Runpod, an AI app hosting platform launched four years ago, has hit a $120 million annual revenue run rate, founders Zhen Lu and Pardeep Singh tell TechCrunch.
Their startup journey is a wild example of how if you build it right and the timing is lucky, they will surely come.
The story involves bootstrapping their way to over $1 million in revenue. landing a $20 million round after VC Radhika Malik, partner at Dell Technologies Capital, saw some posts on Reddit. and winning over another key angel investor, Hugging Face co-founder Julien Chaumond, for using the product and reaching out to the support chat, the founders tell TechCrunch.
It all started in late 2021 when the two friends, working together as corporate developers for Comcast, decided the hobby they were doing wasn’t fun anymore.
They had set up specialized computer setups used to create Ethereum in their respective basements in New Jersey. Although they successfully mined a chunk of the cryptocurrency, it wasn’t enough to return their investment, they said. Additionally, mining was set to end after the long-awaited network upgrade called “The merger.”
Plus, it was “boring” after a few months, Lu said.
But they had asked their wives to let them spend $50,000 on the hobby between them, they estimated. Lu and Singh knew that domestic harmony depended on finding a way to use these GPUs.
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The developers were involved in machine learning projects at work, so they chose to turn their mining rigs into AI servers. This was before ChatGPT, even before DALLE-E 2.
As they reused the rigs, “We were seeing how awful the software stack was to deal with these GPUs,” Lu said. As developers, they found a problem they wanted to solve.
Runpod was born “because we felt that the actual experience of developing software on top of GPUs was just rubbish,” Lu described.
A few months later, in early 2022, they were ready to share what they had built. Runpod is a platform for hosting AI applications, emphasizing speed, easily configurable hardware (including a serverless option that automates configuration), and programming tools such as APIs, command-line interfaces, and other integrations.
Back in 2021, they only had a few such integrations (like support for popular web application tool Jupyter laptops). The next problem: finding beta testers.
“As first-time founders, we didn’t really know how to market or how to do anything,” Lu recalls. “So, okay, let’s post on Reddit.”
So they was posted on some AI-oriented subreddits. The offer was simple: free access to their AI servers in exchange for feedback. It worked. They attracted beta customers, which led to paying customers. Within nine months, they had quit their jobs and reached $1 million in revenue, they said.
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But this led to another problem. “Six months later, business users said, ‘Hey, I want to run real business things on your platform. But I can’t run it on servers in people’s basements,” Lu said.
It hadn’t occurred to the New Jersey founders to raise capital from VCs. Instead, they created revenue-sharing partnerships with data centers to increase capacity. But it was stressful. The founders had to stay three steps ahead.
“If we don’t have the GPUs, the market sentiment, the user sentiment changes. Because when they don’t see capacity from you, they go somewhere else,” Singh described.
Meanwhile, their user base was growing Reddit and Discordespecially after the release of ChatGPT.
VCs were also on track to invest. Malik saw them on Reddit and reached out, their first VC call. But Lu didn’t know how to pitch an investor. “Radhika was extremely helpful, even in the first conversation,” he said. She basically explained to him how a VC thinks and told him to stay in touch.
Meanwhile, Lu had a business to run that had to pay for itself. “It was almost two years where we really didn’t have any funding,” he said. So Runpod never offered a free tier. She had to at least pay for herself, even if she wasn’t making much profit. Unlike other AI cloud services that started as crypto miners, these founders refused to take on debt, they said.
By May 2024, with AI application fever spreading, their lucky decision to launch AI hosting for developers two years early paid off. Their business had grown to 100,000 developers and they landed $20 million seed deal co-led by the VC arms of both Dell and Intel, with big names like Nat Friedman and Chaumond on board.
They haven’t raised more money since then, but now they plan to, armed with a business that they believe should have a healthy Series A.
Today, Runpod counts 500,000 developers as customers, ranging from individuals to Fortune 500 enterprise groups with multimillion-dollar annual spend, the founders said.
Their cloud spans 31 regions worldwide and counts clients such as Replit, Cursor, OpenAI, Perplexity, Wix and Zillow as users.
The competition is also fierce. Developers have all the major clouds to choose from (AWS, Microsoft, Google), as well as many industry-specific options such as CoreWeave and Core Scientific.
But they also see their place in the world a little differently—as a programming-centric platform. They don’t see coding going away but changing. Developers will become creators and operators of AI agents.
“Our goal is to be what this next generation of software developers grows up to be,” Lu said.
