Newsmakers: One on One with Datto CEO Austin McChord

​When Datto opened a new European office recently, the executive in charge gave Datto CEO Austin McChord an unusual gift: a portrait of McChord dressed as an officer of the Scottish Guard, complete with a bearskin helmet.

The image of the young executive in a kilt looking as though he were prepared to lead his troops into battle at Waterloo is something right out of the television show “Silicon Valley.” It’s fitting because McChord is a fan of the show and likes to inject a little theater into his work life when possible. He did so this week in Nashville at DattoCon16, the company’s annual partner summit. There McChord took center stage several times to discuss new products, initiatives and milestones. Afterwards, he sat down with MSPmentor to review his company’s latest achievements.

Today, Datto, a pioneer in backup disaster recovery (BDR) solutions, is a 600-person organization with more than 200 petabytes of data under its careful watch. It runs nine data centers around the world, handles more than 1 million backups every week and spins up half a million virtual machines (VMs) weekly. The company’s cloud technology kicks into gear more than 200 times a day to save customers from system failures. Thanks to Datto, millions of them sleep better at night and thousands of partners put more money into their bank accounts.

Much of the credit, of course, goes to McChord, who founded the company in 2007 in a basement. Since then, he’s been named to Forbes Magazine’s 30-under-30 list and generally hailed as one of the up-and-coming stars of the tech industry, not unlike the fictional Richard Hendricks, founder of Pied Piper, which is the company featured in the “Silicon Valley” show on HBO.

Like some of the Millennial characters in the show, McChord says the words “like” and “cool” a lot. But make no mistake: McChord is quickly mastering the language and secrets of business. Make that big business. This includes delighting customers beyond their expectations and seizing market opportunities ahead of other companies. Take the company’s all-new Siris 3 X1 solid-state drive.

The idea for the product didn’t exist six months ago, McChord explains. But then the company’s development team saw an opening: falling prices on flash storage drives. So they went to work. The result? An industry first that McChord says embodies not only the company’s technical prowess but also its business savvy. When he stood at DattoCon16 and announced that Datto would give a free X1 to every attendee at the event, the crowd roared its approval.

Where did he learn to be such a showman? From watching Apple keynotes over the Internet while still in high school, McChord says.

In addition to learning how to dazzle, he’s also getting better at leading. When one of his lieutenants had a live product demo go awry on stage in Nashville, McChord took it in stride.

“We don’t shy away from the high-stakes demo,” he said.

As Datto matures, it is taking on more and more. The company is expanding into new geographies, for example. It is also developing new product lines including the new Datto Drive and Datto Network Networking Appliance. It is also shoring up little things that benefit partners. This includes increasing the length of a warranty from three to five years and updating its partner portal to save company loyalists time and money.

Is he stretched? McChord concedes he is, but says he is confident that the team he has put in place can scale to meet new challenges. Though tempted by some market opportunities, McChord is being both disciplined and adventurous.

“We’re not really in the business of reinventing the wheel. We only do things that we can do better than anyone else,” he says.

In our one-on-one interview, McChord outlines what that is. Enjoy.

MSPmentor: Where are you now that a year ago you wouldn’t have envisioned you’d be?

Austin McChord: That I wouldn’t have? A year ago, I don’t think I would have envisioned the Siris 3 X1 product. That is something that we didn’t see coming until very early this year. And we moved fast to actually get it into production and start shipping. What we were watching was the price of SSD technology. It’s a pretty amazing story, this revolution in the storage space. We saw prices keep coming down and we said, “we’re going to take advantage of this.” We saw we could acquire and get a hold of very large quantities of flash storage, which is actually very hard to do right now. The challenge is that it’s not stocked. Take a 1 Terabyte SSD hard drive. No one carries more than, like, 20 of those in stock because the price drops every two weeks. So if you hold stock, you get hosed. The entire distribution chain is really, really light. So it took basically an act of God on behalf of the engineering and purchasing teams to be able to acquire enough so that we could stand on stage and give out that many 1 Terabyte SSDs and have enough on-hand [to fulfill orders]. So, while I wouldn’t want that to be the tent-pole story today, it’s one example of something that seems trivial but turns out to be a huge undertaking at scale. It’s cool that our team can respond and do innovative things quickly even though we are now a big company.

MSPmentor: You said you didn’t think that that would be the tent pole announcement, but surprises happen. I talked with one of your advisory members who said the new five-year warranty was a big deal to him. “That’s money in my pocket,” he said. These side announcements can actually be a big deal, right?

