5 ms·

Excellent growth, fair margins. Probably worth about $3bn. If it IPOs at less than $5bn it's probably worth picking up. Long term digitalocean will struggle to

by gizmo 6y ago

Excellent growth, fair margins. Probably worth about $3bn. If it IPOs at less than $5bn it's probably worth picking up. Long term digitalocean will struggle to maintain its margins when competing with Azure and AWS on one side, and Cloudflare edge computing on the other side, so I don't think it can command the same kind of premium we've seen from other tech IPOs. A big red flag is that 570,000 customers bring in only 357m in rev. That's $50 a month for the average customer. That's way too low.

jermaustin1 6y ago
> That's $50 a month for the average customer. That's way too low. I vaguely remember a talk I had with an employee there was a time when I think the average user was paying only $20/mo, which at the time, I had a $250-500/mo bill depending on load. This was before they even had a load balancer product (so 2012-2013-ish?), and I was running a fairly unsuccessful managed WordPress offering that had dynamic scaling based on the reported metrics. The infrastructure was just a big server for MySql, and a tiny server for the orchestrator. Then it would use the DO API to spin up new servers off a snapshot, ssh into them, and run the setup script to point to the right Wordpress instance in the database, then add it to the nginx reverse proxy list for the domain. The whole thing could scale up or down in 30 seconds. Sure it isn't as fast as AWS or Azure could scale, but we were in control, in code, before containerizing was even really a thing.
jakelazaroff 6y ago
I wonder what the distribution of revenue per customer looks like. I bet (hope?) that at the low end there are a lot of consumers who set up a $5 droplet to tinker around for a few months without doing much more, and that the revenue figures are propped up by a small group of bigger customers spending much more.
- CameronNemo 6y ago
  I also think this distribution would be fascinating.
Thaxll 6y ago
Because DO is not used in enterprise, there is no reasons to use DO at work when you can use all other cloud providers.
- heliodor 6y ago
  Read through the comments. There are plenty of them stating what they love about DO.
  - Thaxll 6y ago
    I don't see why you would use DO it's vastly inferior to every cloud provider, the only reason people use DO is for the price, it's cheap compare to AWS, Google or Azure.
    - ForHackernews 6y ago
      It's a lot cheaper, and because it's smaller they don't try to lock you into their own proprietary crap like the big three. Cost savings + flexibility/avoiding vendor lock-in are DO selling points in my mind.
    - Tostino 6y ago
      For some workloads, it's also much faster for similar money. I looked into migrating my app to Azure, to get similar performance to what I have in DO was over 3x the monthly cost. Worked with Azure support to benchmark and try and come up with a plan to migrate, and the support rep ended by saying essentially "don't think we can get close to your current performance for near that price". It's not cut and dry.
    - heliodor 6y ago
      That's okay, the comments can prove illuminating. People like the documentation. People like the simplicity. People like the UX. And more. Give the comments a read. If you value understanding how people make purchasing decisions, this is an opportunity to get some insight because as you can see, there's a lot more to it than what you were able to enumerate. Seems you might be a software engineer. This should interest you because an engineer that understand the business end of things is immensely more valuable than a heads-down coder in the majority of tech companies.
fasteo 6y ago
I saw this as an advantage though. They do not have whale customers bringing a significant % of their revenue. I see lower risk here "Our average revenue per customer (which we refer to as ARPU) has increased significantly, from $35.97 in 2018 to $40.16 in 2019 to $47.78 in 2020. We have no material customer concentration as our top 25 customers made up 11%, 10% and 9% of our revenue in 2018, 2019 and 2020, respectively."
bklyn11201 6y ago
A newsletter about SAAS called CloudedJudgement sent this in January: > SaaS businesses are valued on a multiple of their revenue - in most cases the projected revenue for the next 12 months. Multiples shown below are calculated by taking the Enterprise Value (market cap + debt - cash) / NTM revenue. In the buckets below I consider high growth >30% projected NTM growth, mid growth 15%-30% and low growth <15% So if DO is mid growth, you could use 17x as the EV / NTM multiple. So if 2021 revenue will be 320mm + 25% = 397mm NTM * 17x = 6749mm EV. Total debt is 263mm so best (rough) guess at equity market cap is 6749mm - 263mm debt + 100mm cash
nly 6y ago
$50 seems pretty good when you can get a $5 droplet.
- tgtweak 6y ago
  Believe it or not, $50 is great for a "self service" company like this. No enterprise sales teams pushing complicated billing or contracts, just customers (mostly devs/startups) choosing what they need without endless upsells. Looking at churn and seeing that per-customer number go up over time is the real tell here. Keeping it simple is actually very hard :)
deleted 6y ago
[deleted]
lapnitnelav 6y ago
Hello, I'm the $50 / month customer. Not an internet business per say, mostly used in the context of processing and storing data + internal apps. Do is great value, although not the cheapest. They need to double down on the useful items, maybe go a bit offroad in what they offer, lest they might be a in rough spot.
staysaasy 6y ago
In today's frothy market, do you think that they'd only be at $3B? Not baiting at all, I'm curious on how you'd break this down as it's always an arcane art. I mainly wonder as companies like C3.ai are above a $10B market cap on 50% or less of DO's revenue. And C3 (just to extend the example) is carrying lower margin services revenue as well. Growth is somewhat different, granted.
archon810 6y ago
They raised money over the past several years at over $10bln valuation, there's no way they're going to debut at $3bln.
- bklyn11201 6y ago
  They raised in 2020 on a valuation between 1.1 and 1.2 billion

