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Datto Inc.
OVERVIEW
  • Name
    Datto Inc. (Analysis)
  • Stock Symbol
    None: Private
  • Address
    101 Merritt 7 7th Fl Norwalk, Connecticut 06851  USA
  • Founded
    2007
  • Vertical Market
    General
  • Primary Audience
    Business
  • Revenue Model
    Fees
  •  
  • IPO Candidate
    Yes
  •  
  • Abstract
    Backup software & hardware systems
  • Summary
    Provides cloud and appliance-based backup and recovery systems and services for enterprises. Also provides primary storage NAS devices and managed archiving services for social network operators.
  • Company Context
    Datto was founded in 2007 by CEO Austin McChord, and by 2014, the privately owned company reached annual sales just south of $100m. Although it chose not to disclose whether it reached its internal goal of $200m for 2015, the company remains profitable, and it said that the amount of storage under management increased from 140PB to 184PB. Also, the number of DRaaS appliances in place increased from 40,000 to 50,000-55,000 appliances. We believe this estimated 25% in storage/appliance growth would likely translate to similar growth in total customers from the 50,000-60,000 we estimated in July 2015.

    When we last spoke to Datto on July 1, 2015, it was still operating on the initial $25m series A funding from General Catalyst Partners, and at that time, it had no plans to seek a series B. But only four months later, it accepted a $75m offer for series B funding from Technology Crossover Ventures, a move that it characterized as both unexpected and fortuitous. With these funds, Datto has been expanding its datacenter capacity, as well as its North American and international staffing. Along with its customer and infrastructure growth, Datto has increased its workforce to more than 600 and has been expanding its worldwide customer base from 85% North America/15% international to 70% North America/30% international.
    Source: Datto attracts $75m in series B funding, shows growth domestically and abroad
    Analyst:
    • Steven Hill

    Date: 5 February, 2016
    Company Context
    Datto was founded in 2007 by CEO Austin McChord, and by 2014, the privately owned company reached annual sales just south of $100m. Although it chose not to disclose whether it reached its internal goal of $200m for 2015, the company remains profitable, and it said that the amount of storage under management increased from 140PB to 184PB. Also, the number of DRaaS appliances in place increased from 40,000 to 50,000-55,000 appliances. We believe this estimated 25% in storage/appliance growth would likely translate to similar growth in total customers from the 50,000-60,000 we estimated in July 2015.

    When we last spoke to Datto on July 1, 2015, it was still operating on the initial $25m series A funding from General Catalyst Partners, and at that time, it had no plans to seek a series B. But only four months later, it accepted a $75m offer for series B funding from Technology Crossover Ventures, a move that it characterized as both unexpected and fortuitous. With these funds, Datto has been expanding its datacenter capacity, as well as its North American and international staffing. Along with its customer and infrastructure growth, Datto has increased its workforce to more than 600 and has been expanding its worldwide customer base from 85% North America/15% international to 70% North America/30% international.
    More…
  • Primary Category
    Storage / Data Protection / Backup and recovery
  • See Also
    Storage / Disk systems
    Hosted services / Managed storage services
  • 451 Market Maps
    Secondary and Cloud Storage (Map) / Backup, Data Protection as a Service, DR/BC, Tape
  • Key Competitors
  • Competitor Context
    There are many competitors in the DRaaS market for enterprise customers; among them are Acronis, Accelerite, Axcient, CloudEndure, CloudVelox, Continuum, Databarracks, HotLink, IBM, iland, Peak 10, Seagate, SunGard, Verizon, Zetta and Zerto. However, the list is smaller for companies focusing on midmarket and SMB customers. Most of the players in DRaaS are preaching a 'no appliance' technology, but companies such as Datto, Axcient and Quorum believe there are a number of use cases where the presence of an on-premises appliance that's mirrored by cloud-based storage can provide faster and easier access to data for smaller RTO objectives such as a localized server failure. Datto's hybrid approach may also be of greater benefit for customers that don't have enough on-site infrastructure to support a software-only solution.

