[HN Gopher] DigitalOcean acquires Paperspace (YC W15) for $111M ...
___________________________________________________________________
DigitalOcean acquires Paperspace (YC W15) for $111M in cash
Author : demuis
Score : 168 points
Date : 2023-07-06 12:45 UTC (10 hours ago)
(HTM) web link (finance.yahoo.com)
(TXT) w3m dump (finance.yahoo.com)
| FredPret wrote:
| I'm surprised by this. Digital Ocean is in no position to be
| splurging on new revenue streams. They're underwater and making a
| loss [0].
|
| They've got growing revenue but falling profits and they've got
| more debt than assets. They may want to raise their droplet
| prices, or issue more stock and then refocus on making their
| business profitable.
|
| [0] valustox.com/DOCN
| re-thc wrote:
| They have been buying companies non-stop for a while. It's
| their new operating model.
| AYBABTME wrote:
| What would be the strategy you think they're going for?
| re-thc wrote:
| The I pretend I know what I'm doing strategy.
|
| Most acquisitions fail. It's a difficult path unless it
| fits a very specific need.
|
| Yet a common management / product strategy is to buy random
| companies as though they are ingredients of a dish and
| think it'll just work.
|
| Digital Ocean to me has lost their core focus and appeal.
| They aren't upgrading their hardware, software and other
| crucial pieces of their infrastructure. There's been
| gimmicks, acquisitions and marketing.
|
| Someone said the executives there don't believe they can
| compete with the big cloud providers and so are poking at
| different areas to see what works.
| FredPret wrote:
| I love DO as a user and not an investor, but their main
| value to me is that they have public-facing IPs. I could
| easily host all my sites on a single AMD machine under my
| desk, if only I had a good way of routing from the
| internet to my desk.
|
| I would be closer to nine fives than five nines, but
| that's good enough even for many commercial sites,
| including mine.
| z3t4 wrote:
| Just contact your ISP to get a public IP. You might not
| get a static IP, but you can configure a dhcp client to
| request your old IP when reconnecting after a power
| outage. Set DNS TTL reasonably low like 12 hours so that
| you can recover if you do get another IP.
|
| Another way is to signup for a cheap VPS and use a tunnel
| to your home server. There's lots of really cheap VPS's
| with 128MB of memory that is plenty if you just want a
| tunnel.
| SteveNuts wrote:
| It's not really a silver bullet nowadays, residential
| plan ISPs are very wary of allowing inbound connections
| in my experience
| z3t4 wrote:
| The problem is the lack of IPv4 addresses. IPv4 addresses
| are ridiculous expensive. And most people don't need a
| public address so ISP save a ton of money by using NAT. I
| don't know if they _must_ give you one or not if you ask,
| but I think a public IP address should be a human right,
| or you should at least be able to change to an ISP that
| can provide one.
| graton wrote:
| One option you could try is using a CloudFlare tunnel.
| thejazzman wrote:
| I love this option. Doubles as a way to VPN-into your
| home network remotely (Warp Client) without opening any
| ports
| FredPret wrote:
| Thanks to you both. I'll look into it.
|
| You can buy a computer that is 1000x more powerful than a
| droplet for a fraction of the ownership cost, especially
| if you only get occasional visitors.
|
| I'm excited by the idea of completely decentralized
| hosting; now we just need decentralized payments - that
| take USD.
| noonething wrote:
| Sorry if I'm not getting something, but wouldn't dynamic
| dns help in your instance?
| FredPret wrote:
| You mean like No-IP? I used that to SSH into my own
| servers for a while, but I found it to not be 100%
| reliable.
| gizmo wrote:
| > Yet a common management / product strategy is to buy
| random companies as though they are ingredients of a dish
| and think it'll just work.
|
| Acquisitions are an easy way to juice top line growth.
