Runpod, an AI application hosting platform launched four years ago, has reached annual revenue of $120 million, founders Zhen Lu and Pardeep Singh told TechCrunch.
Their startup journey is a prime example of how if you build it well and the timing is lucky, they will definitely come.
Story includes achieving over $1 million in revenue; landing a $20 million seed round after VC Radhika Malik, partner at Dell Technologies Capital, saw a few posts on Reddit; and gaining another key angel investor, Hugging Face co-founder Julien Chaumond, because he was using the product and contacted the support chat, the founders told TechCrunch.
It all started in late 2021 when the two friends, who worked together as corporate developers for Comcast, decided their hobby was no longer fun.
They had built specialized computer setups used to generate Ethereum in their respective basements in New Jersey. Although they managed to mine some of the cryptocurrency, it was not enough to repay their investment, they said. Additionally, mining was going to end after the much-publicized network upgrade called “The Merge.”
On top of that, it was “boring” after a few months, Lu said.
But they had convinced their wives to let them spend $50,000 on their hobby, they estimated. Lu and Singh knew that family harmony depended on finding a way to use these GPUs.
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The developers were engaged in machine learning projects at work, so they chose to convert their mining rigs into AI servers. This was before ChatGPT, even before DALL-E 2.
As they reused the platforms, “we saw how truly horrible the software stack was for handling these GPUs,” Lu said. As developers, they found a problem they wanted to solve.
Runpod was born “because we thought the real-world experience of developing software on GPUs was just garbage,” Lu said.
A few months later, in early 2022, they were ready to share what they had built. Runpod is an AI application hosting platform, emphasizing speed, easy-to-configure hardware (including a serverless option that automates setup), and development tools such as APIs, command-line interfaces, and other integrations.
In 2021, they only had a few such integrations (like support for Jupyter notebooks, a popular web application tool). Next problem: finding beta testers.
“As new founders, we didn’t really know how to market or how to do anything,” Lu recalls. “So I’m like, okay, let’s just post on Reddit.”
So they released a few AI-focused subreddits. The offer was simple: free access to their AI servers in exchange for feedback. It worked. They landed beta customers, which led to paying customers. Within nine months, they quit their jobs and reached $1 million in sales, they said.
Increase growth
But this led to another problem. “Six months later, business users were like, ‘Hey, I actually want to run real business tasks on your platform. But I can’t run it on servers that are in people’s basements,'” Lu said.
It hadn’t occurred to the New Jersey founders to raise capital from venture capital firms. Instead, they formed revenue sharing partnerships with data centers to increase their capacity. But it was stressful. The founders had to stay three steps ahead.
“If we don’t have GPUs, the market sentiment and user sentiment changes. Because when they don’t see capacity from you, they go elsewhere,” Singh explained.
Meanwhile, their user base was growing on Reddit and Discord, especially after the launch of ChatGPT.
Venture capital firms were also looking for investments. Malik saw them on Reddit and contacted them, their first VC call. But Lu didn’t know how to approach an investor. “Radhika was very helpful, even in the first conversation,” he said. Basically, she explained to him how a VC thinks and told him she would stay in touch.
Meanwhile, Lu had a business to run that needed to make a profit. “It had been almost two years since we really had any funding,” he said. Runpod has therefore never offered a free tier. It had to at least be self-financing, even if it didn’t make much profit. Unlike other AI cloud services that started as crypto miners, these founders refused to take on debt, they said.
In May 2024, as AI application fever spread, their fortunate decision to launch AI hosting for developers two years earlier was paying off. Their company now had 100,000 developers, and they landed a $20 million seed deal co-led by the VC arms of Dell and Intel, with participation from big names like Nat Friedman and Chaumond.
They haven’t raised more money since, but are now considering doing so, armed with a company they believe should command a healthy Series A round.
Today, Runpod counts 500,000 developers among its customers, ranging from individuals to teams at Fortune 500 companies with multimillion-dollar annual spends, the founders said.
Their cloud covers 31 regions worldwide and counts clients such as Replit, Cursor, OpenAI, Perplexity, Wix, and Zillow among its users.
Competition is also fierce. Developers have all the major clouds to choose from (AWS, Microsoft, Google), as well as many industry-specific choices like CoreWeave and Core Scientific.
But they also see their place in the world a little differently: as a platform focused on development. They don’t see coding disappearing but rather changing. Programmers will become creators and operators of AI agents.
“Our goal is to be what this next generation of software developers grow up on,” Lu said.
