they do a great job of introducing it to a friend. It's kind of like watching a great movie on the weekend. Chances are you're going to tell somebody about it on Monday. And, uh, that'…

AI assessment note: “we built a community of Content. We've written a couple thousand tutorials”

Q All right, let's, uh, switch to scaling a little bit. So, um, as you mentioned, so now you have a bunch of employees, tons of customers, very impressive revenues. Maybe let's talk about the recruiting aspect of, um, of scaling. What did you learn there?

A Yeah, the two kind of quick takeaways are, one, uh, recruiting becomes your number one job when you're really scaling a business. Um, there were months where I spent more than 50% of my time in, in recruiting, and, um, you know, it's, it's, it's very challenging still here, I'd say, in New York City to find kind of the right talent. I think it's great that this ecosystem continues to evolve. Um, there are people moving here from all over the world. There are more technology companies than ever before. But when you go back, you know, to the early 2010, Um, that talent pool was still a little bit limited, but anyway, if you're in a high growth, high scale mode, and you're spending, you know, all your time on recruiting, I think that's actually a good thing. And, and the second is, as you bring all these people into the business, you know, the, um, complexity with which you can follow a vision, go down a single path, actually begins to magnify tremendously, and so you want to focus quite a bit on culture, and basically, the simplest way to phrase it is, Um, you know, when you, when you have a couple of people and you're all in constant communication, you know what's going on, it's pretty easy to know what's expected. When you onboard or bring a hundred people into the business, how, how do they know what to do? How do they know how to make a decision? That's really what culture is…

AI assessment note: “the two kind of quick takeaways are, one, recruiting becomes your number one job”

Q Did you start the remote part from the very beginning? Was it always part of the culture?

A Yeah, we thought that remote would actually be kind of a differentiator for us because we were not that hopeful that we would be able to find all the talent that we need in New York City, unfortunately, and it kind of, you know, played out. Maybe it's because we, we thought that way to begin with, uh, but it's been kind of challenging to find people that have experience with infrastructure that, um, have seen companies scale, uh, to, you know, through high growth and, um, You know, and, and to find all of that in New York City at the same time while competing with, you know, financial services, uh, is really a tall order, but I'm, I'm really glad that, you know, a bunch of our employees have gone on to start amazing companies, so it's great to see, you know, that kind of ecosystem continue to evolve, and, you know, we have about half of our team, so about 250 employees here in New York, and I hope that they go on to do some amazing things as well.

AI assessment note: “Yeah, we thought that remote would actually be kind of a differentiator for us”

Q Yeah, how does, how does it mean if you say no to, like, features or?

A That's actually one of the biggest challenges that we have, especially in the product team, where you're actually trying to build something that the customer is going to love. That's one of the other key, um, kind of core values for DigitalOcean is how do you, how do you put love into your work, and how do you get customers to love the product that you're building? And I think it takes a tremendous amount of, uh, empathy and really, Understanding what the customer is trying to achieve, and so, um, we've had countless heated debates in the office, you know, to the point of screaming and yelling at each other, and trying to figure out what, what is actually going to serve the customer best, so, you know, it's also one of the things that we use in the, kind of, interview and recruiting process, because, um, everyone from investors to employees will ask, well, how are you guys really any different than AWS? And the challenge is that yes, you're providing the same basic service underneath, but how do you deliver that with simplicity and ease of use? And so it's actually a very difficult problem to solve because you're, you're taking ownership over that complexity and, um, you know, it's, it's easy. It's actually easier to build a complex solution because you can throw all these different things at it. It's much harder to build something that's simple, elegant, easy to use and can st…

AI assessment note: “That's actually one of the biggest challenges that we have, especially in the product team”