A big red flag is that 570,000 customers bring in only 357m in rev. That's $50 a month for the average customer. That's way too low.
"Our average revenue per customer (which we refer to as ARPU) has increased significantly, from $35.97 in 2018 to $40.16 in 2019 to $47.78 in 2020. We have no material customer concentration as our top 25 customers made up 11%, 10% and 9% of our revenue in 2018, 2019 and 2020, respectively."
I vaguely remember a talk I had with an employee there was a time when I think the average user was paying only $20/mo, which at the time, I had a $250-500/mo bill depending on load.
This was before they even had a load balancer product (so 2012-2013-ish?), and I was running a fairly unsuccessful managed WordPress offering that had dynamic scaling based on the reported metrics.
The infrastructure was just a big server for MySql, and a tiny server for the orchestrator. Then it would use the DO API to spin up new servers off a snapshot, ssh into them, and run the setup script to point to the right Wordpress instance in the database, then add it to the nginx reverse proxy list for the domain.
The whole thing could scale up or down in 30 seconds. Sure it isn't as fast as AWS or Azure could scale, but we were in control, in code, before containerizing was even really a thing.
Keeping it simple is actually very hard :)
> SaaS businesses are valued on a multiple of their revenue - in most cases the projected revenue for the next 12 months. Multiples shown below are calculated by taking the Enterprise Value (market cap + debt - cash) / NTM revenue. In the buckets below I consider high growth >30% projected NTM growth, mid growth 15%-30% and low growth <15%
So if DO is mid growth, you could use 17x as the EV / NTM multiple. So if 2021 revenue will be 320mm + 25% = 397mm NTM * 17x = 6749mm EV.
Total debt is 263mm so best (rough) guess at equity market cap is 6749mm - 263mm debt + 100mm cash
I mainly wonder as companies like C3.ai are above a $10B market cap on 50% or less of DO's revenue. And C3 (just to extend the example) is carrying lower margin services revenue as well. Growth is somewhat different, granted.
Not an internet business per say, mostly used in the context of processing and storing data + internal apps.
Do is great value, although not the cheapest. They need to double down on the useful items, maybe go a bit offroad in what they offer, lest they might be a in rough spot.
Cost savings + flexibility/avoiding vendor lock-in are DO selling points in my mind.
I looked into migrating my app to Azure, to get similar performance to what I have in DO was over 3x the monthly cost. Worked with Azure support to benchmark and try and come up with a plan to migrate, and the support rep ended by saying essentially "don't think we can get close to your current performance for near that price".
It's not cut and dry.
If you value understanding how people make purchasing decisions, this is an opportunity to get some insight because as you can see, there's a lot more to it than what you were able to enumerate.
Seems you might be a software engineer. This should interest you because an engineer that understand the business end of things is immensely more valuable than a heads-down coder in the majority of tech companies.