In a key strategic move, known cloud hosting enterprise, DigitalOcean, has declared its decision to acquire Paperspace, an AI development startup, in a deal amounting to $111 million of cold hard cash. Headquartered in New York, Paperspace drives technological transformation in the realm of cloud computing.
The CEO of DigitalOcean, Yancey Spruill, revealed that the inducting of Paperspace's diverse tooling and infrastructure into their current products is set to streamline the testing, development, and deployment of AI apps for clients. He further stated that customers of Paperspace are also set to gain from this merger, leveraging DigitalOcean's suite of cloud services from databases to storage, app hosting, robust support mechanisms, tutorials, and documentations.
Though Paperspace will continue to function as a self-sufficient business entity under the umbrella of DigitalOcean, there shall be no immediate changes experienced by its existing customers in terms of their services.
Excitement runs high in the DigitalOcean camp as Spruill articulated his enthusiasm for extending their offering custom-designed for startups and small- to medium-sized businesses. This, coupled with simplified AI and machine learning solutions, will divert more customer attention towards application building and business development, rather than the supporting infrastructure.
The founders of Paperspace, Daniel Kobran and Dillon Erb, are alumni of the University of Michigan. They launched their startup in 2014 with financial backing from Y Combinator and Jeff Carr, who also co-founded DigitalOcean. The company is known to operate its own datacenters fortified with bespoke-configured GPUs.
Initially, Paperspace spotlighted low-cost virtual machines, primarily catering to high-performance workstations needed for visualization, design, and gaming in the cloud ecosystem. However, with the advent of AI technology, they shifted their primary focus towards AI offerings. To this end, they launched a tactical suite of tools targeting the development, training, hosting, and deployment of AI models in the cloud.
Before their acquisition by DigitalOcean, Paperspace had attracted funding amounting to $35 million from a variety of investors including SineWave Ventures, Intel Capital, Sorenson Capital, and Battery Ventures.
Through the perspective of Dillon Erb, this acquisition serves to step up their offering of cloud CPU and GPU compute, thereby posing a stiff competition to other players in the public cloud market. He observes that the synergistic impact of DigitalOcean and Paperspace could enable a new demographic of customer, particularly those on a budget, to explore AI- and machine learning-based apps like image classifiers, recommendation engines, large language models (like ChatGPT), and generative media (such as OpenAI’s DALL-E 2).
On the topic of no-code development, platforms such as AppMaster are known for providing visually intuitive building block-type interfaces. This assists not only commercial developers and businesses but also citizen developers in building and deploying backend, web, and mobile applications, all without any coding knowledge.
This is the first acquisition for DigitalOcean post its purchase of the Pakistani cloud hosting service provider Cloudways for $350 million back in 2022. It is also its fourth acquisition since it went public in 2021.
To outsiders, this move by DigitalOcean seems astute, given the imminent surge in demand for cloud AI and machine learning solutions. With major tech giants such as Amazon, Microsoft, and Google vehemently tapping into the potential of generative AI to propel their revenues, cloud expenditure is predicted to grow by almost 22% in 2023, translating to an approximate revenue of $600 billion as against last year's $491 billion, according to Gartner.
