DigitalOcean Buys Cloud Startup Paperspace To ‘Expand’ AI, ML For SMBs, Startups

DigitalOcean acquires cloud startup Paperspace for $111 million to build new artificial intelligence and machine learning products targeting SMBs and startups.


DigitalOcean CEO Yancey Spruill

DigitalOcean has acquired cloud computing startup Paperspace for $111 million in cash in a move to create new artificial intelligence and machine learning offerings for SMBs and startups.

Paperspace provides a cloud platform for building and scaling AI applications, which DigitalOcean said it will leverage to enable customers to easily test, develop and deploy ML and AI applications, as well as utilize GPUs in ways that predominantly have been the domain of large enterprises.

“We are excited to expand our portfolio tailored to the world’s SMBs and startups with simplified AI/ML offerings,” said DigitalOcean CEO Yancey Spruill in a statement. “This acquisition marks a significant milestone in DigitalOcean’s journey to revolutionize how SMBs and startups harness the power of the cloud and AI/ML for their applications and businesses.”

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Paperspace will remain a stand-alone business unit within DigitalOcean.

DigitalOcean Layoffs

The move to acquire Paperspace comes just five months after DigitalOcean said it will lay off 11 percent of its employees, which amounted to approximately 200 employees globally.

CRN discovered via posts on LinkedIn that layoffs hit engineers and employees working on DigitalOcean’s App Platform and Spaces offerings.

About half of New York-based DigitalOcean’s workforce is outside the U.S., with overseas sales making up about 70 percent of the company’s revenue. In 2022, DigitalOcean generated $576 million in revenue, representing an increase of 34 percent year over year.

The Paperspace purchase marks DigitalOcean’s first acquisition this year. In 2022, the company acquired cloud hosting service provider Cloudways for $350 million.

Paperspace’s Secret Sauce

Paperspace provides cloud infrastructure as a service for highly scalable applications leveraging GPUs.

The New York-based startup aims to simplify the AI and ML experience, enabling easy and cost-effective experimentation and production across various use cases, such as generative media, text analysis and natural language understanding, recommendation engines and image classification. Other use cases include deploying Large Language Models (LLMs), fine-tuning Foundation Models, building the next ChatGPT and harnessing generative media.

“The combined offerings allow customers to focus more on building applications and growing their businesses and less on the infrastructure powering them,” said DigitalOcean’s CEO in a blog post.

Combined, DigitalOcean and Paperspace will provide SMBs and startups with a suite of cloud offerings, advanced networking, and the flexibility to harness both GPU and CPU capabilities as AI and ML demand increases.“The integration of GPUs alongside CPU workloads opens up a world of possibilities,” said DigitalOcean’s Spruill.

Founded in 2014, Paperspace has raised $35 million from investors including Battery Ventures, Intel Capital and SineWave Ventures.