    We believe that the ultimate value-add for middle-tier DRaaS vendors should be in the disaster recovery experience and end-user support provided by them and their network of partners to assist customers in understanding and addressing their specific business-protection needs. Many larger enterprises have already been forced out of necessity or compelled by compliance issues to move from traditional backup to BC/DR strategies, but the majority of SMBs may not have a clue even where to begin. This means that the 'service' capabilities of the DRaaS vendors should extend beyond simply offering self-service software consumption to providing a more personalized evaluation and resolution of an SMB customer's needs.
    Source: Datto attracts $75m in series B funding, shows growth domestically and abroad
    Analyst:
    • Steven Hill

    Date: 5 February, 2016
    Competitor Context
    There are many competitors in the DRaaS market for enterprise customers; among them are Acronis, Accelerite, Axcient, CloudEndure, CloudVelox, Continuum, Databarracks, HotLink, IBM, iland, Peak 10, Seagate, SunGard, Verizon, Zetta and Zerto. However, the list is smaller for companies focusing on midmarket and SMB customers. Most of the players in DRaaS are preaching a 'no appliance' technology, but companies such as Datto, Axcient and Quorum believe there are a number of use cases where the presence of an on-premises appliance that's mirrored by cloud-based storage can provide faster and easier access to data for smaller RTO objectives such as a localized server failure. Datto's hybrid approach may also be of greater benefit for customers that don't have enough on-site infrastructure to support a software-only solution.

    We believe that the ultimate value-add for middle-tier DRaaS vendors should be in the disaster recovery experience and end-user support provided by them and their network of partners to assist customers in understanding and addressing their specific business-protection needs. Many larger enterprises have already been forced out of necessity or compelled by compliance issues to move from traditional backup to BC/DR strategies, but the majority of SMBs may not have a clue even where to begin. This means that the 'service' capabilities of the DRaaS vendors should extend beyond simply offering self-service software consumption to providing a more personalized evaluation and resolution of an SMB customer's needs.
    More…
  • 451 Research Analysts
METRICS
  • Revenue
    Year Value Confidence Level
    2016 $160,000,000 Level 1 – Primary Estimate Source: 451 Research, Q1 2017
    2015 $130,000,000 Level 1 – Primary Estimate Source: 451 Research, Q1 2017
    2014 $100,000,000 Level 2 – Corroborated Estimate Source: 451 Research, 07/01/15
    2013 $50,000,000 Level 2 – Corroborated Estimate Source: 451 Research, 09/10/14
    2012 $25,800,000 Level 2 – Corroborated Estimate Source: 451 Research, 09/10/14
    2011 $8,700,000 Level 2 – Corroborated Estimate Source: 451 Research, 10/14/13
  • Revenue Notes
    2016: Datto was founded in 2007 by CEO Austin McChord, and by 2014, the privately owned company reached annual sales just south of $100m. Although it chose not to disclose whether it reached its internal goal of $200m for 2015, the company remains profitable, and it said that the amount of storage under management increased from 140PB to 184PB...Datto has taken a channel-specific approach to DRaaS and has no direct sales capabilities, with the exception of a team dedicated to bringing new resellers onboard. Source: 451 Research, 2/5/16

    2015: If Datto can maintain its historical growth rates, the company will approach the $200m milestone in 2015 (noting that in the field of hybrid cloud backup providers, there are plenty of players in sub-$50m territory)...North America accounts for about 85% of its revenue, a figure that has held fairly steady over the past nine months but Datto noted that it is looking to expand. Source: 451 Research, 07/01/15
  • Employees
    2017
    750
    2016
    600
    2015
    500
    2014
    300
    2013
    250
    2012
    130
  • Employee/Customer Notes
    2016: Along with its customer and infrastructure growth, Datto has increased its workforce to more than 600 and has been expanding its worldwide customer base from 85% North America/15% international to 70% North America/30% international...Also, the number of DRaaS appliances in place increased from 40,000 to 50,000-55,000 appliances. We believe this estimated 25% in storage/appliance growth would likely translate to similar growth in total customers from the 50,000-60,000 we estimated in July 2015....Buoyed by an additional $75m in funding, Datto has been growing its datacenter presence in Toronto, London, Sydney and two locations in the US, and now protects 184PB of customer data worldwide. Source: 451 Research, 2/5/16

    2015: Having added the customers that it obtained in its December 2014 purchase of Backupify, Datto now claims 50,000-60,000 clients, more than double our estimate of 25,000 in September 2014. Source: 451 Research, 07/01/15

    2014: Datto has almost 7,000 active channel partners (out of a total of 8,000 registered resellers), versus 5,000 in 2013. Source: 451 Research, 09/10/14

