DigitalOcean Hatches New Startup Incubator

8 September 2016
Justin Warren

Developer focused cloud hosting company DigitalOcean has announced a new incubator program, dubbed Hatch, aimed at startups looking to use cloud infrastructure to get started.

The support takes the form of up to $100,000 in “Cloud Infrastructure Credits” that last a year, as well as technical training, mentoring and linkage into a community of like-minded folk.

Cloud systems are extremely attractive for startups because it reduces cash burn to the barest of minimums, and it also helps VCs when a startup fails. Turning off a cloud account is a lot simpler than having to organise a liquidation sale for a bunch of servers and storage.

“Use of the cloud has significantly decreased the capital required to start a business,” said CEO Ben Uretsky in a canned quote, “yet still remains one of the largest expenses founding teams face in the early days.”

A hundred grand is a lot of cash for a startup just figuring out what it’s trying to do. It almost seems like too much, given how little cloud infrastructure tends to cost when you’re still at small scale. It would allow a startup to run a lot of different experiments without fear of blowing their budget, but can a small organisation afford that sort of lack of focus?

It would be a lot like throwing a bunch of spaghetti at a wall to see what sticks. That’s the machine learning approach to business models — or the VC model, if one were to be unkind — so the pure cash amount seems arbitrarily high. I suspect it’s simply a large, headline grabbing figure that won’t be used by the vast majority of participants, but it’s so much that it removes the thought of “but what about our hosting costs?” from all discussions, which does remove one distraction.

It’s not really a new idea, either, as AWS, Azure, and Google all offer varying levels of free credit so new customers can become familiar with the platform at low risk. It’s a relatively cheap way to remove barriers to adoption for your platform, with the hope that enough customers will stick around until they pay money to make the initial credits worth it. I myself took advantage of six months of free hosting from competitor Rackspace initially, got comfortable, and now inertia keeps my hosting there rather than a cold comparison of costs vs. benefits.

Of far more interest is the community aspect of the program. Hosting infrastructure is near enough to a commodity at small scale, but a good network of mentors and assistance is of far greater value to a nascent startup, in my opinion.

DigitialOcean prides itself on its community mindedness, which is part of why it focuses on developers, particularly those in the open-source world. It’s this incubator aspect that I believe is far more important to both participants in Hatch, and to DigitalOcean itself. If the company can spot a likely success early, and take a part position in it, DigitalOcean may end up making back its money many times over, as well as buying itself a customer, much as Netflix has become a staunch supporter of AWS.

The program should also provide additional direction to DigitalOcean about which features should be added to its platform and in which order. Those features most in demand from its community of successful incubees are likely to be the most commercially successful, so there’s a potential for a nice positive feedback loop here.

Ignore the free credits and focus on the ecosystem.

Listen to Ben Uretsky talk about DigitalOcean’s vision and its focus on community on my podcast The Eigencast 019.

This article first appeared in here.

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