DigitalOcean recently announced its acquisition of cloud computing startup Paperspace for a whopping $111 million in cash. This acquisition brings together the strengths of both companies, allowing them to offer customers enhanced AI application testing, development, and deployment capabilities. By integrating Paperspace’s infrastructure and tooling with DigitalOcean’s products, customers will enjoy a more seamless experience.
Despite the acquisition, Paperspace will continue to operate as a standalone business unit within DigitalOcean, ensuring stability and continuity for its existing customers. There will be no immediate changes to the services provided by Paperspace.
Yancey Spruill, the CEO of DigitalOcean, expressed excitement about the expansion of their portfolio, specifically catering to small and medium-sized businesses (SMBs) and startups by providing simplified AI and machine learning offerings. The combined expertise and offerings of DigitalOcean and Paperspace will enable customers to focus more on building applications and growing their businesses, while reducing their reliance on the underlying infrastructure.
Paperspace, founded in 2014 by Daniel Kobran and Dillon Erb, graduates from the University of Michigan, has impressed investors with its success. Backed by Y Combinator and Jeff Carr, one of DigitalOcean’s cofounders, the company operates its own datacenters equipped with custom-configured graphics processing units (GPUs).
Initially focusing on low-cost virtual machines for design, visualization, and gaming in the cloud, Paperspace later shifted its focus to AI offerings. It launched a suite of enterprise tools designed for the development, training, deployment, and hosting of AI models in the cloud, capitalizing on the growing demand for AI solutions.
Before the acquisition, Paperspace managed to raise $35 million from investors such as Battery Ventures, Intel Capital, SineWave Ventures, and Sorenson Capital. Dillon Erb, one of the co-founders, believes that the acquisition will allow them to offer a comprehensive range of cloud central processing unit (CPU) and GPU compute services to compete with other vendors. With the combined capabilities of DigitalOcean and Paperspace, customers, particularly those on a tight budget, will be able to explore AI- and machine learning-driven applications like generative media, large language models, recommendation engines, and image classifiers.
Erb praised DigitalOcean for its expertise in simplifying complex cloud technologies and making them accessible to developers and businesses alike. He expressed his excitement about joining forces with DigitalOcean, as he believes there is no better company to unlock the endless possibilities of AI and machine learning for developers and businesses.
This acquisition marks DigitalOcean’s first since 2022 when it acquired Pakistani cloud hosting service provider Cloudways for $350 million. It is the company’s fourth acquisition since going public in 2021.
From an external perspective, this move by DigitalOcean seems wise, as it enables them to stay relevant in the rapidly growing market for cloud AI and machine learning solutions. Big Tech cloud providers like Microsoft, Amazon, and Google have increasingly turned to generative AI to boost their revenue, with significant success. The enthusiasm for AI is expected to drive a 21.7% growth in cloud spending in 2023, reaching nearly $600 billion this year compared to $491 billion last year, according to Gartner.
With this acquisition, DigitalOcean is well-positioned to capitalize on the surging demand for AI and machine learning solutions while offering customers an optimized and seamless experience.
