Mitch Wainer

Interview with DigitalOcean co-founder Mitch Wainer

Three years ago, Mitch Wainer joined the brothers Ben and Moisey Uretsky to become one of the co-founders of DigitalOcean, a New York-based cloud infrastructure provider built for developers. To date, the young company has attracted over half a million developers to their platform by offering the best user experience in the industry, becoming the second largest hosting provider in the world. Since graduating from the Techstars Accelerator Program in 2012, they’ve raised $3.2 million in seed capital from IA Ventures, $37.2 million in a series A funding led by Andreessen Horowitz, and $83 million in a series B funding led by Access Industries.

Let’s see what Mitch has to say, and how his story goes.

Goran Duskic: So I would like to start at the very beginning when there wasn’t even a hint of an idea for DigitalOcean. I saw your interview just a couple of days ago on This Week in Startups and I saw a bunch of your SEO-related videos on YouTube from a few years ago (chuckles).

So I was wondering what was going through your head before joining the other founders of DigitalOcean? And what wasn’t perfect then for you that made you go after more?

Mitch Wainer: Sure. I think what was going through my head at the time was that I spent the majority of my spare time building websites and building online businesses, while I was working full-time at an ad agency for almost 5 years as a marketing director.

And I was having a lot of fun with my side projects. I was a front-end developer as well as a graphic designer, plus I had the marketing chops. So I was able to build online businesses and generate revenue for those online businesses.

But I knew there was a ton of potential to do something much greater. I was pretty active online in researching and reading blogs and watching videos. That’s when I came across this pretty successful video podcast with Jason Calacanis on “This Week in Startups” and I figure I’d to reach out to him because honestly, I was a little lost.

So I wanted to ask what he would do if he were in my shoes, to get a different perspective from someone who has been successful at building a tech business as well as invested in other companies. He carries a lot of invaluable experience, so I sent him an email. They asked me to come on the show as a guest during the Ask Jason segment.

My question at the time was: “What do I do. I’m working in this ad agency, I don’t have any equity, I’m not learning, I’m not growing, what do I do?” And he basically said, “The answer is simple. It’s better to be the worst player on the Knicks than the best player at the Rec Center at the YMCA.” I totally got that. I mean it just made complete sense to me.

So after that interview, I started to do more research in the tech world and in the startup world. And he also recommended applying for a tech accelerator like TechStars or YC. So I started looking into TechStars. I applied as a hack star, which means that I applied as an individual person instead of a  team and I actually got accepted to the Boulder Program. It was a complete coincidence that the DigitalOcean founding team got into Techstars Boulder at the same time because I applied way in advance prior to their application.

So it was just like the stars aligned. When I first met Ben and Moisey Uretsky, they had a posting up on Craiglist looking for a marketing director or head of marketing to help them with their hosting business. We went out to Boulder Colorado together to build this new business (DigitalOcean) from the ground up.

Goran Duskic: Was this your first startup experience or were you working in a startup before at any time of your life?

Mitch Wainer: I’ve always created online businesses. They weren’t hugely successful. I mean I sold one for $50,000 and one made like 2- $3,000 a month. They were small-scale SAAS startups that I was creating on the side. It was nothing substantial but it gave me the experience early on in my career to know what works and what doesn’t work with digital marketing. So that experience is invaluable and I carried that over to DigitalOcean when I started building the website and the growth engine behind the company.

Goran Duskic: What was going with DigitalOcean right before the first investment or when you joined Techstars? I mean have you invested any of your own money? Or was the income that you had that was supporting you? What was your traction back then?

Mitch Wainer: Yeah well so you’re talking about for DigitalOcean specifically?

Goran Duskic: Yes, before the first investment.

Mitch Wainer: Yeah so we were very fortunate. When I came on board, I received a salary as a head of marketing for the managed hosting company the brothers Moisey and Ben had built prior to DigitalOcean. That was a $6 million a year business so that essentially infused the capital that we needed to grow DigitalOcean while paying ourselves a salary.

Goran Duskic: Going back to the question that was regarding the first investment and what was happening before that. So when you got the first investment how long were you in touch with people that made that first investment? What do you think it was that won them over?

Mitch Wainer: IA Ventures was the company that gave us our first round of funding, our seed round. They were one of the key influencers early on that pushed us to apply to Techstars. They encouraged us to apply and we kept in touch with them during the program until we graduated. And then once we had the traction numbers to prove our story and our vision, then they finally committed to investing into DigitalOcean.

Goran Duskic: How would you separate your focus on 3 main categories with DigitalOcean? One is working on creating a great product; the second one spending time on the technology, and the third is spending time on marketing. So what would be a pie chart percentage for those 3 categories?

Mitch Wainer: So I think one thing that we’ve done really well is we spend half our time focusing on product development and then half our time focusing on marketing. And I think that’s a healthy mix. And it’s actually one of the reasons Andreessen Horowitz invested in us – because we weren’t a company that just said, “Hey we’re all about the product if we build it they will come.” We’ve always focused on multiple areas of the business: the financial arm, the marketing arm, support, community, etc. We are well balanced. And that’s what really drew a lot of their interest.

