I can understand the SaaS business model where you lose money in the short term to acquire customers, because that customer will be worth money over the next four to six years. If you are expanding aggressively, you will be losing money as a company for sales and marketing in order to acquire many long-term customers.
But I don't understand why Digital Ocean should be losing money. Unless I am mistaken, they do not seem to be spending on sales in order to acquire long-term customers. If they are losing money on operations, then doesn't that mean their business model is broken?
Perhaps they lose money on small-scale hosting as a marketing expense in order to acquire big long-term customers? Or perhaps they have big capital expenditures for data centers? Otherwise, this doesn't look good for Digital Ocean.
It doesn't seem like the author of the original article knows what they are using the credit facility for, note the "maybe":
This new credit line means two things. First, DigitalOcean is sill investing heavily in its infrastructure. Maybe existing users will get a performance upgrade with new servers replacing existing servers. Or maybe DigitalOcean will expand its product offering.
And if they have to take out a credit line simply to upgrade existing customers, without bringing in new revenue, that is bad news. That means they are losing money simply to maintain their current position.
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[ 4.6 ms ] story [ 16.1 ms ] threadBut I don't understand why Digital Ocean should be losing money. Unless I am mistaken, they do not seem to be spending on sales in order to acquire long-term customers. If they are losing money on operations, then doesn't that mean their business model is broken?
Perhaps they lose money on small-scale hosting as a marketing expense in order to acquire big long-term customers? Or perhaps they have big capital expenditures for data centers? Otherwise, this doesn't look good for Digital Ocean.
This new credit line means two things. First, DigitalOcean is sill investing heavily in its infrastructure. Maybe existing users will get a performance upgrade with new servers replacing existing servers. Or maybe DigitalOcean will expand its product offering.
And if they have to take out a credit line simply to upgrade existing customers, without bringing in new revenue, that is bad news. That means they are losing money simply to maintain their current position.