I am installing App Controller to provide Client access to my Lab Private Cloud to students.
On “Configure the SQL Server Database” step the setup stopped for a long time and finally gave me “The specified database has insufficient disk space” message.
I double checked the space and it is ~100GB available 
I noted “Instance name” was not populated automatically, so it looked like a firewall issue for me. I checked my Windows firewall and all SQL ports are open (including SQL browser). I added File and Print Sharing and DCOM, but that did not help.
Resolution:
I created a custom firewall rule allowing all traffic from App Controller Server to SQL. The Instance Name field was populated right away and setup continued how it should be.
I did not investigate what exactly port was a root cause of the issue – just implemented a quick resolution for my Lab environment.