| Acquisitions also offer ample opportunity to put lipstick
| on your finances. After all, any acquisition has many
| one-time costs and you can use this to juice your
| margins. You also forecast substantial cost savings by
| eliminating redundant positions. All in all, your gross
| margins and YoY growth look a lot healthier after the
| acquisition even when nothing has fundamentally improved
| about your business.
|
| Repeated acquisitions really muddy the water and make it
| even harder for analysts to figure out how well your core
| business is doing. Especially when growth in your core
| business is stalling it makes a lot of sense to obfuscate
| your finances while you purchase top line growth.
|
| All the while the stock price stays high and the
| executives get to enjoy their option packages. Eventually
| the music stops, but clever executives jump ship before
| that happens.
| BonoboIO wrote:
| Oh the SoftBank model.
| impulser_ wrote:
| You can say this about the majority of tech companies.
| Cloudflare is unprofitable and they are used by the majority of
| the web.
| malfist wrote:
| So that's why my droplet increased costs by 50% last year.
| looping__lui wrote:
| Oh, fun memories - locked me out of my account (froze it or
| whatnot) but happily charged me. Didn't notice for a while as I
| didn't really use it. Support just ignored my questions.
| mewmew07 wrote:
| too vague!
|
| who locked you out? why did you get the hammer?
| looping__lui wrote:
| I also never got an explanation or like any feedback from
| customer support. They randomly charged back a number of
| charges and deleted my account (!) so I could never find out
| what happened. Weirdest customer/service experience I had in
| a VERY long time
| looping__lui wrote:
| I have no idea tbh. Never got an email abt it. Saw the
| charges after a while (my miss) wanted to log back into my
| account to cancel - couldn't because account was locked.
|
| The thing that annoyed me most is: they knew the account was
| locked and I could not used it and still charged me.
| DTE wrote:
| Dillon here (CEO @ Paperspace, YCW15). I want to give a huge
| thanks to the YC community and all the support over the years. We
| have always admired DO and couldn't be happier to join forces!
| jzelinskie wrote:
| Congrats! Are you keeping the office space in Bushwick?
| TheFreim wrote:
| Is there a way to sign up on paperspace without a phone? I've
| used the same VOIP number for half a decade but unfortunately
| it's still automatically blocked from being used for many
| services, this prevents me from creating an account.
| [deleted]
| atlasunshrugged wrote:
| Congratulations!
| gbN025tt2Z1E2E4 wrote:
| Sad to see your company going away. Your boxes were great for
| hosting Plex servers.
|
| Grats on the sale either way.
| sixwing wrote:
| congrats, dude.
| dzohrob wrote:
| congrats to you and the team!
| xNeil wrote:
| Hi Dillon - congrats on the offer! I adore your product. Quick
| question though - how sure are you DO won't be interfering with
| the product and the current team will continue doing its job?
| Alternatively, would you _like_ DO to take a dominant role in
| running the product?
| user_named wrote:
| Stop dreaming. The acquirer does whatever they want with what
| they've bought.
| dboreham wrote:
| To be fair, parent only asked for a level of sureness.
| Which of course is zero.
| makestuff wrote:
| Back when I was in college Paperspace was kind enough to give us
| a few thousand in compute credits for our research project around
| autonomous driving to help with training costs. Glad to see the
| success!
| gigatexal wrote:
| How much did Paperspace raise? Was the exit dilutive?
|
| Seems it was a win all around. They raised 35M exited at 111M.
| Not. 10x win but not under water.
|
| https://www.crunchbase.com/organization/paperspace
| moneywoes wrote:
| Roughly how much would the founders net
| alexawarrior wrote:
| It's a private transaction, so it's unknown and unless it's
| leaked out we are unlikely to ever know. There was a startup
| I was co-founder of at one point, and seven years later
| (about the same age as Paperspace) we sold for a similar
| amount, and the net of my shares was a little over $100,000.
| The CEO got more, other early joiners less. And among my
| direct knowledge of individuals in the startup community,
| this is not an unusual case, but rather typical. Many times
| companies are sold but the money goes primarily to the
| venture capitalists. Even seed and early round investors can
| get minimal or no returns after later dilution after a sale.
