AI cloud startup Runpod hits $120M in ARR — and it started with a Reddit post  

Runpod, an AI app hosting platform launched four years ago, has reached $120 million in annual revenue, founders Zhen Lu and Pardeep Singh told TechCrunch.

Their startup journey is a wild example of where they will surely come if you build it right and the timing is right.

The story includes bootstrapping their way to over $1 million in revenue; raising a $20 million seed round after VC Radhika Malik, a partner at Dell Technologies Capital, saw some posts on Reddit; and acquiring another key investor, Hugging Face co-founder Julien Chaumond, because he used the product and reached out through the support chat, the founders tell TechCrunch.

It all started in late 2021 when the two friends, who were working together as business 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 successfully mined some of the cryptocurrency, it was not enough to repay their investment, they said. Furthermore, mining would end after the much-discussed network upgrade called “The merger.”

Plus, it was “boring” after a few months, Lu said.

But they had convinced their wives to let them spend more than $50,000 on their shared hobby, they estimated. Lu and Singh knew that harmony in the home depended on finding a way to use those GPUs.

The developers were involved 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.

When they repurposed the rigs, “we saw how terrible 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 felt that the actual experience of developing software on top of GPUs was just 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 with an emphasis on speed, easy-to-configure hardware (including a serverless option that automates configuration), and development tools such as APIs, command-line interfaces, and other integrations.

In 2021, they only had a few such integrations (such as support for the popular web app tool Jupyter notebooks). The next problem: finding beta testers.

“As early founders, we didn’t really know how to market or do anything,” Lu recalls. “So I’m like, let’s just post on Reddit.”

So her posted in a few AI-oriented subreddits. The offer was simple: free access to their AI servers in exchange for feedback. It worked. They brought in beta customers, which led to paying customers. Within nine months, they had quit their jobs and reached $1 million in sales, they said.

Initiate growth

But that led to another problem. “Six months later, business users said, ‘Hey, I 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 New Jersey’s founders to raise capital from venture capital funds. Instead, they formed 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 and user sentiment changes. Because if they don’t see capacity from you, they’ll go somewhere else,” Singh described.

Meanwhile, their user base grew Reddit And Disagreementespecially after ChatGPT was launched.

VCs were also on the hunt for investments. Malik saw them on Reddit and reached out, their first VC call. But Lu didn’t know how to pitch an investor. “Radhika was super helpful, even on the first call,” he said. She basically explained to him how a VC thinks and told him she would keep in touch.

Meanwhile, Lu had a business to run that had to pay for itself. “It was almost two years where we really had no funding,” he said. So Runpod has never offered a free tier. It had to at least pay for itself, 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 app fever spread, their fortunate decision to launch AI hosting for developers two years early paid off. Their company had grown to 100,000 developers and they were making landfall a $20 million seed deal co-led by the VC departments of both Dell and Intel, with participation from big names like Nat Friedman and Chaumond.

They haven’t raised any more money since then, but now plan to do so, armed with a company that they believe should lead a healthy Series A.

Today, Runpod counts 500,000 developers as customers, ranging from individuals to Fortune 500 enterprise teams with annual spends in the millions of dollars, according to the founders.

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

Competition is also fierce. Developers can choose from all the major clouds (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 developer-focused platform. They don’t see coding ever disappearing, 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 with,” Lu says.