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Docker
Docker is an application development platform based on open source technologies that allows developers to create, deploy and manage containerized applications.

Revenue

$135.00M

2022

Valuation

$2.10B

2022

Growth Rate (y/y)

150%

2022

Revenue

None

Note: All revenue and growth rates are estimated by Sacra from publicly available information.

Docker hit ~$54M in annual recurring revenue (ARR) by the end of 2021, up about 400% from ~$11M in 2020. That’s after 170% growth from ~$4M in 2019.

Docker primarily makes money charging companies a per-seat subscription fee for all the developers using Docker Desktop to create, deploy, and manage containers.

Docker launched this subscription pricing model in August 2021, before which it earned revenue from users paying for additional features on the Docker Hub, a GitHub for Docker images product. Currently, Docker has over 1M paid subscriber seats.

Valuation

Docker has raised $165 million since the Mirantis deal closed in November 2019 from Tribe Capital, Benchmark, Insight Partners, and Bain Capital. Docker is valued at $2.1B, implying a revenue multiple of ~15x.

Business Model

None

Docker’s core value proposition revolves around the use of containers and how developers and teams can use them to write, collaborate on and deploy applications without worrying about the particularities of different cloud or local development environments.

Instead of having to think about whether each member of the team has all the same libraries and dependencies, developers can build apps inside standardized Docker containers.

Until 2019, Docker’s primary means of monetizing their open source container standard was through top-down, enterprise deals via which Docker would provide services to help big companies use Docker.

After that spinoff, Docker doubled down on a bottom-up growth motion, adding new features to the core Docker toolset and introducing a freemium pricing model, limiting the free tier to basic features. Any firm with more than $10M in revenue or 250 employees must buy a paid subscription to use Docker.

The Pro tier, at $5/month/user, is inexpensive enough for devs who work independently or in early-stage startups to put their cards rather than going to a central purchase team. Docker caps the Team tier, which sells at $9/month/user, to 100 users to get the enterprises to buy the Business tier.

Docker is taking another shot at targeting enterprises with features like single sign-on (SSO), higher security, and a centralized permissions management layer through the Business tier.

Product

None

The typical developer workflow is to develop locally and deploy to a server. However, a developer’s system and production servers have many libraries, hardware, and environment mismatches, due to which the shipped code rarely works. 

To avoid this, developers spin-up virtual boxes called ‘containers’ on their local system, package the code with all dependencies and then deploy the container to a server, making the code independent of the underlying tech infrastructure.

Before containers, developers built applications by spinning up virtual machines (VMs) on their local systems. But containers are lightweight and new instances of apps can be spun up much faster while also being portable, so an app can be moved across cloud servers without any issues.

Docker wasn’t the first company to launch containers but found traction by providing a superior developer experience through open-source tools and a straightforward command line interface (CLI). It rode the shift in developer workflow from building large monolithic applications to microservices-based architecture with the code split into thousands of smaller pieces.

Docker’s key components are:

  • Docker images: A template for creating containers. An infinite number of containers can be created from one image.
  • Docker containers: Created by running a Docker image and contains the app and its dependencies, libraries, etc.
  • Docker client: a command line interface (CLI) installed on the developer’s machine and used to create Docker images, containers, etc. 
  • Docker Engine: A background process that manages Docker’s containers, images, storage, etc.
  • Docker Hub: A Github-like location to store Docker images from where developers can pull an image to build a container.
    • Docker Desktop: A GUI tool for managing various Docker components and functions.

Competition

With 20M+ users, Docker is the most popular containerization platform, but there are several other tools that individual developers and teams can use to create and manage containers. Many of these tools are free to use, with the key trade-off being that they don’t necessarily offer:

  • the same compatibility with hosting platforms and public cloud services—Docker is compatible with virtually every permutation here
  • the same kind of ecosystem for orchestration—instead, multiple tools and open source projects must be patched together
  • the same millions of developers in their community that can help newcomers with advice, troubleshooting, etc.

Containerization standards like OCI (Open Container Initiative) have standardized managing container images, making it possible for developers to replace Docker in their containerization workflows.

Developers can combine Podman and Buildah from Red Hat to replace Docker in Linux OS or add point solutions to their workflows, such as Containerd, to manage container lifecycle.

However, none of the existing tools fully replace how Docker integrates various containerization components, letting developers focus on writing the actual code. Docker is deeply entrenched in developer workflows, and it is not yet expensive enough for them to move en masse to free tools.

TAM Expansion

Revenue expansion from existing users

7-10% of Docker’s 15M users have upgraded to paid tiers, providing Docker a big opportunity to expand revenue by upgrading more users. Even at scale, Docker remains a very small component of the infrastructure cost for most enterprises compared to the likes of AWS, making it easier for them to expand by adding more seats. It recently launched Docker Desktop (its paid product) for Linux OS, used by ~50% of developers globally. Docker is also making Docker Desktop more attractive for developers, accounting for 50% of the upcoming feature releases, per Docker’s product roadmap.

Launching new products

With the rise of cloud computing, developers continue to look for more ways to securely run any code on any infrastructure. Docker is adding such technologies under its wrapper instead of limiting itself to containers, adding the developers of these new techs to its user base. For instance, Docker recently released a way to build WebAssembly apps inside Docker on local systems. Like Docker, WebAssembly allows developers to wrap their codes into secure virtual boxes, and while WebAssembly started as a browser-based tech, it is moving quickly to the back end, used by apps like Disney+ and Shopify.

None

Risks

Churn from business model shift

In the past, using Docker for development was a no-brainer for many teams in part because it was free to use. By turning on monetization, Docker runs the risk that budget-conscious dev teams will look to migrate from Docker to free alternatives—particularly in a potential recession scenario.

Disclaimers

This report is for information purposes only and is not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting or tax advice or a representation that any investment or strategy is suitable or appropriate to your individual circumstances or otherwise constitutes a personal trade recommendation to you.

This research report has been prepared solely by Sacra and should not be considered a product of any person or entity that makes such report available, if any.

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