Datto Raises $25 Million in Round Led by General Catalyst

Sep 03, 2013

Helping companies protect and restore their data is a growing business. Now, a six-year-old start-up is aiming to get a bigger..

BY MICHAEL J. DE LA MERCED | September 3, 2013 Helping companies protect and restore their data is a growing business. Now, a six-year-old start-up is aiming to get a bigger piece of the action.


Datto, which provides both local and cloud-based data backup and continuity services, plans to announce on Tuesday that it has raised $25 million in its first round of venture capital financing, led by General Catalyst Partners. Steve Herrod, a managing director at General Catalyst, and Paul Sagan, the executive vice chairman of Akamai Technologies, will join Datto’s board.

The financing is the latest bet that cloud computing – relying on an array of remote servers to power a dizzying number of computing services – will help transform data backup and recovery.

Datto is aimed at companies who generally cannot afford the traditional, expensive data backup and continuity offerings. By keeping smaller businesses up and running longer, argues the company founder, Austin McChord, they can better compete against larger rivals as society becomes less tolerant of downtime and user outages.

“This is something new, with more availability of something that before only the biggest of big companies could take care of,” Mr. McChord said by phone. “Instead, we can provide a service and make it available for businesses that are much smaller.” Among Datto’s current clients are Susan G. Komen for the Cure, the breast cancer research foundation, and several National Football League teams.

“These are companies that were used to having coffee wipe out their machines. Before, they were resigned to losing some data,” Mr. Sagan said in an interview. “But the cloud levels the playing field, so even small and medium-sized companies can compete on a global scale.” Datto, founded in 2007, has grown to about 225 employees and counts customers on six continents without help from venture capital firms.

While the company does not disclose its financial information, it says it has posted four consecutive years of 300 percent annual growth. But Mr. McChord said that a push to significantly expand internationally unearthed a colleague’s connection to a General Catalyst co-founder, David Fialkow, which led to meetings with the venture capital firm. Mr. Sagan added that after having stepped down as Akamai’s chief executive this year, he had been looking to invest in young entrepreneurs focused on information technology services. Mr. Fialkow, a longtime acquaintance, introduced him to Mr. McChord. “He’s gotten great growth and impressive sales in four years from a standing start,” Mr. Sagan said of Mr. McChord. “Austin has created a new model.” Mr. McChord, who will remain Datto’s biggest shareholder, said he would continue to focus on his international expansion plans, particularly in Western Europe. He said he was not looking to take the company public or look for a sale in the near term. “We’re focused on growing,” he said. Mr. Sagan added, “My advice is, if the company’s successful, the future takes care of itself.”

A version of this article appears in print on 09/04/2013, on page B8 of the NewYork edition with the headline: Fund-Raising Round.