How Austin McChord Reached for the Stars But Kept His Feet on the Ground

Austin McChord didn’t start his own business because he had some grand vision that would change the world. He started Datto, he tells the audience at ChannelCon, to solve his own unemployment problem. In 2007, he graduated from the Rochester Institute of Technology with a 2.2 GPA and a degree in bioinformatics—whatever that is—and he wanted to get out of his parents’ house. Someday, if he was lucky, he hoped to sell the business for about a hundred thousand bucks and buy an Audi R8 like Ironman.

His first backup and data recovery (BDR) product, the Datto 100, was comprised of parts off a Linksys device and was the result of “copious amounts of hot glue, three Legos and a lot of soldering.” He set up an online store and waited for the money to roll in. Nothing. So he put it on Amazon. Nothing. He spent the next two months emailing tech press begging for someone to give it a review. Finally, one editor emailed him back, saying that if he promised he’d never email them again, they’d review his product.

McChord’s “secure data center” was his dad’s basement. His “advanced cooling system” was a dozen or so PC fans taped together and stuck in a window. He and his team, made up mostly of friends from high school, were feeling their way along. They didn’t have a real office space, but they had more monitors than a company five times their size would need for reasons they couldn’t really explain. “We had a monitor fetish,” he says now with a grin.

And then, six months into selling the appliances, Linksys discontinued the product they were using as a basis for the Datto 100. They reluctantly made the switch from embedded circuit boards to just making small computers.

In retrospect, McChord says that each time a setback like that occurred, somehow the company wound up stronger than before. It was the unexpected moments that made Datto the company it is today, but looking back, it’s striking how much of it was pure chance.

People kept calling and asking if Datto had a channel program, and McChord kept saying no. He was leery of letting the control of sales out of his hands. But finally, after about the fifteenth call, he told the MSP on the phone that Datto’s channel program was launching in about four hours if he’d like to call back.

That channel program is what really enabled Datto to take off and gave McChord a business to build on. He left the direct sales space within about three months, and not long after, he moved Datto’s servers from the basement to an actual data center. After his first trip walking up and down those aisles of racks, of wires and blinking lights and hardware that held the data that made the world run, he says he remembers thinking, I got to visit the internet today.

From there, success just kept on coming. Datto held its first sale on a Black Friday and made half a million dollars the bank wouldn’t release because they were convinced some sort of fraud was going on. They moved into a new, bigger space—more space than they needed, but it came with a ton of free monitors the last tenant left behind. The Datto team was sold.

Along the way, McChord wanted to make sure he and his team had fun. He spent most of the time he was awake with his employees at work, so why not enjoy it? They built computers suspended in mineral oil and covered a wall with LED tiles, just because. It’s easy to get obsessed with productivity and time tracking, but McChord says the most important thing is to build goodwill deposits with employees.

Hurricane Sandy in 2012 gave McChord the chance to see if those deposits would pay out. The storm hit the eastern seaboard on October 29, bringing 14-foot swells surging over New York Harbor. In the United States, the wind, rains and flooding impacted 24 states, caused tens of billions of dollars in damage and killed 71 people in nine states. Businesses came to a screeching halt from Florida to Maine…and Datto’s phones began to ring off the hook.

In Connecticut, McChord’s employees battled 80 mile-per-hour winds to come into the office and make sure that all the tech that worked on paper would stand up to a hurricane-level disaster. McChord says when he started the business, he didn’t really have an idea of what it was he was promising, what his services actually meant to his customers. Sandy turned out to be the biggest turning point in Datto’s history because everyone, McChord included, got to watch as the company saved people’s livelihoods. The team lived in the offices for a week. When he talks about it, McChord still sounds a little surprised—and a lot grateful.

In 2013, when he was 26 years old, McChord received a phone call that threw into stark relief exactly how huge this company he’d built in his dad’s basement had become. A large security company—one whose name he won’t divulge but he says you’d definitely recognize—made him an offer to buy Datto. He won’t name the exact price, but says it was over $100 million.

At this point, McChord owned 100 percent of the company. He’d never known anything about equity or stock options, so he hadn’t given anyone any. He didn’t know what to do. He called his parents, his friends and his lawyer, the last of who had the most quotable response: “Why are you thinking about this?” the lawyer asked. “You could regret this decision for the rest of your life from the beach of your own private island.” But in order to do that, McChord would have to cut his team out of the deal, and he wasn’t willing to do that. He said no. The company called back and offered more money. McChord said no again.

“The loved our tech,” he explains, “but they didn’t understand our team.” He’d always known he loved his job, but he hadn’t expected that to be tested with a nine-digit number. He realized he needed to get serious about running a big technology business.

He had no idea what he was doing, so he knew he needed to surround himself with smart people. He slowly began to build a board of directors, thinking long and hard about the people he asked to join. Paul Sagan from Boston investment group General Catalyst was first. Steve Herrod, fellow partner at General Catalyst and former CTO at VMware, followed soon after. McChord gave every single employee stock options and $1000 in $20 bills, a request the bank denied until he threatened to take his business elsewhere. Oh—and he bought himself some liquid nitrogen. “We like to freeze stuff,” he shrugs.

Today, Datto has about 600 employees in nine data centers around the world, from its original Norwalk, Conn., location, to offices in Canada, the U.K., Singapore and Australia. It manages more than 200 petabytes of data, handles over 1 million weekly backups and operates half a million virtual machines each week. Last year, McChord was named to Forbes Magazine’s annual 30-Under-30 list, and he’s still chasing new technologies to protect customer information better and get their systems back online faster.

As for that bioinformatics degree? McChord says he still never uses it, and the rest of us still don’t know what it is.