DigitalOcean today announced that it has secured $10 million in equipment financing from CapX Partners. CapX previously invested in DigitalOcean’s $3.2 million seed round in 2013. The announcement comes on the heels of its huge $37.2 million funding round earlier this year led by Andreessen Horowitz to fuel its fast growth.
We don’t usually hear all that much about equipment financing rounds these days, but that’s probably because most startups these days don’t have all that much equipment that needs financing.
For DigitalOcean, however, getting discounts and lines of credit with Dell and other vendors was very important during its early days because it does actually have to incur quite a bit of cost to keep its co-located data centers running and scale them up as demand grows.
Early on, DigitalOcean often had a hard time coping with the ever-increasing demand and had to limit access to new cloud computing instances on a number of occasions.
“CapX was impressed with the company’s product offering, customer growth, and the trend for small business to move IT needs to the cloud,” said Peter W. Washington, Vice President of CapX Partners, in a statement today. “DigitalOcean’s impressive management team and support from its lead investor, Andreessen Horowitz, convinced CapX to step up its financial commitment to the business. We look forward to growing our relationship with both DigitalOcean and Andreessen Horowitz.”
DigitalOcean COO Karl Alomar said today that, “CapX is providing a meaningful contribution towards our overall syndicated leasing structure and remains one of our key partners in this regard.”
CapX says that in the process of working with the company, it has helped Digital Ocean to “draw down incremental tranches of capital to better match the company’s scaled financing needs.” This “Lease Line of Credit” structure is meant to help the company “manage its capital efficiently during the new shareholder’s investment period,” CapX noted in today’s announcement.