    2013: It claims more than 50,000 business customers, compared with 20,000 one year ago. Source: 451 Research, 10/14/13
  • Company's Acquisitions
    Announced Target Target Abstract Target Primary Sector Target TTM Rev.
    2017-01-31 Open Mesh Inc. WiFi management hardware & SaaS Carrier infrastructure / Wireless infrastructure / Metro-scale WiFi infrastructure
    2014-12-11 Backupify [fka Lifestreambackup] Managed storage services provider Hosted services / Managed storage services $5,000,000*
    2013-07-22 Paradeon Technologies Limited UK reseller & Datto distributor IT services & distribution / Distribution
    View All
COMPANY FUNDING
  • Venture Backed
    Yes
  • Total Known Venture Funding
    $100,000,000
  • Total Known Funding Rounds
    2
  • Known Investors
    General Catalyst Partners, Technology Crossover Ventures (B), Undisclosed Investors
  • Detail By Round
    Quarter Round Type Amount Investors
    2013 3Q Equity $25,000,000 General Catalyst Partners, Undisclosed Investors
    2015 4Q B Equity $75,000,000 Technology Crossover Ventures
ANALYSIS
451 Research Analysis & SWOT 5 February, 2016
Datto attracts $75m in series B funding, shows growth domestically and abroad
Analyst:
  • Steven Hill
451 Take

To win in this growing market, DRaaS vendors must be able to protect local, virtual and cloud workloads, and with the addition of Backupify, Datto's feature set is well positioned to cover those requirements for midsized customers. Datto's approach, which combines local hardware and cloud storage for business applications plus cloud-to-cloud protection for SaaS, enables it to support a speedy recovery time objective (RTO) via local access, and offer remote access via the cloud to protect against a complete loss of facilities. Buoyed by an additional $75m in funding, Datto has been growing its datacenter presence in Toronto, London, Sydney and two locations in the US, and now protects 184PB of customer data worldwide.

SWOT Analysis
Strengths
Datto has a strong combination of on-premises appliances and hybrid cloud-based services that appeal to its SMB and mid-range customer base. Its 24/7/365 support network and screen shot validation reports bring big-business-level protection to smaller business counterparts.
Weaknesses
Datto still lacks name recognition, in part because its products are only available through the channel. The company's use of the open VMDK format for data is useful, but is also limited to a maximum volume of 62TB/image.
Opportunities
The mid-scale and SMB markets will remain fertile ground for DRaaS vendors for the foreseeable future, and Datto can only gain more name recognition as its business continues to grow. It would be useful to find a way to introduce more branding into its channel strategy to help Datto become more of a household name.
Threats
The increasingly noisy DRaaS market will make it difficult for Datto to differentiate itself from the pack. It will have to work harder to make its brand synonymous with hybrid disaster recovery for business and build a stronger story around its appliance-based approach to offset that of its competitors.
451 Research Analysis & SWOT 5 February, 2016
Analyst:
451 Take

To win in this growing market, DRaaS vendors must be able to protect local, virtual and cloud workloads, and with the addition of Backupify, Datto's feature set is well positioned to cover those requirements for midsized customers. Datto's approach, which combines local hardware and cloud storage for business applications plus cloud-to-cloud protection for SaaS, enables it to support a speedy recovery time objective (RTO) via local access, and offer remote access via the cloud to protect against a complete loss of facilities. Buoyed by an additional $75m in funding, Datto has been growing its datacenter presence in Toronto, London, Sydney and two locations in the US, and now protects 184PB of customer data worldwide.

SWOT Analysis
Strengths
Datto has a strong combination of on-premises appliances and hybrid cloud-based services that appeal to its SMB and mid-range customer base. Its 24/7/365 support network and screen shot validation reports bring big-business-level protection to smaller business counterparts.
Weaknesses
Datto still lacks name recognition, in part because its products are only available through the channel. The company's use of the open VMDK format for data is useful, but is also limited to a maximum volume of 62TB/image.
Opportunities
The mid-scale and SMB markets will remain fertile ground for DRaaS vendors for the foreseeable future, and Datto can only gain more name recognition as its business continues to grow. It would be useful to find a way to introduce more branding into its channel strategy to help Datto become more of a household name.
Threats
The increasingly noisy DRaaS market will make it difficult for Datto to differentiate itself from the pack. It will have to work harder to make its brand synonymous with hybrid disaster recovery for business and build a stronger story around its appliance-based approach to offset that of its competitors.
More…