Founding Digital Ocean with Moisey Uretsky

“It’s a classic case where you have to be contrarian. It seems like the worst idea in the world to start a cloud hosting business. We didn’t know any better.”

Moisey Uretsky is the cofounder of Digital Ocean, a leading cloud hosting provider based in New York.

“It’s the usual immigrant story. My parents moved to America when we were four or five. We were poor and didn’t have much money so our parents focused on education.”

Moisey told me about his early years, and how he started working on technology with his brother Ben.

“I was bored during my first summer break and my brother had a job at a data center company and I just started reading books about it. Two weeks later he told me to take over as a sysadmin. From there we started our first company.”

Prior to Digital Ocean, Moisey worked on ServerStack, a hosting business similar to Digital Ocean. He also tried to start a hedge fund analytics company, which he had difficulty making successful.

“I did make one sale. I had some sales experience from ServerStack. The first year was just me working and pretending to be four people. But ultimately, product-market fit in that category is extremely complicated. It’s pretty much a nightmare. I don’t envy any financial services startup.”

Moisey has built on the learnings from ServerStack and his financial services company.

“It was tremendously formative. We made every single classic business mistake. This was a decade ago when there wasn’t much of a New York City startup community. We didn’t understand how to attract customers or market properly. We weren’t able to capture the success that was available in the space. It’s easy to start, but it’s hard to scale.”

Digital Ocean was founded in a time when the field was rife with competition. Amazon Web Services, Heroku, Google App Engine, Rackspace, and others had created a market that seemed saturated.

“It’s a classic case where you have to be contrarian. It seems like the worst idea in the world to start a cloud hosting business. We didn’t know any better.”

“What was missing from all the other providers was simplicity. I have a background as a developer and a sysadmin, and yet they were still too complicated for me.”

“With AWS, the learning curve is very steep. It could be a little daunting for people just starting out. There are a lot of things that are no longer relevant that you are forced to think about. These are carryovers from days when hard drives were counted in megabytes not gigabytes.”

Everyone else was putting engineering first, and not product first. “If you get a bunch of engineers together, often times you are going to get an engineering-focused solution. We always went backwards from the product side instead of the engineering side.”

Moisey found himself personally delighted by the product that Digital Ocean was building.

“It took us about six months to build Digital Ocean. When we spun up that first server, I was like ‘this is amazing, all I want to do is build a Rails app and spin up some more servers.’ We knew that if we could deliver that feeling to other customers we were on to something.”

He pointed out similarities and differences between Digital Ocean and Heroku. The two companies both allow easy onboarding for someone looking to deploy an application to a hosted environment. But Digital Ocean offers more options for simple yet advanced configuration–a huge upside for businesses that need to iron out small problems that magnify upon a business’s event of scale.

“When you get past the point of hitting product-market fit, you can experience really fast dramatic growth. At that point, you want to be more hands-on. All of those 1% errors that you could ignore with 100 users, they begin to creep into the picture.”

“With Heroku, it’s a bit more curated, but when it doesn’t fit your product, you might need to go find something else.”

This spectrum between ease of use and configurability parallels the spectrum from small business use cases to large business use cases.  “That’s why AWS is so large.” Large businesses require lots of knobs to turn, so those customers historically have had to turn to Amazon Web Services. Digital Ocean has found a sweet spot along that configurability/ease-of-use spectrum.

Digital Ocean was started as a spinoff project from ServerStack. This strategy leveraged both the hardware and the domain expertise which the Uretskys already had.

“If you look at start-ups that have hardware as well as software–it’s a lot harder. If you have never bled in a data center, you don’t know about the problems you are going to encounter.”

“We ran two companies at the same time. Eventually, Digital Ocean had to acquire Server Stack. Server Stack was like the incubator for Digital Ocean. We learned from the mistakes we made. Without the experience of Server Stack, we would not have been able to build Digital Ocean into what it is today.”

Digital Ocean’s customer service complements its easy-to-use product offerings. I asked if it was difficult to scale the support team.

“The way to scale anything is you get a good product. If you have a good product, you get less support questions. If you hire aggressively, you get less support questions. It’s a thing you put into your mission statement early on. When we didn’t have much funding, there was probably a 50% chance that I would be answering a customer’s support question.”

Moisey told me about his experience growing up with his eventual cofounder Ben.

“We came to America, and we were always passionate about computers, but we were really poor. We got a computer when we were 13 and used AOL and a dial-up modem. My mom was starting to use Visual Basic, and I stole her book and printed out the huge Windows API because I wanted to make my own app. I got about halfway through. It was doing stupid stuff that kids do. Cracking software and whatnot.”

“We always had a strong work ethic. One thing leads to another, I never had a resume, never worked a job. You never see things from the perspective of an employee if you’ve never been one. You always think about how you can push forward.”

“For me and Ben, it was a situation where he had a job and I stopped by to learn stuff and he gave me a job. The company we were working for was going out of business. Working with family is a unique dynamic. One thing that I can say for certain is that whatever the dynamic is with the brothers, that will be the dynamic within the office.”

Locating a tech company in New York has its perks as well as its hazards.

“Ten years ago, it would have been [difficult]. But today, you have a large number of local VCs and Silicon Valley VCs with local offices. The thing is, the best people are always hard to find. The benefit to New York is that there are people that get burnt out on other cities. And there all of these offices for Twitter and Facebook and Google,” and employees are sometimes willing to leave those companies for Digital Ocean.

“Technically speaking, we should be in San Francisco. But we love New York.”

I asked a question about what sort of economic boom we are in, which he answered with subtlety.

“The internet as a whole is still growing. Developers as a whole are growing more as a sector than any other degree. And we’ve been doing this for twelve years. Because we’ve already gone through a downturn, and it didn’t really affect what we were doing, we’re optimistic.”

“Until you can stream HD right to your Oculus Rift, we haven’t reached peak internet usage.  There’s still a lot of growth in the emerging markets. Globalization had a lot of negatives and a lot of positives. We can really be a part of that globalization of information.”

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