Runpod, an AI app hosting platform launched four years ago, has hit $120 million in annual revenue, founders Zhen Lu and Pardeep Singh tell TechCrunch.
Their startup journey is a wild example that if you build it well and the timing is lucky, they will surely come.
The story includes bootstrapping their way to over $1 million in revenue; landed a $20 million seed round after VC Radhika Malik, a partner at Dell Technologies Capital, saw some Reddit posts; and getting another key angel investor, Hugging Face co-founder Julien Chaumond, because he used the product and reached out beyond the support chat, the founders tell TechCrunch.
It all began in late 2021 when the two friends who worked together as enterprise developers for Comcast decided that the hobby they were doing wasn’t fun anymore.
They had built setups of specialized computers 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 pay back their investment, they said. Plus, mining had to end after the very involved network upgrade called “The Merge.”
On top of that, it was “boring” after a few months, Lu said.
But they had talked their wives into letting them spend a good $50,000 on the hobby between them, they estimated. Lu and Singh knew that the harmony of the home depended on finding a way to use these GPUs.
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The developers had been involved in machine learning projects at work, so they chose to convert their mining rigs to AI servers. This was before ChatGPT, even before DALLE-E 2.
When they recycled the rigs, “we saw how really terrible the software stack was at handling 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 hot garbage,” Lu described.
A few months later in early 2022, they were ready to share what they had built. Runpod is an AI app hosting platform that emphasizes speed, easily configured hardware (including a serverless option that automates configuration), and developer tools such as APIs, command-line interfaces, and other integrations.
Back in 2021, they only had a few such integrations (like support for the popular Jupyter notebooks for web app tool). The next problem: finding beta testers.
“As first-time founders, we didn’t really know how to market or do anything,” Lu recalled. “So I’m like, okay, let’s just post on Reddit.”
So they posted in a few AI-oriented 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 had quit their jobs and reached $1 million in revenue, they said.
Bootstrapping growth
But that led to another problem. “Six months in, business users were saying, “Hey, I actually want to run real business stuff 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 VCs. Instead, they formed revenue-sharing partnerships with data centers to increase capacity. But it was stressful. The founders had to be three steps ahead.
“If we don’t have the GPUs, the market sentiment changes. Because when they don’t see capacity from you, they go somewhere else,” Singh described.
Meanwhile, their user base grew on Reddit and Discord, especially after ChatGPT launched.
VCs were also looking for investments. Malik saw them on Reddit and reached out, their first VC call. But Lu didn’t know how to pitch to an investor. “Radhika was super helpful, even at the first interview,” he said. She basically explained to him how a VC thinks and told him she would stay in touch.
Meanwhile, Lu had a business to run that would pay for itself. “It was almost two years where we really had no funding,” he said. So Runpod never offered a free tier. At least it had to pay for itself, even if it didn’t make much profit. Unlike other AI cloud services that began as crypto miners, these founders refused to take on debt, they said.
In May 2024, with AI app fever spreading, their lucky decision to launch AI hosting for developers two years earlier paid off. Their business had grown to 100,000 developers and they landed a $20 million seed deal led by the VC arms of both Dell and Intel, with participation from big names like Nat Friedman and Chaumond.
They haven’t raised any more money since, but now plan to, armed with a company they believe should command a healthy Series A.
Today, Runpod counts 500,000 developer customers, ranging from individuals to Fortune 500 enterprise teams with multimillion-dollar annual spend, the founders said.
Their cloud spans 31 regions globally 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), plus plenty of industry-specific choices 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 coding ever going away, but changing. Programmers become AI agent creators and operators.
“Our goal is to be what this next generation of software developers grows up with,” Lu said.