AI startup Runpod has achieved $120 million in ARR — and it started with a post on Reddit

Runpod, an AI application hosting platform that launched four years ago, has had an annual revenue run rate of $120 million, founders Zhen Lu and Pardeep Singh told TechCrunch.

Their startup journey is a great example that if you build it well and the timing is lucky, they will definitely come.

The story involves paving their way to over $1 million in revenue; Secured $20M seed round after VC Radhika Malik, partner at Dell Technologies Capital, saw some Reddit posts; It acquired another major angel investor, Hugging Face co-founder Julian Schumond, because he had been using the product and reached out via the support chat, the founders told TechCrunch.

It all started in late 2021 when the two friends, who worked together as developers for Comcast, decided that the hobby they were doing wasn’t fun anymore.

They built setups for the specialized computers used to create Ethereum in their basements in New Jersey. They said that although they succeeded in extracting part of the cryptocurrency, it was not enough to repay their investments. Additionally, mining was about to end following a highly publicized network upgrade called “The Merge.”

What’s more, it was “boring” after two months, Lu said.

But they convinced their wives to let them spend a good $50,000 on the hobby between them, they estimate. Lu and Singh knew that home harmony depended on finding a way to use those GPUs.

The developers were involved in machine learning projects at work, so they chose to turn their mining rigs into AI-powered servers. This was before ChatGPT, and even before DALLE-E 2.

As they reused the hardware, “we saw how terrible the software stack was at handling these GPUs,” Lu said. As developers, they found a problem and wanted to solve it.

Lu described that Runpod was born “because we felt that the actual experience of developing software on top of GPUs was garbage.”

A few months later, in early 2022, they were ready to share what they had built. Runpod is a platform for hosting AI applications, with a focus on speed, easily configured hardware (including a serverless option that automates configuration), and development tools like APIs, command-line interfaces, and other integrations.

In 2021, they only have a few of these integrations (such as support for Jupyter notebooks for the popular web app tool). Next problem: Finding beta testers.

“As first-time founders, we didn’t really know how to market or how to do anything,” Lo recalls. “So, okay, let’s post on Reddit.”

So, they posted on a few AI-oriented subpages. The offer was simple: free access to their AI servers in exchange for feedback. You succeeded. They got trial customers, which led to paying customers. They said they quit their jobs within nine months and made $1 million in revenue.

Growth smoothing

But that led to another problem. “After six months, business users were saying, ‘Hey, I actually want to run real business stuff on your platform. But I can’t run it on servers in people’s basements.’ Lou said.

It never occurred to the New Jersey founders to raise capital from venture capital firms. Instead, they formed revenue-sharing partnerships with data centers to grow capabilities. But it was exhausting. The founders had to stay three steps ahead.

“If we don’t have 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 on Reddit and Discord, especially after the launch of ChatGPT.

Venture capital firms were also on the lookout for investments. Malik saw them on Reddit and reached out to them, on their first call with a VC. But if he did not know how to present the idea to the investor. “Radhika was very helpful, even in the first conversation,” he said. She basically explained to him how VCs think and told him she would stay in touch.

Meanwhile, Lou had a business to run that he had to pay for himself. “It’s been almost two years without us having any funding,” he said. So Runpod never offered a free tier. It had to at least pay for itself, even if it didn’t make much profit. They said that unlike other AI-driven cloud services that started out as cryptocurrency miners, these founders refused to take on debt.

By May 2024, with AI application fever spreading, their fortunate decision to launch AI hosting for developers two years earlier had paid off. Their business has grown to 100,000 developers, and they secured a $20 million seed deal co-led by the venture capital arms of Dell and Intel, with participation from big names like Nat Friedman and Chaumond.

They haven’t raised more money since then but now plan to, armed with a company they believe should have a good Series A.

Today, Runpod has 500,000 developers as customers, ranging from individuals to Fortune 500 enterprise teams with multi-million dollar annual spend, the founders said.

Their cloud spans 31 regions globally, and counts clients like Replit, Cursor, OpenAI, Perplexity, Wix, and Zillow as users.

Competition is also fierce. Developers have all the major clouds to choose from (AWS, Microsoft, Google), as well as plenty of industry-specific options like CoreWeave and Core Scientific.

But they also see their place in the world a little differently – as a development-centric platform. They don’t see programming ever going away but changing. Programmers 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.