Fast-Growing Cloud Hosting Service Digital Ocean Raises $3.2M Seed Round Led By IA Ventures To Build Out Its Infrastructure

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Digital Ocean, one of the fastest-growing cloud hosting services around, today announced that it has raised a $3.2 million seed round led by IA Ventures, with participation from CrunchFund and TechStars. The company, which is currently adding new subscribers at a rate of about 500 a day, plans to use the funding to hire more marketing and engineering talent and to build out its infrastructure.

As the company’s CEO and co-founder Ben Uretsky told me earlier this week, the timing of this round couldn’t be better for his company. Digital Ocean, which found a niche in the market through its¬†focus on simplicity and by¬†keeping prices as low as $5/month for an entry-level server, had quickly grown without much funding until now, but given that the company constantly needs to buy servers and bandwidth to keep up with demand, now was the right time to raise its credit profile to do so.

Uretsky also noted that its fast and early growth often meant the company ended up in a capacity crunch and, at the time, couldn’t add users as fast as it wanted to because it simply didn’t have enough resources available in its data centers. Users, however, expect that their cloud hosting provider has virtually unlimited resources and Uretsky agrees that they should be able to spin up a new server whenever they want to. “We raised at the time where we got to the limits of what we could do on our own,” he told me.

IA Ventures, Uretsky told me, has long been a friend of Digital Ocean and had already helped the company previously through assistance with financing, attracting key employees and by helping it build the right business metrics to measure its performance. Indeed, it was IA Ventures that told the company to apply to TechStars (which participated in this round because it converted its original convertible note) in the first place.

Since January, Digital Ocean has almost tripled its headcount from 12 employees to over 30 today. This means the company has finally been able to move from just keeping up with growth to actually being able to develop new features for the service. Later this month, for example, Digital Ocean plans to launch private networking in its new New York data center in Google’s 111 Eighth Avenue building. Also on the roadmap are support for CDNs, load balancing, IPv6, usage graphs in the dashboard and more.

Disclosure: As you’re probably aware, CrunchFund’s Michael Arrington also founded TechCrunch.