Welcome to the podcast. I'm your host, Jane Schafer. Today on the show, I want to talk about a company called RunPod. They're an AI cloud startup, and they just hit a $120 million in annual recurring revenue.
And what's hilarious to me about them is that this whole company started from a Reddit post, and they got some of their first investors from their customer support email. So anyways, it's an interesting company. I want to dive into how they're able to raise the money, what they're doing and where they plan on going in the future. Before we get into that, I wanted to mention, if you want to build AI tools and you are not a developer like myself, I would love you to check out AIBox.ai.
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And I would love to have you try it out and tell me what you think. All right, let's get into what's going on with RunPod. So this is a really impressive startup. I thought their kind of founding story was hilarious.
They have two founders, Zen Liu and Pardip Singh. And apparently when they were starting the company, they actually were able to bootstrap to about $24 million in revenue. They have raised money now and around $120 million in annual recurring revenue. And they have also raised a $20 million seed round.
But before all that happened, they were able to bootstrap to $24 million. And the path of their company was hilarious. One thing that I'll say is that they raised about $20 million when Radke Malik, that's a VC, and a partner at Dell Technology Capital, he noticed them from a Reddit post. And then they also picked up an early angel from the Hugueface co-founder Julian Chomond, who apparently was just a big fan and was a big user and he reached out to them from their support chat.
So they actually started the company in 2021. They were both coworkers at Comcast and they decided that they wanted to start a hobby, a side project, which is essentially that they built a custom GPU rig, this is a new jersey and like basement and they're mining Ethereum with it. They made some money, apparently, but they didn't really make enough money to actually pay back the equipment. So they weren't recouping their investment or anything.
And so they were kind of coming to the end of the mining hype, Ethereum's network upgrade was about to happen if anyone remembers the merge. So that was about to happen. Anyways, they said that they got kind of bored of the project between them. They'd convinced their wives to let them buy about $50,000 worth of hardware.
And so if they wanted to keep their wives happy, apparently they had to find a better use for the GPUs. So because of that, they both kind of worked on machine learning projects and they decided to run their mining rig into AI servers. It was like way before Chai Tiptine and even before Dolly II. So when they were rebuilding the system, they ran into a big problem and they said, quote, we were seeing just how awful the software stack was for working with GPUs.
And so they decided that this is what they wanted to go and fix. And so that's kind of when they built run pilots when it came together. Lou, the co-founder said, quote, the experience of developing software for top GPUs was just hot garbage. So then by 2022, they were ready to launch it.
They kind of positioned themselves as a fast developer focused AI app. They were a hosting platform. They had kind of this configurable hardware. They also had a serverless option and then a bunch of like APIs and integrations, all that kind of stuff.
At the time though, he said that the integrations were really minimal and it was quite challenging for them to actually go find users. So they said, as first time founders, we had no idea how to market. So I thought let's just post on Reddit. So they started just spamming Reddit basically in a bunch of different AI focused sub-readits.
They were giving free access and it changed for feedback. And actually this worked. They got a bunch of beta users that turned into paying customers. And within nine months, they quit their jobs and they'd hit $1 million in revenue.
So with all of that, this is a funny quote from them. They said, six months in customers started saying, I want to run real business workloads. I can't do that on servers and someone's basement. And so that's when they decided that maybe they need to look at raising money, raising venture capital wasn't the initial plan.
They had partnered with some data centers on a revenue share deal to expand. And that actually worked. They said it was a little bit tense, but it was working. They didn't have to go raise money.
They said, if we don't have GPU availability, user sentiment flips immediately when people don't see capacity, they leave. So they said that their community was growing on Reddit and Discord, especially after Chatechapati launch. At the same time, they said that's when investors started reaching out to them. So now, like, reached out after seeing them mentioned on Reddit.
And of course, they didn't know how to pitch the VCs, but they walked him through their software. And for about two years, RunPod ran without any outside findings. They just kept bootstrapping it. So that also meant that there was no free tier.
And they had to basically at least pay for themselves. So unlike a lot of other GPU clouds that kind of evolved out of crypto mining, they avoided taking on any debt, which helped them. And by 2024, all of that paid off. There was obviously this huge AI developing surge and RunPod had about 100,000 developers and close to about $20 million in a seed round, which was co-led by Dell technology capitals and Intel capital.
And then it had some participation from Nat Friedman and Chumand. And they have not raised since then, since back in May in 2024, almost two years ago. But they said that they're preparing for Series A and their company has grown a lot. Apparently, they have about 500,000 developers.
They got a lot of individual builders, Fortune 500 companies that spend millions annually with them. And their cloud is in about 31 different regions. And they have some big customers like Replitt and Cursor and OpenAI and Perplexi Wix and Zillow. So a lot of huge players are using them.
What I will say about this whole industry though is that the competition is very intense. There's hypersailers, AWS, Microsoft, Google, who are specializing in a lot of these GPU provider types of things. There's obviously Core, even Core Scientific. I think with all of that, I'll be interested to see if RunPod is going to continue to grow and thrive.
According to them, they see software development evolving and not disappearing. They programmers, they argue, are going to continuously become builders and operators of AI agents. According to Loo, he said, our goal is to be the platform. The next generation of developers grows up on.
Anyways, those are really interesting companies. I was happy to give them a little bit of a highlight. I'm super impressed by their bootstrap approach. I think we're going to see a lot of these companies where startup founders are going to bootstrap for as long as they possibly can before they go and try to raise VC money.
And I think VCs honestly prefer a situation like that where they can see a company that has awesome traction. They've got a lot of users. They have an awesome product. And then they'll be able to jump in and make an investment and help grow the company.
I think the older model that we saw in the past was more someone had an idea. They got funded and then it was very risky whether it would actually be successful or not. Today, I think we're seeing more investments going into companies. Obviously, all of the huge hyperscalers, all the big companies, those ones are getting huge rounds, but there are still a lot of new startups that are getting money.
And usually that's when they're able to show that they have strong product market fit growth and a lot of users right off the bat that are using them. Those are the ones that will get the VC dollars and that just is essentially there to help expand and kind of expedite what's already happening. Not like, hey, we need money so that we can make a company and grow. I think it's so easy to build software today.
And I know so easy as a lot of people be raging at me for saying that. It's not so easy. It is way more accessible to build software today than it has been in the past. So if you're going to come out, whether it's better or not, I mean, you guys can argue about that.
We're seeing a lot more stuff for come out today. And so if we can build that, you can validate the idea, see if users are going to come on board. And once they are, you get the VC dollars and just kind of expedite what you're already doing. You just accelerate the growth that you already seen and all of the product marketing channels that you're already using.
All right. Thank you so much for tuning into the podcast. That was an interesting episode to you. It would mean the world to me, honestly, I'd be super, super appreciative.
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