by gizmo 6y ago

jermaustin1 6y ago

> That's $50 a month for the average customer. That's way too low. I vaguely remember a talk I had with an employee there was a time when I think the average user was paying only $20/mo, which at the time, I had a $250-500/mo bill depending on load. This was before they even had a load balancer product (so 2012-2013-ish?), and I was running a fairly unsuccessful managed WordPress offering that had dynamic scaling based on the reported metrics. The infrastructure was just a big server for MySql, and a tiny server for the orchestrator. Then it would use the DO API to spin up new servers off a snapshot, ssh into them, and run the setup script to point to the right Wordpress instance in the database, then add it to the nginx reverse proxy list for the domain. The whole thing could scale up or down in 30 seconds. Sure it isn't as fast as AWS or Azure could scale, but we were in control, in code, before containerizing was even really a thing.

jakelazaroff 6y ago

I wonder what the distribution of revenue per customer looks like. I bet (hope?) that at the low end there are a lot of consumers who set up a $5 droplet to tinker around for a few months without doing much more, and that the revenue figures are propped up by a small group of bigger customers spending much more.

CameronNemo 6y ago
I also think this distribution would be fascinating.

Thaxll 6y ago

Because DO is not used in enterprise, there is no reasons to use DO at work when you can use all other cloud providers.

heliodor 6y ago
Read through the comments. There are plenty of them stating what they love about DO.
- Thaxll 6y ago
  I don't see why you would use DO it's vastly inferior to every cloud provider, the only reason people use DO is for the price, it's cheap compare to AWS, Google or Azure.
  - ForHackernews 6y ago
    It's a lot cheaper, and because it's smaller they don't try to lock you into their own proprietary crap like the big three. Cost savings + flexibility/avoiding vendor lock-in are DO selling points in my mind.
  - Tostino 6y ago
    For some workloads, it's also much faster for similar money. I looked into migrating my app to Azure, to get similar performance to what I have in DO was over 3x the monthly cost. Worked with Azure support to benchmark and try and come up with a plan to migrate, and the support rep ended by saying essentially "don't think we can get close to your current performance for near that price". It's not cut and dry.
  - heliodor 6y ago
    That's okay, the comments can prove illuminating. People like the documentation. People like the simplicity. People like the UX. And more. Give the comments a read. If you value understanding how people make purchasing decisions, this is an opportunity to get some insight because as you can see, there's a lot more to it than what you were able to enumerate. Seems you might be a software engineer. This should interest you because an engineer that understand the business end of things is immensely more valuable than a heads-down coder in the majority of tech companies.

fasteo 6y ago

I saw this as an advantage though. They do not have whale customers bringing a significant % of their revenue. I see lower risk here "Our average revenue per customer (which we refer to as ARPU) has increased significantly, from $35.97 in 2018 to $40.16 in 2019 to $47.78 in 2020. We have no material customer concentration as our top 25 customers made up 11%, 10% and 9% of our revenue in 2018, 2019 and 2020, respectively."

bklyn11201 6y ago

A newsletter about SAAS called CloudedJudgement sent this in January: > SaaS businesses are valued on a multiple of their revenue - in most cases the projected revenue for the next 12 months. Multiples shown below are calculated by taking the Enterprise Value (market cap + debt - cash) / NTM revenue. In the buckets below I consider high growth >30% projected NTM growth, mid growth 15%-30% and low growth <15% So if DO is mid growth, you could use 17x as the EV / NTM multiple. So if 2021 revenue will be 320mm + 25% = 397mm NTM * 17x = 6749mm EV. Total debt is 263mm so best (rough) guess at equity market cap is 6749mm - 263mm debt + 100mm cash

nly 6y ago

$50 seems pretty good when you can get a $5 droplet.

tgtweak 6y ago
Believe it or not, $50 is great for a "self service" company like this. No enterprise sales teams pushing complicated billing or contracts, just customers (mostly devs/startups) choosing what they need without endless upsells. Looking at churn and seeing that per-customer number go up over time is the real tell here. Keeping it simple is actually very hard :)

deleted 6y ago

[deleted]

lapnitnelav 6y ago

Hello, I'm the $50 / month customer. Not an internet business per say, mostly used in the context of processing and storing data + internal apps. Do is great value, although not the cheapest. They need to double down on the useful items, maybe go a bit offroad in what they offer, lest they might be a in rough spot.

staysaasy 6y ago

In today's frothy market, do you think that they'd only be at $3B? Not baiting at all, I'm curious on how you'd break this down as it's always an arcane art. I mainly wonder as companies like C3.ai are above a $10B market cap on 50% or less of DO's revenue. And C3 (just to extend the example) is carrying lower margin services revenue as well. Growth is somewhat different, granted.

archon810 6y ago

They raised money over the past several years at over $10bln valuation, there's no way they're going to debut at $3bln.

bklyn11201 6y ago
They raised in 2020 on a valuation between 1.1 and 1.2 billion