Less than 5 years after being sentenced to "death", Docker turned into a Silicon Valley unicorn, and the new strategy succeeded?

Author | Chu Xingjuan

On March 31, 2022, Docker, a containerization company that has been sentenced to the death penalty several times, announced that it has received a $105 million Series C funding round led by Bain Capital Ventures (BCV). The round brought Docker's total capital to $163 million and the company's valuation at $2.1 billion. At the same time, BCV partner Enrique Salem will join Docker's Board of Directors.

"This funding milestone is the result of a joint effort by the Docker team, the developer community, and our partners." Scott Johnston, CEO of Docker, said, "Together, we focus on the needs of our developers to help them quickly and securely build, share, and run any application, anywhere. Over the past 10 years, tens of millions of new developers have joined the market, and this funding has enabled us to solve future problems faster. ”

The financing not only brought Docker back to the competition, but also won it unicorn status.

Lost in the rise

From 2014 to 2015, the heyday of container technology, Docker was a big company with a strong voice and dominated the development of the entire community. In the face of the "olive branch" thrown by the big silicon valley manufacturers, Docker company obviously did not accept it, which directly led to the development and growth of Kubernetes.

At this point, Google wanted to work with it to promote a neutral container runtime library as a core dependency of the Docker project, and Docker Company refused to release its own container runtime library Libcontainer. To compensate for the shortcomings of the business model, Docker launched Swarm. As a significant contributor to the early days of the Docker project, RedHat expressed dissatisfaction with the platforming strategy and withdrew from the project in anger.

In the face of Docker's tough attitude, Google and RedHat jointly led the launch of a neutral foundation called CNCF (Cloud Native Computing Foundation) to promote the development of Kubernetes.

As Kubernetes grew, Docker declined. In 2017, Docker announced that the Docker project would be renamed Moby and left to the community for self-maintenance, while Docker's commercial products would bear the Docker trademark. In this way, Docker companies want to convert users who originally belonged to the Docker community into their own customers.

But that didn't save Docker. "Docker grew so fast that it became the foundation of the technology industry almost overnight, which caused the company to lose its way forward." Docker founder Solomon Hykes later recalled.

Hykes announced his departure from Docker in March 2018, saying in an interview, "We haven't been able to come up with a great commercial product because we still can't focus. We can only taste everything. It was hard enough to sustain the growth of the developer community and build a great commercial product, and we needed to build three or four at the same time. Unfortunately, we put a lot of energy and money into this, but we didn't end up on any road. ”

In 2019, Docker was in trouble. "After a thorough analysis with the management team and board of directors, we determined that Docker had two distinct businesses: one was an active developer business and the other was a growing enterprise business." Rob Bearden, then-outgoing Docker CEO, said.

Docker chose to sell its enterprise business focused on operations, CXO and direct sales to Mirantis, a Kubernetes cloud services company. Scott Johnston succeeds Rob Bearden as CEO. Scott Johnston has worked for many years and in various roles at the company, and he bets very clearly on the developer community.

Docker has repositioned itself as a developer platform, with a focus on developers. "Faster at the time you build, share, and run modern applications" became the company's new vision.

Business model exploration after restructuring

In 2020, Docker promoted Community Edition projects, increased ecosystem health, and converted a small percentage of users in Community Edition projects into paying customers, resulting in a 170% year-over-year increase in recurring revenue (ARR) in 2020. In March 2021, Docker raised $23 million in Series B funding to start product innovation and increase user productivity in containerized application development.

But until mid-2021 (https://www.theregister.com/2021/08/31/docker_desktop_no_longer_free/), the company will struggle to find a foothold and a successful business model.

At the end of August 2021, Docker announced the launch of a Business version of Docker Desktop, which provides richer components and capabilities for large enterprises. The paid editions, which include Pro, Team, and Business, are for large-scale businesses that require companies with more than 250 employees or more than $10 million in annual revenue to pay a subscription fee if they use the Desktop version.

It's a progressive tax-like way of charging: charging more to bigger users. This also means that Docker companies must provide more revenue than payers pay, otherwise the model will not last.

In fact, Docker's "whale" users are still too few to generate more revenue through payment. According to the latest disclosures, Docker has more than 10 million registered developers and development teams, while the number of commercial customers is in the order of 56,000.

"Two and a half years ago, while we had popular upstream open source assets and well-known brands, it was not clear whether we could accept all the changes and re-enact the product strategy to go to market, the business model of a successful remake of the company." Johnston said. "It's great that we're still here two and a half years later. We haven't been able to make perfect decisions all the time, but most of our bets have paid off and we're giving developers the product they're delivering. ”

Johnston revealed that the financing was actively sought out by investors. In addition to being a popular open source component for developers, the potential market for developer tools is huge, especially as application demand continues to grow. He believes it is these two factors that have driven investor interest in this round of financing.

Analysts predict 500 million applications will be built by the end of 2023 — more than the total number of applications built in the entire 40-year history of information technology, Johnston wrote in his blog. In addition, the number of developers exceeded 45 million in this decade, growing eight times faster than the average occupation. Finally, the explosion in the number of applications and their reliance on open source components has led to a 7.5-fold increase in attacks on the software supply chain year-on-year.

Johnston believes docker can grow because it helps developers meet industry challenges. "With Docker, development teams have a 13x increased release frequency, a 65% reduction in productivity using new technologies, and a 62% reduction in average time to repair (MTTR) for security vulnerabilities." He also said that Docker supports not only application modernization and microservices, but also future serverless/FaaS, WebAssembly, Web3/blockchain, and more.

According to Johnston, Docker will further accelerate the frequency of "inner loops" in Docker Desktop in the future, including easier development of Kubernetes applications, improved performance and reliability, enhanced visibility of application components, and scalability for ecosystem partners.

According to the announcement, Docker's ARR over the past year has increased by more than 4 times year-on-year. The company, which was restructured in 2019 to 70 people, now employs more than 150 people and is expected to double next year.