Docker recently raised another $95 million in a Round D, even though it is still burning through its Round B cash and hasn’t touched the $40 million it raised in Round C. Docker has now raised roughly $160 million dollars. Analysts have estimated its valuation is somewhere in the $1 billion range. With each round, the investors are higher up on the VC food chain. The latest round includes such big names as Goldman Sachs and Northern Trust. When I asked David Messina, Docker’s VP of enterprise marketing, about this, he said it speaks to Docker’s ability to exceed even its own expectations and to continuously increase the business value of its offerings.
How Did Docker Get So Big So Fast?
It was just two years ago, in March of 2013, that the PaaS company dotCloud decided to open-source its container technology under the name “Docker.” Docker quickly became a hit, with Docker Meetups spawning weekly worldwide and downloads occurring at record-breaking rates. The dotCloud team quickly changed direction, renamed the company “Docker,” and brought in new CEO Ben Golub in July 2013 to lead the new business model. At the time, Docker was about a twenty-person company. Fast-forward to today, and Docker has north of 120 people, has made a handful of strategic acquisitions, and has integrated with technology giants including Amazon, Microsoft, Google, Red Hat, and many others. What a difference two years makes.
Why Are Investors Throwing Cash at Docker?
Let’s look at some numbers:
- Four million Docker users
- Three hundred million downloads
- Thousands of Docker Hub subscribers
- Tens of thousands of companies leveraging Docker, including many large enterprises.
If those numbers are not compelling enough, Messina will point you to a recent Enterprise Technology Report that declares the following:
An April 2015 survey of 685 enterprise CIOs by Enterprise Technology Research (ETR) highlights that Docker technology has the strongest buying intention score (known as a Net spending intentions score or “Net Score”) ever recorded in the six years of the firm’s research, which covers 274 technology vendors across 24 sectors of enterprise technology.
We just might be looking at a company whose early stages resemble those of Microsoft, when enterprise buyers started a shift from big mainframes to client-server technology and went head over heels over the Windows operating system. Only this time, the enterprises are looking for an open, portable, lightweight solution that can improve their agility and maximize the consumption of their infrastructure.
So what is Docker going to do with its stockpile of cash? The answer is simple: grow, and grow fast.
As I wrote recently, Docker is putting numerous resources toward security, networking, and orchestration. Expect to see more investments in these areas, and watch for movement in the area of storage, which is in the early stages of development and ideology for containers. Messina says that Docker will invest a lot in API development and extensibility, which aligns with CTO and founder Solomon Hykes’s mantra: create technology and toolsets to help developers make better tools. What some people don’t realize is that each partnership with a technology company takes a substantial effort. As Messina says, “Partnerships take an organization within itself.” As Docker partners with more companies within the ecosystem, including the networking and storage space, it will need to make incremental investments for each new integration. Expect to see more acquisitions as well. Docker has a track record of finding small, talented teams that have enhanced the Docker ecosystem with related open-source projects. SocketPlane, Kitematic, and Koality are three recent examples. If Docker finds a few more teams that have value-added open-source projects, and the teams fit its culture, it might just acquire them as well. This is a smart and relatively inexpensive way to add talent and new functionality.
As I mentioned above, enterprises are jumping on board with Docker. To meet the needs of enterprises, Docker will invest in making its product more enterprise ready. Many enterprises are experimenting with Docker right now or using it in non-production environments. There is more work to be done to make Docker more attractive for production enterprise workloads. If you are going to DockerCon in June this summer, expect to see some impressive production use cases by large enterprise and government entities.
Where Is the Revenue Coming From?
Docker has risen to stardom so fast that many people don’t understand what it does and how it makes money. In the B2C space, we have seen a number of social media darlings with billion-dollar valuations even though their paths to revenue are questionable at best, and nonexistent at worst. With Docker, things are cut-and-dried. It charges for support for its product, which enterprises are more than willing to pay for. In addition, it sells Docker Hub and Docker Hub Enterprise (the on-premises version). Along with support, Docker Hub, and Docker Hub Enterprise, the company offers an enterprise Docker image store, which enables developers to bring solutions to market faster. It does so by providing ready-to-use containers that are pre-integrated with various technologies, reducing the amount of work and complexity required to roll your own from scratch. Messina tells me that hundreds of companies are using Docker Hub and a number of Fortune 100 companies are already using Docker Hub Enterprise. So don’t think this is another typical silly Silicon Valley $1B valuation. This valuation is based on the potential investments of some of the world’s leading companies, not on the number of preteens uploading meaningless content to yet another social media webscale product.
Docker is on a roll. It loaded up its bank account with a substantial amount of capital from some of the most prestigious investors and is in a position to take enterprises by storm. Its biggest challenge will be to manage its growth while maintaining its entrepreneurial culture. It is a good problem to have. I’ll be at DockerCon in June, and I look forward to sharing the enterprise use cases as they are presented on stage.