|
| The "20%" case is typically the best case that happens only
| in the 1/10,000 chance of extreme fast growth into a new
| behemoth, OR where the founders are already high net worth
| individuals or come from high net worth families, and can
| provide their own money in conjunction with VCs instead of
| relying on them for most capital.
|
| Because this is all private and not discussed, we tend to
| only hear of the very exceptional cases, and ignore the vast
| majority of the non-lottery winners in the startup world.
| y7 wrote:
| If you want to share some more (approximate) numbers, I'm
| very curious. What equity percentage did you have at the
| start? And were your shares worth more at an earlier
| investment round than at the exit?
| alexawarrior wrote:
| Starting equity was a little less than 10%. Valuations
| went up as several rounds were raised up to $30+m and
| share value went up until at one point it was north of
| $20m paper dollars. After market re-valuation an
| additional $60+m was raised and value went down a little
| but was still substantial. Then the IPO market all but
| disappeared. Final sale price was around $150m and common
| shareholders including myself initially received zero.
| Essentially the VCs converted their preferred to common
| and then voted to sell to a related party (another
| company the same VC firm had invested in).
|
| According to a lawyer who setup our initial investments,
| this was actually illegal so common investors including
| myself sued, but was this bankrolled by one of the big
| early investors as it's incredibly expensive to try and
| do a shareholder lawsuit against a major VC firm and
| investment bank. It ended up being settled out of court
| and that's where my $100,000 came from. The CEO came out
| a little better, but people who sweated years (and I mean
| frequent all nighters, weekends, true dedication) ended
| up with even less than me. And the only reason we even
| received anything at all was because we had a HNWI common
| investor who also got screwed and backed the lawsuit,
| they ended up getting their money back and a small return
| on investment from what I remember of the settlement
| terms.
|
| Just a word of caution to founders and early employees of
| startups to know what they are getting in to and the
| typical case of what happens (a small or non existent
| exit is the typical case in a tech startup), even when
| you see those big number raises and a big sale and you
| just assume that everyone is making bank.
| mymac wrote:
| That VC deserves to be named.
| no_wizard wrote:
| Name any of them, they all work this way, more or less.
| This is standard practice
| sashank_1509 wrote:
| agree
| 8n4vidtmkvmk wrote:
| That's nuts. I'm thinking about selling my business but
| we'd probably only get $200k or so. I'm 50% owner, no VCs
| so I reckon I'd get the full 50% minus taxes but I'm also
| about 8 years in and haven't taken a penny out so $100k
| would make me real sad. Sorry dude.
| popcorncowboy wrote:
| Common getting zero makes sense if pref holders had
| liquidation multiples ("we get 3x our investment back
| first"), but not if they converted to common, unless
| their conversion to common had some weird mechanic
| attached to it that massively diluted the remaining
| common down to effectively zero % (which sounds sue-
| able). I'm really curious about the mechanics of how your
| common holding netted out to zero if prefs also converted
| to common?
| alexawarrior wrote:
| Yes so what happened is they converted, then had majority
| common, then voted to recapitalize and sell, after which
| recapitalization they made out with a profit but common
| got nothing. The problem with this legally was they
| didn't have the right to convert without a common vote
| beforehand, essentially they did it in reverse order.
| Their leverage was the company was not cash flow positive
| (in no small part because of the massive management fees
| the VC loaded on as part of funding), and so needed
| funding to continue. They also offered the existing board
| members a $1m bonus as part of post-sale consulting
| (essentially a legal bribe) as part of agreeing to the
| sale. It's all not technically legal, but you know the
| golden rule, he who has the gold makes the rules.
|
| Because of the settlement terms I'm not able to name the
| VC, but I can tell you this kind of behavior is by no
| means unique to this VC, in fact it's rather de rigueur
| for the VC and PE worlds. It's even defensible in a way,
| they owe fiduciary duty to their limited partners, NOT to
| the common shareholders of the company they invest in.