I believe that it’s important to have a strategic marketing plan. Unless you’re the first player in an industry, you need to be as competitive and as aggressive as possible with your efforts, because you are trying to take a piece of a market share that’s already being consumed by multiple companies at the same time. You have to make sure your message stands out. You have to make sure your positioning stands out; that your marketing channels are far and above your competitors. And that’s really what we’re trying to do here.

Goran Duskic: In our last interview at one point you mentioned and I can quote you on that – “As a matter of fact we’re in the process of raising our Series A somewhere in the range of $20 million to $30 million.” And if I have my facts straight you actually ended up raising $37.2 Million from Andreessen Horowitz. So I was wondering if you could talk a little bit about how that happened and how was that deal different from your first $3.21 million funding. Could you compare the two?

Mitch Wainer: The seed investment carried us for a few months. And it was crucial because we needed it to inflate our balance sheet so we could leverage credit lines for our hardware leasing component of the business. We have such high demand for servers and we have to keep up with supply; when it comes to the cloud it’s all about being infinitely scalable. So we have to have a data center environment where we can scale out our racks and add as much server capacity as possible to support demand. So that required millions and millions of dollars to do. And we needed X amount of dollars on our balance sheet to leverage those credit lines. Now that only got us so far, because we quickly outgrew that; where we needed even more capital. And that’s when we decided that now it was time to raise again, roughly 6 months later at the end of 2013. We initially were saying that we needed $20 million and then it quickly became $30 and now we closed it at $37. That number is large enough that we would not have to worry about capacity limitations and ordering on time. And it allowed us to hire more talent.

We’re now at 150 employees plus. The new $37 million of series A completely and drastically changed the business. And it just gives us the breathing room really to excel and to focus on what is really important for the business. Without having too many distractions from the credit. Plus securing credit lines and capacity and all that. So we are in a better state now and we’re very profitable and we’re generating lots of revenue so we’re just trying to keep up with that momentum.

Goran Duskic: Have you personally ever had someone you considered a mentor or someone that was instrumental in helping you get to the level you’re currently at?

Mitch Wainer: Yeah. I mean I had mentors at every stage in my career. My first mentor was my CEO at my first company – Patrick. He was sort of like the VP of communications at VISA and E*TRADE. He eventually branched off and created his own marketing agency, and I learned a lot from him in my career. I mean we bonded and connected really early when I joined the company and there were about 30, 40 people. And it was pretty cool when I was like a low-level marketing associate speaking with the CEO of the company and sharing trade secrets and knowledge and learning from each other. And then he provided guidance to me throughout my career earlier on.

And then through the TechStars accelerator program we’ve met a ton of mentors. Jason Seats, cofounder of Slicehost that got acquired by Rackspace, became our mentor. He shared some really invaluable information. Our investors: IA Ventures, Jesse Beyroutey, Brad Gillespie those guys are continuing to help us grow and educate us, and guide us in the right direction. Right now, I’m actually in the process of securing a coach for myself. I fly out to San Francisco next week and I’m meeting with a couple of CMOs at some publicly traded tech companies. So they’ve been there done that; scalable large marketing organization. I think it’s really gonna help guide me when I think about how I want to structure and plan the marketing work here at DigitalOcean.

Goran Duskic: So what is next for DigitalOcean? Where do you guys go from here? Are you aiming for an IPO or selling to a competitor or buying a competitor? What’s the direction?

Mitch Wainer: It’s too early to tell to be honest. I mean we’re honestly just heads-down focused on trying to acquire developers throughout the world – that’s our mission. We’re trying to build a product that developers love. We’re not really worried about any type of exit or any type of IPO strategy yet. It’s just too far away to think about and we really just have to think strategically right now and execute really well and continue to build the team and the product. We can’t get distracted by any type of liquidation opportunities. After all, the company is still pretty young.

Goran Duskic: For the final thoughts what would you say the biggest contributor was to your personal growth besides the mentors? Were there any books, seminars, or just problems you had to deal with at work, or maybe anything else I’m not mentioning?

Mitch Wainer: My best advice is to read books and just do it yourself – actually go out and do it. The best teacher in my life has been myself. So when I went to school, when I went to college, I didn’t learn anything in class that I’m really applying today. Everything that I’m doing I have pretty much learned by teaching myself. Certainly, you can learn by listening to others; but it really takes getting out there and doing it to really understand what works and what doesn’t.

Goran Duskic: (chuckles) Yeah, I mean not that I have any vote in this but I gave it a lot of thought and I was really curious about your opinion because I was thinking the same thing. All those books that you read or seminars you attend aren’t worth anything if you don’t put them to the test and put them into your own life. I realized that I was advancing most in my career when I was facing some sort of challenge that I hadn’t faced before and then utilizing anything that I’ve read in a book or learned in a seminar.

Mitch Wainer: Yeah!

Goran Duskic: Real pleasure to talk with you again and thank you for finding time to do this interview!