Austin McChord: Absolutely. We have a lot of tech integration that didn’t even make it into the keynote. Some big things we had to announce in track sessions. There’s so much going on. A year ago, I don’t think I would have been able to predict the volume of all of the announcements we had today. Datto has gotten to a size where you sorta start these projects and then tell people, “you go in this direction, you go in that direction.” We talk about it internally and say, “Wow, this company is pregnant with a lot of stuff.” And then to see all of these things coming out of the pipeline now? That feels really good. Same with the redo of the partner portal, which saves our partners time. I love those kind of releases, too, because they provide something that everybody gets [snap] right now. And you don’t have to do anything for it. You didn’t even have to come to conference or know about it, but you still get it. The world just got better for you when you logged in. I always try to put some of these benefits into every keynote every year. It [reminds me] of when I was a kid in high school and would watch the Apple keynotes. Apple would come out with, like, a new version of iTunes or they would introduce a new version of iPhoto. And it was cool. I didn’t go to their event or do anything but a couple of hours later I could download something new. Usually it was very incremental. But it was still something. So to be able to deliver that [experience] today, I am really proud of.

MSPmentor: You are getting pulled into multiple directions. You’ve got international expansion, multiple product lines, etc. How do you scale your own management style? Do you bring in new people? Do you find more than 24 hours in the day?

Austin McChord: If you look, it does come down to team. We’ve been refining the team constantly. That’s painful, but important. And so, in the last year alone, [Chief Revenue Officer] Brooks Borcherding joined in November to oversee all of sales and marketing. We added a CMO, which is a position we didn’t have at the company before. That’s Pete Rawlinson. And the nice part about that is [Marketing Vice President] Carrie Reber stayed on. She ran marketing before. So it’s not like we lost that internal knowledge. We’re able to add to it. I look at Robert Gibbons, who is our CTO, and who is just fantastic. I am ensured that I have a really great team just below me. And I think we are now at the stage where we are paying a lot of attention to the team directly below that. Another great example would be Emily Glass. She is somebody who was at the company before and who we tapped to step up and take over support and step into a big role. I think if you ask our customers, “how are we doing in experience?” you’ll find that Emily has taken it to an entirely new level. It’s not that customer experience was broken in the past. It’s that every day at Datto we have to be challenging ourselves to be better. The fact that we are industry-leading or that our customer sat metrics are very, very good is great. But we push ourselves and ask, “how will they be better?” We have got to keep making those improvements. It’s relentless. It’s painful. And it’s frustrating, but ultimately it’s a big part of who we are and how we succeed.

MSPmentor: As you get bigger you now enter in markets or adjacencies or complementary areas that butt up against someone who may a partner. If I were in the audience today watching you introduce your DNA product, I might be thinking, “hmm, if I’m a WatchGuard or SonicWALL or Sophos, a Silver sponsor here, are they coming after my space?” You have natural things that fit [as an extension] into your product set. But how do you navigate those thorny waters?

Austin McChord: I think it’s through open dialogue. SonicWALL is probably a case in which we are going after their market. And we think we can build a better product. Ultimately I think everybody wins if it encourages SonicWALL to up their game because that’s great for our partners. It’s sort of just a natural consequence. Sometimes it’s unintended.

MSPmentor: Growing pains?

Austin McChord: I think so. I think in Datto’s case I think we always want to be open about what our objectives are, what we are doing, etc., and then we will let other people decide. We are not in business of preventing people from coming to our conferences. And we want to be partners with everybody and we want to work with everyone. That’s what matters.

MSPmentor: So… pick your metaphor. When you look at the landscape, the chessboard, the candy shop, etc., there are a number of market adjacencies that just seem a natural extension of your product portfolio.

Austin McChord: We’ve been very judicious about expansion. If you were to ask me a year from now, “will there be new adjacencies that we are playing in?” I think the answer would be “no.” One of the hardest but most important things about being a CEO is to say “no”—a lot. So, yes, there are lots of spaces that I think Datto could build good solutions in. But rather than build good solutions in a zillion spots—and you can see lots of companies that have tried to do that—we want to learn from the ones that have done that and wound up diluting themselves. We want to bring a lot of focus to a few key areas. Obviously, continuing in the on-prem DR space is core to us. Protecting cloud applications is a direct adjacency and matches to what we do. So we will continue to invest there. And as I said on stage, networking is a big bet for us; it’s different. But I see it playing into the same model. It’s all about where business data lives. That’s somewhere where I’ve said we are making a big bet. We’re clearly not perfect at it yet. We clearly have to get better. We’re going to continue to do that. But when you look at that sub market, that is a huge market for us to attack. We’d love to be great at solving those two problems. And I think that’s really our goal, much more so than “can we go after or build an also-ran in a bunch of places.”