|
| I currently advise startups seeking financing to either
| a) only go the VC route if you think you're in megagrowth
| into the next dropbox et. all or b) you have enough
| self/family wealth to take VC investment on favorable
| terms ala stripe.
| popcorncowboy wrote:
| Ah makes (mechanical) sense now. Thanks for the reply.
| incahoots wrote:
| I recall this was one of the plots from the HBO show
| Silicon Valley
|
| Thanks for providing insight to the process, very
| fascinating.
| alexawarrior wrote:
| Hard to watch, not only because it rang so true, but also
| because I've known people personally who gave their all
| to the company and when it didn't work out in the end,
| commit suicide. It's a cautionary tale of putting your
| entire self concept into your startup / employer.
| spacebanana7 wrote:
| Hard to say from the outside. Most founding teams end up with
| around 20% of a company at IPO so you could use that as a
| reference point.
|
| However, this company was a few stages before IPO so there
| could have been less dilution from investors - allowing the
| founders to get a bigger cut.
|
| On the other hand, some investors have really aggressive
| terms that can screw founders in situations like this. For
| example, their contracts could stipulate that an investor
| gets the first $45m of any exit even if that investor only
| put $15m into the company.
| ericd wrote:
| My impression is that those kinds of preference terms have
| been unusual over the past decade in SV.
| debacle wrote:
| To calculate that you'd need to know what they raised at.
| lbeltrame wrote:
| I use Stabile Diffusion with Paperspace's Pro tier ($9/mo) which
| gives you up to 6 hours of non per-usage GPU (meaning you don't
| have to worry about having a mortgage to pay for the cost) since
| I have an aging Vega at home and I worry about the electricity
| bill (EU). My worry is that plan will go away replaced by strict
| per usage costs.
| 7e wrote:
| $111M exit on $35M. Seems meh for seven years effort. Were
| prospects cloudy? Better return over seven years for most
| employees (possibly even founders) working up through a FAANG.
| I'm sure YC did great, of course.
| wg0 wrote:
| What is $35M here? Also, YC2015 would make it about 8 years run
| in 2023.
|
| I think exit is timely because there's the dire possibility of
| fading AI/LLM hype that's where GPU demand would fall off the
| cliff not only on the server side but also that many devices
| might have better inference hardware.
| gizmo wrote:
| 35m is what Paperspace raised according to crunchbase. 12 of
| which was raised in 2021, before the AI hype. So unless their
| valuation was absurd I think all investors did OK here.
| KRAKRISMOTT wrote:
| But all things considered their exit is solidly average,
| not the insane valuations top tier unicorns usually get.
| drc500free wrote:
| It's kind of like going to vegas for a week and coming out with
| a lot of good stories and 90% of your money.
|
| In terms of investor return, I think it's healthy to have some
| exits like this. A bunch of the money was only in for 2 years,
| and probably doubled their investment in that time. The rest of
| the investors got their money back, with something close to
| NASDAQ returns on top of it. If this was the baseline for the
| fund instead of going to zero, you wouldn't need unicorns and
| the questionable growth tactics that go with them.
|
| If founders had 25%, they got "retirement with reasonable
| luxuries" or "gunpowder to play investor" money of double digit
| $millions.
|
| If 20-25 employees split an option pool of 15%, it's close to
| replacing the FAANG opportunity cost.
|
| So totally agree that it's a bit of a "meh" outcome in
| comparison to financial alternatives, and the pie splitting
| matters a lot. But it didn't go to zero, and everyone is within
| a stone's throw of their stock market / FAANG hurdle rates (and
| it's not like that FAANG career is guaranteed for people who
| thrive better at startups). And the stories and experiences are
| a hell of a lot better.
| alexawarrior wrote:
| Without insider knowledge of the transaction, it is
| impossible to say what the returns were for various tranches
| of investment or for the founders or employees.
| czechdeveloper wrote:
| $35M being meh is peak HN here. Me not being from US, getting
| $100k was golden cufs that took many years to break even when I
| did not enjoy my work.
