Runpod, an AI application hosting platform launched four years ago, has reached $120 million in annual revenue, founders Zhen Lu and Pardeep Singh told TechCrunch.
His initial journey is a wild example that if you build well and the timing is right, it will come.
The story includes bootstrapping to more than $1 million in revenue; landing a $20 million seed round after VC Radhika Malik, a partner at Dell Technologies Capital, saw some Reddit posts; and got another angel investor, Hugging Face co-founder Julien Chaumond, because he used the product and reached out to support conversations, the founders told TechCrunch.
It all started at the end of 2021 when two friends, who worked together as corporate developers for Comcast, decided that the hobby they were doing was no longer fun.
He has built a special computer setup that he uses to generate Ethereum in his New Jersey basement. When they successfully mine a bit of cryptocurrency, it is not enough to pay back the investment, they said. Additionally, mining will end after the much-ballyhooed network upgrade called “Combined.”
Plus, it gets “boring” after a few months, Lu said.
But he has talked his wife into spending $50,000 on the hobby between them, roughly. Lu and Singh knew that the harmony of the house depended on finding a way to use the GPU.
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The devs were already involved in a machine learning project at the office, so they chose to turn their mining rig into an AI server. This was before ChatGPT, even before DALLE-E 2.
When they repurposed the rigs, “We saw how really god-awful the software stack is for dealing with these GPUs,” Lu said. As a developer, they find a problem they want to solve.
Runpod was born “because we felt that the actual experience of developing software on top of a GPU was just a waste of heat,” Lu said.
A few months later in early 2022, they are ready to show what they have built. Runpod is a platform for hosting AI applications, emphasizing speed, easy-to-configure hardware (including serverless options that automate configuration) and dev tools like APIs, command-line interfaces, and other integrations.
Back in 2021, they only had some of these integrations (such as support for the popular web application tool Jupyter notebook). Next problem: finding beta testers.
“As the first founders, we didn’t know how to market or how to do anything,” Lu recalls. “So I was like, okay, let’s post it on Reddit.”
So, they are sent in several AI-oriented subreddits. The offer is simple: free access to AI servers in exchange for feedback. It works. They land beta customers, which lead to paying customers. Within nine months, he had quit his job and made $1 million in profit, he said.
Bootstrap growth
But that causes another problem. “Six months in, business users are like, ‘Hey, I want to actually run a real business on your platform. But I can’t run it on a server in the basement.'” Lu said.
No New Jersey founders to raise capital from VCs. Instead they formed revenue-share partnerships with data centers to increase capacity. But stiff. Founders must stay three steps ahead.
“If we don’t have GPUs, market sentiment, user sentiment changes. Because when they don’t see capacity from you, they go somewhere else,” Singh explained.
Meanwhile, the user base is growing Reddit and Discordespecially after ChatGPT is launched.
VCs are also on the prowl for investment. Malik saw him on Reddit and reached out, his first VC call. But Lu doesn’t know how to instruct investors. “Radhika was very helpful, even in the first conversation,” he says. He actually explained how the VC thinks and told him he would stay in touch.
Meanwhile, Lu has a business to pay for. “It was almost two years when we had absolutely no funding,” he said. So Runpod never offers free tiers. At least you have to pay for yourself, even if you don’t spend a lot of money. Unlike others An AI cloud service that started as a crypto minerThe founder was willing to take the loan, they said.
In May 2024, with AI app fever spreading, the lucky decision to launch AI hosting for devs two years earlier has paid off. His business has grown to 100,000 developers, and he’s landed $20 million seed offer co-led by two VC hands Dell and Intel, with the participation of big names like Nat Friedman and Chaumond.
They did not earn more money, but now they plan, armed with a business that, they believe, should command a healthy Series A.
Today, Runpod counts 500,000 developers as customers, ranging from individuals to teams of Fortune 500 companies with multi-million dollar annual spend, the founders said.
The cloud covers 31 regions worldwide, and counts customers like Replit, Cursor, OpenAI, Perplexity, Wix and Zillow as users.
The competition is also fierce. Devs have all the major clouds to choose from (AWS, Microsoft, Google), as well as many industry-specific options like CoreWeave and Core Scientific.
But they also see their place in the world a bit differently – as a dev-centric platform. They don’t see coding going away but changing. Programmers will be the creators and operators of AI agents.
“Our goal is to be the next generation of software developers,” Lu said.