DigitalOcean buys Paperspace in $111m deal to build AI plan

The new AI products are aimed at SMBs and other start-ups

DigitalOcean has acquired cloud computing start-up Paperspace for $111m in cash in a move to create new artificial intelligence (AI) and machine learning (ML) offerings for SMBs and start-ups.

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 utilise 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 start-ups with simplified AI/ML offerings," said DigitalOcean CEO Yancey Spruill.

"This acquisition marks a significant milestone in DigitalOcean's journey to revolutionise how SMBs and start-ups harness the power of the cloud and AI/ML for their applications and businesses."

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 per cent 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 US, with overseas sales making up about 70 per cent of the company's revenue. In 2022, DigitalOcean generated $576m in revenue, representing an increase of 34 per cent year over year.

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

Who are Paperspace?

The newly acquired group provides cloud infrastructure as a service for highly scalable applications leveraging GPUs.

The New York-based start-up 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.

Together, the duo Cwill provide SMBs and start-ups 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 $35m from investors including Battery Ventures, Intel Capital and SineWave Ventures.