| brigadier132 wrote:
| $35 million is how much they raised. If they were purchased
| for $111 million that means that after the investors are paid
| off their principal there is $76 million left. There are 70
| employees, the original investors probably made some profit
| on their initial investment, so split that remaining $76
| million among everyone and none of the employees left super
| rich from this deal except maybe the founders.
| jerrygenser wrote:
| If they raised $35million, you're not accounting that
| venture funding especially at this scale is preferred
| shares.
|
| This means that the vc money requires 7-9% per year payback
| on liquidity event until any other equity gets any money.
|
| This means you're likely subtracting 1-3 million per year
| from other equity holders based on $35mn raised
| smallerfish wrote:
| > none of the employees left super rich from this deal
| except maybe the founders
|
| You could say that about 99.9(9?)% of startup exits.
| perlgeek wrote:
| The article calls paperspace "a leading provider of cloud
| infrastructure as a service".
|
| Does that mean they have/had lots of hardware investment? Or do
| they "just" offer a management layer based on other clouds?
| sashank_1509 wrote:
| PaperSpace product recently has been really bad. Gradient
| Notebooks are a worse version of Google Collab. Useless for any
| serious DL product building.
|
| Their DL virtual servers, Core I think you call them is horrible.
| Very slow internet, takes forever to copy datasets into them.
| Most of the time, it's an uphill battle to get ssh access to
| them, they create some pointless virtual console instead and then
| a GUI to copy datasets, run trainings etc which is confusing and
| a hassle over simple ssh access. Programmers just want a simple
| ssh access to a server with a GPU, we are not looking for a
| WYSWYG like editor! I really don't know who the customer for this
| is? Marketing execs who want to do deep learning? I tried
| powering through the documentation, but it was outdated, and was
| plain wrong at points. It took me a couple of hours just to
| figure out how to copy a large dataset into my server and find
| the path to that dataset. Once I discovered, Lambda and Vast ai,
| I never looked back and forgot Paperspace for good.
|
| Really as a cloud provider, all you need to do is create send a
| ssh tunnel to a system with a certain amount of compute and
| memory. Maybe like AWS you can create storage buckets but it's
| not absolutely neccesary. Don't add GUI, interfaces etc, your
| customers are engineers and they prefer simple systems that give
| them control.
|
| One feature I would like in Lambda/ Vast is the opportunity to
| copy the dataset into the server before the GPU hours start
| billing. When you have TB's of datasets like me, you end up
| wasting 8-9 hours just copying the dataset and it feels annoying
| that I pay for the cloud hours during that time. Amazon kind of
| solves this, but it slows down data access in return. I would
| like a cloud provider who just lets me copy everything before
| starting to bill me.
| TradingPlaces wrote:
| People buying companies just to get their hands on some more
| Nvidia GPUs.
| gargablegar wrote:
| That's a pretty hysterical outlook.
|
| What's Nvidia supply chain like with their AI GPUs? Is it
| constrained or is this a joke :p
| TradingPlaces wrote:
| It is so constrained that companies are literally buying
| smaller GPU cloud companies.
|
| So, if by "hysterical," you mean it is pretty funny and a
| reflection of the hype cycle, then yes. If you mean that I am
| being overwrought, I can assure you I am not. Even the
| hyperscalers do not have enough GPUs
| x86_64Ubuntu wrote:
| Ignorant question, but where is ATI in the AI/ML space? I only
| ever hear about NVidia and it's Cuda.
| badrequest wrote:
| ATI was acquired by AMD in 2006. :)
| MikusR wrote:
| Essentially all Nvidia gpus support cuda, even cheap ones.
| The amd rocm supports only like 10 very specific models.
| denverllc wrote:
| AMD released ROCm (its competitor to CUDA) in 2016, nearly 9
| nears after NVidia released CUDA. They relied on OpenCL and
| failed to invest in "GPGPU", and as a result were so far
| behind NVidia they couldn't keep up. As a result, for about a
| decade most scientific GPU code was written in CUDA.