MSPmentor: Can you give me an example of something that looked shiny but that you had the discipline to resist? Anything come to mind?

Austin McChord: I think remote monitoring and management (RMM) is a good example. There are a lot of players in the RMM market. At Datto, we sit behind the firewall. At some point, an RMM play [for us] could be interesting. But it ultimately is not the business we want to be in. And when we dig into it from a technical standpoint, it’s not our core competency. And there’re a lot of great solutions out there that are already MSP-focused. So we said “no” to RMM. The same is true of professional services automation (PSA) software. That whole area? There are already good answers already there. The question is “can we bring an enormous amount of value to the table?”

MSPmentor: You’ve made a huge bet on a lot of different components of open source. Is that a core, company philosophy?

Austin McChord: Um, we’re not really in the business of reinventing the wheel. We only do things that we can do better than anyone else. So if Datto went out to write a hypervisor, I doubt we could do better than KVM. We pick those pieces. One of the things that you will see is that Datto is an active contributor to these projects. So in the case of KVM—and this is pretty cool—our partners use RDP, remote desktop, to get in and interact with their VMs. KVM did not support RDP. So Datto wrote the RDP engine for KVM. And if you look, Siris 3 is shipping with it and we have contributed it back to the open source community. I don’t think it has actually made it into the main line Linux [distribution] yet, but we’re the only people in the world right now that are shipping RDP-capable KVM. That was a huge engineering effort to make that happen.

MSPmentor: How are you finding talent today?

Austin McChord: Just hard work. Shoe leather.

MSPmentor: Do you still interview most of the top engineers you bring in?

Austin McChord: Yes, I do.

MSPmentor: What do you look for? What is your binary [must have]: Tech talent or cultural fit?

Austin McChord: I think it’s a combination of IQ and passion. So, are they smart enough to do the job—like really smart—and can they get excited about the work? If you have those two pieces, all the rest fades away. What projects they have done in the past doesn’t really matter.

MSPmentor: I gotta ask, then, what’s harder to find: Is it the intellectual horsepower that you need or the hunger or passion?

Austin McChord: You can find some very passionate people that don’t have the horsepower to get things done. And a lot of times you can find some really smart people who have lost the energy to do things because rarely are they challenged. (They think they can do a day’s work in 10 minutes.) You can find smarts or talent pretty easily. But finding someone with both is actually quite hard.

MSPmentor: Your company is coming of age—and you are as well—at a time of the “Silicon Valley” television program, which is putting all these ideas in people’s heads about how the Valley works. You’re not based there but you work there essentially. And you’re of that generation of companies. How is the myth different than the reality?

Austin McChord: I’ve seen lots of other companies that really do live like “Silicon Valley.” The show is obviously a parody, but like, “holy shit,” I’ve seen that. [Then there are large, established companies.] Datto strives to be somewhere in between. I think that the single biggest piece that motivates people to come to work that other companies may miss or forget is that people have to feel like their contribution matters. So when they come to work and do what they do they inevitably ask themselves, “did I move the needle? Did I make a difference?” That’s the key piece. If we can emphasize or make it really clear and visible to our employees that they’re making that difference, it drives them. And it drives them more than salary, more than perks or any of that stuff.

MSPmentor: I’ve seen more change in the industry in the last year than I’ve seen in the previous 10. Big gears are turning. At Apple, HP, Dell, etc. Where the hell do you think the industry is going?

Austin McChord: There’re two things that are happening. One, we are a technology tipping point. Look around. Flash storage is a piece of it. Better connectivity is a piece of it, etc. And those things empower and enable the cloud. Then there’s mobile, the Internet of Things, etc. There are a whole bunch of technologies that are tipping all at a similar time. I think that when you combine them with an enormous amount of capital that is not part of the public equity market, whether it’s through private equity, venture capital, etc., you get a situation ripe for [massive] change. Technology can be a zero sum game [laughs] that you better be on the right side of [the outcome.] That’s hard because it’s not always clear what the right side of things is and because the rate of change is much faster than ever. So far, we’re proud of what we have accomplished. But there’s more to do.