Docker: A Whale becomes a Phoenix
From a down round and 75% headcount reduction to $50m revenue & accelerating growth
In 2019, after raising $300m from investors, open-source containerisation platform Docker realised their business model wasn't working. To give them time to pivot, insiders led a meaningful down round and reduced headcount by 75%. They replaced the CEO twice in a year.
In April 2022, Docker announced a $150m raise at a $2.1bn valuation on the back of 4x yoy growth to $50m revenue. Today, Docker has more than 56,000 commercial customers, including over 70 percent of the Fortune 100.
Today, at a time journalists relish exposing difficulties at startups, it felt like a good opportunity to spotlight a turnaround story.
So what can we learn from Docker:
Find a fast-moving current and own the category
Docker’s brand and Containers are intimately linked. Containers only became ubiquitous when Docker launched in 2013 and made it considerably easier to package and deploy applications.
As businesses shifted to the cloud, Docker enabled developers to create a containerised version of their application that could run anywhere, whether it's on a developer's laptop, a test server, or in production.
By catching a fast-moving current early, Docker captured mindshare and owned the category. When developers think of containers they think of Docker.
Don't plug and play someone else's business model. Find the right business model for you
The first generation of open-source startups monetised in similar ways. Give the tools to developers for free and charge Enterprises for a Managed Service offering.
Docker tried to plug and play this model by offering an enterprise container orchestration solution. However, Kubernetes launched its own free open-source container orchestration platform and commoditised this feature set, killing Docker's business model.
In 2019, Docker pivoted to refocus on their core audience — developers. Paid features make it easy for developers to build applications for and ship to Kubernetes securely, whether it's on premise or in the cloud.
Stay focused on the user
To pick yourself up after burning $300m and letting go of 75% of staff takes guts. But Docker management knew they'd built something their customers loved and refocused on building functionality those customers were willing to pay for.
While the next few years will be tough for many, staying focussed on deeply understanding and delighting customers gives a startup the best chance of emerging stronger on the other side.
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