|
| Today, AMD support in PyTorch is minimal. Actually getting
| anything running is very difficult, and random crashes are
| common. This is in contrast to NVidia, which spends a lot of
| money to ensure a full compiler stack and compatibility with
| AI libraries.
|
| Today, the AMD hardware itself is pretty capable and has a
| good price/performance ratio. However, actually taking
| advantage of that performance is difficult because of the
| poor quality of drivers and software.
| ganoushoreilly wrote:
| They're not really playing ball, NVIDIA did the right thing
| in pushing software support early on. CUDA really has a good
| strong hold and AMD isn't doing much by way of pushing code
| support for their CU's.
|
| It's going to take a big long investment, which people have
| been arguing about for the past 6 years, and AMD really isn't
| jumping up take the mantle. It's really a shame too because
| we need a strong competitor if we ever expect more realistic
| pricing for the average users/company.
| 0xDEF wrote:
| AMD exposed an OpenCL API for GPGPU and hoped the open source
| community would do the rest. That approach failed.
| toomuchtodo wrote:
| Ain't nothing wrong with buying revenue (potential or actual),
| or a multiple bump ("we do VMs"->"we enable AI too!"). Go where
| the margin and demand is.
| monlockandkey wrote:
| I don't think there is much point to using the big 3 cloud
| providers. In fact I would think it is a fools errand to use AWS
| for startups or even big companies given the sheer cost of
| bandwidth, storage and compute compared to Digital Ocean, Vultr
| etc.
|
| I shake my head every time when I read startups using AWS and
| racking up expensive and unpredictable bills to use the same
| compute that can be had at a fraction of the cost when using Tier
| 1.5 cloud providers.
|
| As for this acquisition, I think it was a matter of time before
| GPUs were added to the service offering for Digital Ocean and
| this would be the best way forward rather than implementing this
| infrastructure from scratch.
| brucethemoose2 wrote:
| Paperspace gives free access to Graphcore IPU nodes (with 4 IPUs
| each), which is pretty neat. Theoretically that is way more
| throughput than a Colab T4 instance.
|
| ... But in practice, I tore my hair out trying to port an actual
| Stable Diffusion web UI, until I hit a wall. I needed to upgrade
| the "Poplar SDK" or something beyond the ancient Python 3.8
| version to get things working, but the download was behind some
| kind of corporate login.
|
| That left a bad taste in my mouth.
| ineedasername wrote:
| The gaming community also used Paperspace sometimes for PC game
| streaming. It allowed users to install Steam or other clients to
| tap into existing libraries.
|
| I found about it in the reddit /r/cloudygamer sub and used it
| temporarily on vacation to play Assassin's Creed Odyssey and it
| worked pretty well.
| kossTKR wrote:
| True, but i would say shadow.tech is way better valuable for
| money.
| TheFreim wrote:
| Does anyone know of a service like this that only charges
| based on storage + how much you use it? I would like to use
| something like this to run some windows software so I don't
| need a local VM or dual booting but paying monthly for
| something I would only use a few hours a month would not work
| for me.
| rat9988 wrote:
| Paperspace?
| TheFreim wrote:
| I can't use Paperspace due to them blocking my phone
| number (https://news.ycombinator.com/item?id=36617551),
| plus I am interested in alternatives for the sake of
| comparing options.
| ineedasername wrote:
| At the time I used Paperspace shadow was in some kind of
| limbo, not accepting new customers-- I'm not sure if pre-
| existing ones were still able to use the service.
|
| Also Paperspace would let you choose how much GPU you needed,
| which seemed like a nice way to conserve costs if you were
| playing low-overhead games, some indies or older games,
| though I never used it as such.
| kawsper wrote:
| I used Paperspace to do daily quests in Age of Empires 2 on a
| holiday once, it worked great for that.
___________________________________________________________________
(page generated 2023-07-06 23:02 UTC)