United States securities and exchange commission logo
December 17, 2020
Yancey Spruill
Chief Executive Officer
DigitalOcean Holdings, Inc.
101 6th Avenue
New York, New York 10013
Re: DigitalOcean
Holdings, Inc.
Draft Registration
Statement on Form S-1
Submitted November
20, 2020
CIK No. 0001582961
Dear Mr. Spruill:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1 submitted November 20, 2020
Prospectus Summary
Overview, page 1
1. Please disclose how you
define monthly unique users and tell us if this is a key metric
management uses to
evaluate your business.
Industry Background
Proliferation of Cloud Native Start-Ups and SMBs, page 3
2. Please clarify how you
define small and medium-sized customers ("SMBs"). Also,
disclose the basis for
your estimates that there are 100 million SMBs globally and that
more than 14 million
net new SMBs are created globally each year.
Yancey Spruill
DigitalOcean Holdings, Inc.
December 17, 2020
Page 2
Key Benefits to Our Customers, page 5
3. In regard to the customer success stories profiled in this section,
please explain the criteria
you used in selecting these scenarios, and why they provide a fair
representation of your
user base.
Risk Factors
We rely on a limited number of suppliers for certain components..., page 23
4. We note that you source some materials from a limited number of
suppliers. To the extent
any of these supply contracts represents a material contract pursuant
to Item 601(b)(10) of
Regulation S-K, please file such contract as an exhibit to the
registration statement and
disclose the material terms of the contract in the prospectus.
The recent COVID-19 pandemic and any related economic downturn could negatively
affect our
business, page 34
5. Given your reliance on a limited number of suppliers for certain
equipment, please
disclose whether the pandemic has created any material supply chain
issues for you.
Selected Financial Data
Non-GAAP Financial Measures, page 59
6. We note that your calculation of adjusted gross profit excludes
depreciation and
amortization because it primarily relates to investments in data
center servers and may not
reflect your current or future cash spending levels to support your
business. Please revise
your discussion of this measure to address disclosures made on page 14
and elsewhere
that you plan to continue to expend substantial financial resources on
your technology
infrastructure.
Business
Our Customer Support and Service, page 95
7. Please explain what the "Net Promoter Score" measures, how it is
calculated and why you
believe it is a meaningful metric.
Audited Consolidated Financial Statements
Note 12. Income Taxes, page F-30
8. You disclose on page F-31 that state NOL carryforwards of nearly $93
million will begin
to expire in 2021. Please revise to give greater context to the specific
time periods in
FirstName LastNameYancey Spruill
which these NOL carryforwards will expire. For example, if the NOLs will
expire over a
Comapany NameDigitalOcean
period Holdings,revising
of several years, consider Inc. to quantify the amount that
will expire in the
next17,
December 1-22020
years, 3-52years and more than 5 years.
Page
FirstName LastName
Yancey Spruill
FirstName LastNameYancey
DigitalOcean Holdings, Inc. Spruill
Comapany17,
December NameDigitalOcean
2020 Holdings, Inc.
December
Page 3 17, 2020 Page 3
FirstName LastName
Note 15. Subsequent Events, page F-33
9. Please provide us with a breakdown of all stock-based compensation
awards granted to
date during 2020 including the fair value of the underlying stock used
to value such
awards. To the extent there were any significant fluctuations in the
fair values, please
describe for us the factors that contributed to such fluctuations,
including any intervening
events within the company or changes in your valuation assumptions or
methodology.
Also, please disclose any share-based issuances subsequent to the most
recent balance
sheet date and the expected financial statement impact, if material.
Refer to ASC 855-10-
50-2.
General
10. Please revise so that the order of the financial statement periods
presented are consistent
from left to right throughout the filing. Refer to SAB Topic 11:E.
11. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to
do so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
You may contact Lisa Etheredge, Staff Accountant, at (202) 551-3424 or
Robert
Littlepage, Accounting Branch Chief, at (202) 551-3361 if you have questions
regarding
comments on the financial statements and related matters. Please contact
Matthew Crispino,
Staff Attorney, at (202) 551-3456 or Larry Spirgel, Office Chief, at (202)
551-3815 with any
other questions.
Sincerely,
Division of
Corporation Finance
Office of
Technology
cc: Alison A. Haggerty