2016 IPO Prospects: Datto Bootstrapped First, Raised Money Later

| About: Datto (DATO)

Summary

According to a MarketsandMarkets report, the Disaster-Recovery-as-a-Service market is estimated to grow 53% annually over the period 2015 to 2020.

Norwalk, Connecticut-based Datto was founded in 2007 by the Rochester Institute of Technology graduate Austin McChord.

Today, DATO manages more than 160 petabytes of private cloud and offers its customers a suite of software and hardware devices to help companies meet their data protection needs.

According to a MarketsandMarkets report, the Disaster-Recovery-as-a-Service market is estimated to grow 53% annually over the period 2015 to 2020. The market is estimated to be worth $11.92 billion in 2020. While North America will be the largest market in terms of market size, emerging markets of Latin America, Asia Pacific, and the Middle East and Africa will be the ones with high growth rates.

Datto's Offerings

Norwalk, Connecticut-based Datto (Private:DATO) was founded in 2007 by the Rochester Institute of Technology graduate Austin McChord. Austin set up the company right after he graduated from college with a goal to provide SaaS-based backup and recovery solutions at a lower cost so that smaller organizations could benefit from the technology. The company began life in a basement with Austin building the product as he believed that he could offer a better product than what was available.

Today, Datto manages more than 160 petabytes of private cloud and offers its customers a suite of software and hardware devices to help companies meet their data protection needs. Data backup and recovery solutions are offered for both on-premise and cloud-based data. It offers end-to-end recoverability and single-vendor accountability to the organizations.

Datto offers a hybrid on-premise and cloud approach to data recovery. With the combination of an on-site appliance and the cloud solution, it is able to deliver a very fast restore capability. According to the management, if a business's email server goes down, it is able to restore the services within six seconds. Datto believes that since most of the SMB segment relies on on-premise infrastructure, by keeping an on-premise appliance, it is able to offload data duplication, archival, and encryption related tasks on-site itself. The cloud replica helps with the data recovery when the physical appliances go down.

Recently, Datto got some notoriety when it was made to deal with the FBI because of the Hillary Clinton email scandal. Datto had backed up the contents of the mail server.

Datto's Financials

Datto is a privately-held company and does not disclose financials. It was bootstrapped initially and raised venture funding after it hit nearly $50 million in revenues in 2013. The company has been profitable for a while. It has raised $100 million in funding so far with investments from General Catalyst Partners in 2013 and Technology Crossover Ventures last year. Its last round of funding was held in November last year when it raised $75 million from Technology Crossover Ventures at a $1 billion valuation.

With its SME-focused hybrid approach to data recovery, Datto has made quite a presence in the US markets, and it is now looking toward international expansion. The recent round of funding will be used toward market expansion to help it enter new markets and build new products and technology. The company is looking to expand in the EMEA region. Its detailed financials are not known, but given its product focus and profitable nature, I won't be surprised if it goes public soon. Once it does, it should also be able to sustain its valuation due to its fundamentals focus.