Founded in 2011, US-based cloud infrastructure provider, DigitalOcean has already won the hearts and minds of developers with their user-centered approach, differing from Amazon’s AWS, Google’s Cloud Platform or Microsoft’s Azure. The company is currently the second largest web hosting service in the world with over 12 million cloud servers deployed by 600,000 developers worldwide, and now looking to conquer the entire Software as a Service (SaaS) market.
In the light of the company’s recent European expansion and partnership with Factory, we caught up with co-founder & CEO Ben Uretsky at their New York City headquarters. We asked Ben how they managed to define their product-market fit, differentiate themselves from competitors and go from a team of five people to 275.
How did you come up with the idea for DigitalOcean?
My brother, Moisey and I built our first company, a managed service provider in 2003. After eight years it was time to step back and figure out what to do next. We saw big trends happening in the industry. Cloud services really started to take off, with Amazon Web Services (AWS) leading that transition, and we were true believers of this new on-demand, self-service concept.
Did you choose a different approach for your second company?
The one thing we wanted to do differently this time around is to actually build a product, rather than running a service-based business. It turned out that there’s a huge difference. In the services company, you can hire a bunch of knowledge workers, who can deliver your service. You can walk into a client’s office and promise them the world because you know you have a pretty smart team, who will figure out how to make things work. That’s how you build up your reputation. If you’re selling a product, things are radically different because you can’t make empty promises. You have the product, you know what it’s capable of and that’s it, there is no grey line. There’s a positive and negative side to that. The disadvantage is that if a client needs a new feature or functionality, it takes lots time and resources to build that. The positive thing is that once you build the product set, you can sell at volume and scale.
Most startups have a hard time figuring out what their initial offering should be. Did you get it right for the first time?
We started out with DigitalOcean in summer 2011 and for 6 months we were doing pure R&D. At the end of that period we had the MVP (minimum viable product), that made us really excited. The market didn’t share our enthusiasm. People did enjoy and use our product, but it was tremendously difficult to build awareness around it. It took us a whole year until in January 2013 we finally hit the market fit and the traction took off overnight. We suddenly went from two or three customers a day to two or three hundred.
Along the way, especially when we got into Techstars, we tried to pivot in every single direction, which was very exhausting. We attempted ten or twelve different approaches before we eventually decided that pivots are distracting and time consuming. There were some pretty great ideas we came up with, but we just wanted to see our original concept work or fail.
What was your strategy to differentiate DigitalOcean from competitors, like Amazon or Google?
We knew right from the start that this is a very competitive market, which includes some of the best companies in the world, so we had to identify our unique place in the cloud. What makes us different is that we focus on the user rather than on the technology. The user experience resonates with the product that we’re building. Our mission is to simplify cloud infrastructure for developers and create an experience they love. We’d like any SaaS company in the world to be able to run on top of our platform.
Unlike DigitalOcean, Amazon and Google took internal systems they needed for their own businesses and ultimately productized them for their customers. Amazon CEO Jeff Bezos recognized early on that the same infrastructure service they built to enable their rapid software development would be valuable for any other software company. However, their service was based on what they had built for their enterprise and you can really see that in the product. It’s rather technical, difficult to use and highly disconnected from our focus on the developer in a small or medium-sized business. We believe that the needs of an earlier stage SaaS business are radically different than some of the complex offerings that Amazon provides. The question is whether your company needs a tool that can build a rocket ship, or one that helps you go to market faster.
You started the company with your brother. What is it like to do business with your family?
My brother and I are the exact opposites of each other and that generates a great work dynamic between the two of us. He’s our Chief Product Officer, so he has the vision to orient us on our product road map. In my role as CEO, I want to get things done, make sure the execution is working and there’s a clear understanding of goals and objectives within the team. The sense of trust and understanding we have for each other might be hard to find otherwise.
What are DigitalOcean’s core values that helped you build the company from five people to 275?
Our core values are simplicity, community and love.
Simplicity involves everything from product development, technical architecture to the processes that we run in the business. We’re always looking for clear, elegant and simple solutions, trying to avoid overengineering.
We’re an open source community inside and outside, which does not only include the people in the company, but also our developer community worldwide.
We believe that if you love what you do, others will love the product you build. Same goes for the people you work with. We have a real vibe in our team and we can’t wait to put on a show every other week at our all-hands meetings. There’s always place for people to give kudos and applaud teammates for their accomplishments. To live up to the spirit of transparency we also do ask-me-anything sessions. Even if the team throws us some curveballs sometimes, we like addressing challenges openly in the team.
A big part of your team is remote. How do you engage with them?
Around 40% of our team is remote. Our goal is to make them feel included and part of the experience at all times. Sometimes the remote teammates score a little bit higher on the engagement than people in the office. Slack is a huge piece of this, and Google hangouts is automatically set up in every conference room, which means connecting with a coworker is only one click away.
What are your future plans with DigitalOcean? What's next?
I think we’ve done a great job at winning the hearts and minds of developers. The next step will be to upgrade our platform to be able to support developer teams and ultimately entire SaaS companies.
You’re also expanding in Europe. What’s your take on the European tech scene?
Europe is definitely part of our strategy for expansion, where we open up data centers and build our community. The tech scene seems to be growing and evolving with certain hubs being in the lead, like London, Dublin or Berlin. However, I think economic conditions and job markets have not always been healthy and ideal in the EU, so it’s still a very new and emerging market for technology businesses.
What's your plan for the German market?
We launched our data center in Frankfurt in April 2015 and it turned out to be the fastest growing one in Europe. I think it’s because Germany is quite open and attracts a lot of other countries and businesses to it. We’d like to get to know the people and understand the scene better, that’s why we’re partnering up with Factory. We host monthly meetups and curated tech events together for our communities to meet and mingle.