DigitalOcean Acquires Cloud Computing Startup Paperspace for $111 Million in Cash
In a significant move, DigitalOcean, the cloud hosting business, has announced its agreement to acquire Paperspace, a New York-based cloud computing and AI development startup. The acquisition is valued at $111 million in cash and marks DigitalOcean’s first major deal since 2022.
A Strategic Move for DigitalOcean
According to Yancey Spruill, CEO of DigitalOcean, the acquisition of Paperspace will enable customers to more easily test, develop, and deploy AI applications. The company’s infrastructure and tooling, once integrated with DigitalOcean’s products, will provide a streamlined experience for developers.
"We’re excited to expand our portfolio tailored to the world’s small- and medium-sized (SMBs) businesses and startups with simplified AI and machine learning offerings," Spruill said in a press release. "The combined offerings allow customers to focus more on building applications and growing their businesses and less on the infrastructure powering them."
Paperspace: A Brief History
Paperspace was co-founded in 2014 by Daniel Kobran and Dillon Erb, graduates of the University of Michigan. Backed by Y Combinator and Jeff Carr, one of the co-founders of DigitalOcean, the company has been focused on providing high-performance workstations for design, visualization, and gaming in the cloud.
However, as AI entered the mainstream, Paperspace leaned hard into its AI offerings, launching a suite of tools designed for developing, training, deploying, and hosting AI models in the cloud. Prior to the acquisition, Paperspace raised $35 million from investors including Battery Ventures, Intel Capital, SineWave Ventures, and Sorenson Capital.
The Acquisition: A Strategic Move by DigitalOcean
Erb sees the acquisition as a step toward a comprehensive offering of cloud CPU and GPU compute to rival other vendors in the public cloud market. The combined power of DigitalOcean and Paperspace will enable a new class of customers – particularly those on a tight budget – to delve into AI- and machine learning-driven applications like generative media, large language models, recommendation engines, and image classifiers.
A Wise Move by DigitalOcean
From the outside looking in, it’s clear that this acquisition is a wise move for DigitalOcean. The company’s revenue increased in Q1 2023, growing 29.7% to $165.13 million. However, earnings per share, return on equity, and net margin fell short of expectations.
Increasingly, Big Tech cloud providers like Microsoft, Amazon, and Google are turning to generative AI to boost revenues – with some success. A recent CNBC poll found that AI is now the biggest spend for nearly 50% of top executives across the economy, indicating it’s a wise place to invest resources.
Driven by the enthusiasm for AI, Gartner predicts that cloud spending will grow 21.7% in 2023, coming in just under $600 billion this year versus $491 billion last year.
A Comprehensive Offering: The Future of Cloud Computing
The acquisition of Paperspace is DigitalOcean’s fourth since its public stock listing in 2019. This deal marks a significant step towards providing a comprehensive offering for cloud computing and AI development. With the integration of Paperspace’s infrastructure and tooling, DigitalOcean will be well-positioned to capitalize on the growing demand for AI-driven applications.
The Future of Cloud Computing: A New Era
As we move into a new era of cloud computing, it’s clear that AI will play an increasingly important role. The acquisition of Paperspace by DigitalOcean is a significant step towards providing a streamlined experience for developers and enabling them to focus on building applications and growing their businesses.
With the combined power of DigitalOcean and Paperspace, customers will have access to a comprehensive suite of tools for developing, training, deploying, and hosting AI models in the cloud. This acquisition marks a new era in cloud computing, one where AI-driven applications will be at the forefront of innovation and growth.
Conclusion
The acquisition of Paperspace by DigitalOcean is a strategic move that positions the company for success in the growing market for cloud computing and AI development. With a comprehensive suite of tools and infrastructure, DigitalOcean will be well-positioned to capitalize on the increasing demand for AI-driven applications. As we look towards the future, one thing is clear – the acquisition of Paperspace by DigitalOcean marks the beginning of a new era in cloud computing.
