December 11, 2023

DigitalOcean, Today’s Cloud Hosting Business Announce The company agreed to acquire Paperspace, a New York-based cloud computing and artificial intelligence development startup, for $111 million in cash.

DigitalOcean CEO Yancey Spruill said Paperspace’s infrastructure and tools, once integrated with DigitalOcean’s products, will enable customers to more easily test, develop and deploy AI applications. For Paperspace customers, he said, they will benefit from DigitalOcean’s cloud services, including databases, storage, application hosting, documentation, tutorials and a strong support system.

For now, Paperspace will remain a separate business unit within DigitalOcean, and Paperspace customers will not see immediate changes to their services.

“We are excited to expand our portfolio of products tailored for SMEs and startups around the world with simplified AI and machine learning offerings,” Spruher said in a release. “The combined offering enables Customers can focus more on building applications and growing their businesses, and less on the infrastructure that supports them.”

Paperspace was co-founded in 2014 by University of Michigan graduates Daniel Kobran and Dillon Erb. Backed by Y Combinator and DigitalOcean co-founder Jeff Carr, the company runs its own data centers with custom-configured GPUs.

Paperspace initially focused on low-cost virtual machines, providing high-performance workstations for design, visualization, and gaming in the cloud. But as AI enters the mainstream, Paperspace is ramping up its AI offerings, launching a suite of tools designed for developing, training, deploying, and hosting AI models in the cloud.

Prior to the acquisition, Paperspace raised $35 million from investors including Battery Ventures, Intel Capital, SineWave Ventures and Sorenson Capital.

Erb sees the acquisition as a step toward offering comprehensive cloud CPU and GPU computing services to compete with other providers in the public cloud market. He asserts that the combined power of DigitalOcean and Paperspace will enable a new class of customers, especially those on tight budgets, to delve into AI and machine learning-driven applications such as generative media (such as OpenAI’s DALL-E 2 ), large language models ( such as ChatGPT), recommendation engines, and image classifiers.

“DigitalOcean is known for simplifying complex cloud technologies and making them more accessible to developers and businesses,” Erb said in an advance statement. People and businesses unlock the limitless possibilities of artificial intelligence and machine learning.”

The paperspace acquisition is DigitalOcean’s first since its $350 million purchase of Pakistani cloud hosting provider Cloudways in 2022 and its fourth since its public stock listing in 2021.

From the outside, it’s a smart move for DigitalOcean, as it risks being left behind on the wave of cloud artificial intelligence and machine learning solutions. Despite a 29.7% jump in revenue to $165.13 million in the first quarter of 2023, earnings per share, return on equity, and net margin rose 29.7% did not meet expectations.

Big tech cloud providers like Microsoft, Amazon and Google are increasingly to turn Generate artificial intelligence to boost revenue — and with some success. Recently CNBC polling Finding that AI is now the largest expense for nearly 50% of executives across the economy suggests that this is an area for wise investment of resources.

Driven by enthusiasm for AI, Gartner predict Cloud spending will grow 21.7% through 2023, with spending this year approaching $600 billion, compared to $491 billion last year.