The Doyle Report: Catching Up with Datto, Where It’s Been a Very Good Year to Sell Backup, Recovery and Business Continuity Solutions

A little more than a year ago, Rob Rae went to an industry trade show and found his way to the booth of one of the largest and most influential providers of backup and disaster recovery solutions, Veeam. After a few minutes, Rae, the vice president of business development at Datto, was approached by one of the good-natured booth managers.

The manager pointed to the corporate logo stitched on Rae’s shirt and said, “Datto, huh, what do you guys do?”

Rae explained that Datto, like Veeam, sold backup, recovery and business continuity solutions and was, in fact, a company to watch. “Good luck,” the Veeam representative told him.

Flash forward one year. Rae went to another trade event and navigated his way to the Veeam booth once more. This time the reception was very different. After one of the Veeam representatives spotted the logo on his shirt, he told Rae, “You’re going to have to leave.”

So what happened in the interim? “Datto made waves,” Rae says—and in a big way.

What Datto has done, Rae says, is a very good job of “moving away from the dozens and dozens of mom and pop BDR vendors… and position ourselves to go up market and start competing with some of the larger vendors.”

If you follow Datto, you know this to be true. Today, the company has achieved full-blown “Unicorn” status by becoming a born-in-the-cloud startup with an estimated value of more than $1 billion. It did so by achieving rapid sales growth and, as of November 2015, a $75 million investment from Technology Crossover Ventures (TCV).

The investment will be help fund Datto expansions into new areas such as the enterprise segment and new geographies including Australia, Asia, Europe and more.

MSPmentor recently caught up with Rae, who had just returned from Australia. In a wide-ranging conversation, he provides a summary overview of what the company accomplished in 2015 and where it plans to focus in 2016. One thing he emphasized repeatedly: Datto has achieved everything with a “100 percent channel strategy.”

“It’s difficult to maintain that level of growth and maintain your channel strategy,” Rae says. “[But] we’ve successfully done it.”

He believes the company can become a $1 billion company and remain all-channel, all-the-time.

Here are some of the best bits of our conversation.

MSPmentor: The end of 2015 is upon us. What do you think the company has done best?

Rae: What I believe the company has really done best in 2015 is really start separating ourselves from the pack. We talk about how there is an infinite number of BDR companies and have for some time. You know, before I joined the BDR industry, I was in the remote monitoring industry and we looked at BDR and thought there were so many options and so many vendors. You would get a call every day to integrate with this guy or integrate with that guy. I think what Datto has done a very good job of is separating from that pack. [We] knew it was going to happen, and we’ve had a ton of success this year. It’s been a fantastic ride. It’s been enjoyable and profitable—everything that we speculated came true. So for us, moving away from the dozens and dozens of mom and pop BDR vendors… and positioning ourselves to go up market and start competing with some of the larger vendors [is the biggest accomplishment of the year.]

MSPmentor: Looking back, what do you think will be the biggest industry trend of 2015?

Rae: One of the things that drove me crazy in 2015 was the fact that every single time there was an outage or “down” scenario, it was [attributed to] terrorism. And it drove me nuts… Take United [Airlines]. It had a router failure in July that stranded thousands. Everyone says “it’s gotta be terrorists.” That stuff just drives me crazy. Cybercrime is prevalent; there’s no doubt about it. There is significant growth in it, and threats are getting more significant. But c’mon. We are also looking at very simple technical errors, including upgrades failures, device failures and problems with infrastructure. But every time there’s an outage or somebody is down, no one is looking at the company, they are looking at hackers or terrorists. There have been a lot of big companies that have made some pretty big mistakes in terms of cyber security and they have been able to get away with it in the press because the media is more interested in sensationalizing it into something that it is not. The United failure? It was just some guy who failed to download the upgrade in time. Did any one follow-up to report what really was the problem? No. So now everyone assumes it was terrorists as was originally speculated. It’s insane and this need to be addressed. Companies need to be more diligent and more responsible. Is CryptoLocker a genuine threat? Absolutely. Phishing schemes? Hell yes. But these threats are not as sensationalized as terrorists are… Remember, 97 percent of the restores that we do are human related.

MSPmentor: People are people, right?

Rae: Let me tell you. What I’ve done is hire a model for a one-hour window. I give her a bowl with 100 USB keys and they are all labeled “Inverse Technologies.” This is a company you’ve never heard of, but it kid of fits at an IT convention. So picture it. There’s a model in a polo shirt that says, “Inverse Technologies.” How quickly do you think those USB sticks are scooped up at an IT show? I’ve done this in Canada, Australia and the United States. The longest is has taken was seven minutes. Seven minutes to give out 100 strange USB keys! I don’t put anything on these sticks but a Datto brochure. But if technologists are willing to pick up a foreign USB key from a girl in a golf shirt, what does this say? We should all know better than this!

MSPmentor: Your growth and influence has been remarkable. What’s next?

Rae: We legitimately have solutions that work in the SMB space, and we have legit solutions that work in the enterprise space. We have solutions that scale up and down sideways. So for us, instead of manufacturing a product for a certain niche, we’re looking at data as a whole. Where does it reside and what can we do to protect it? It goes beyond simple backup.

MSPmentor: Through it all, you’ve remained loyal to the channel. Will that continue?

Rae: A lot of the innovation that’s in our products has been focused around a couple different angles. No. 1, being able to have a viable solution for you to go to market with. For you to be able to resell, service and add to your managed services offering. We want to help you be that expert around data protection. On top of that, we continue to add widgets and widgets and widgets to make things even more profitable for partners. This includes like Office 365 migrations to SaaS applications. We have seen Microsoft and Google potentially cut the MSP out and start commoditizing things like mailboxes. We are looking at that and data and believe you should have control and stay involved and be profitable doing it.

MSPmentor: Surely there are things you know you need to improve upon…

Rae: Our channel programs. Our channel program is one that customers like, one that rewards loyalty and one that is okay. [But] there are better things that we could be doing to service our customers. Our channel programs are already award-winning, but we want to be even better. We talk about technology disruption and we talk about forward thinking when it comes to backup. We want to do the same thing even in simplistic business practices. We want to have a partner program that is unique and is different and is pushing the envelope so you’re not falling into the traditional ways of doing business, such as a certain amount of points for a certain amount of sales or a certain amount of discount for a certain amount of terabytes. We want to try something creative and something new—something that is more designed around the needs of the MSP… rather than something that’s designed for us.

MSPmentor: What’s going to be the big, break-out trend for 2016?

Rae: I think the winner is going to be education. I think managed service providers need to bring these newer forms of technology—cloud computing specifically, the Internet of Things, etc.—down to a layman’s level. Winners in this market will be the guys that figure out how to message this stuff so that the typical layman can understand it and feel safe [putting it to use.] I’m not talking about being a “cloud solutions expert” so much as merely simplifying what we are doing for customers. We’re technologists and can dazzle people with technology to the point where they feel they know nothing about what we are talking about and hence feel compelled to come to us for answers. But I think educating is going to be more important than ever before. Empowering with knowledge. That’s going to be big in 2016.