Datto-Backupify Deal Could Ignite More Data Backup M&A

**Editor’s Note: Please click here for a recap of the biggest channel-impacting mergers in Q3 2014.**

Chalk up today’s M&A between Datto and Backupify as yet another example that the data backup sector is ripe for consolidation.

Indeed, the deal, whose financial terms were not disclosed, comes not long after eFolder bought CloudFinder and EMC bought Spanning. Because three signals the creation of a pattern, it seems reasonable to expect that Datto-Backupify well could kick off a frenzy of consolidation in the data backup industry.

Certainly the field has grown saturated over the past few years, the result of startups and incumbents all going after a hot technology, thanks, in large part, to cloud capabilities. And when saturation occurs, deal-making soon follows for many of the companies that don’t fold first (remember Nirvanix?). With players including Box, Carbonite, StorageCraft, Symantec, HP, EMC, IBM, Datto and more, all offering similar and synergistic services, the cloud backup and BC/DR industry looks poised to get smaller and, at the same time, stronger.

Datto on Dec. 11 may have ignited that trend with the acquisition of Massachusetts-based Backupify. Backupify built its business on backing up data from users’ online services, such as Salesforce.com, Twitter and Google Apps; to date, Backupify says it serves more than 2 million customers and manages almost 4PB of data – that’s the physical equivalent of 208 tons of pepperoni pizza. Datto, meanwhile, specializes in backing up organizations’ cloud and on-premise systems, and provides business continuity and disaster recovery services. As such, Datto’s CEO Austin McChord views Backupify as a complement rather than a rival.

“We’re not competitors at all. … We protect systems, and they protect [software-as-a-service] applications,” McChord told xconomy.com.

The combination of Datto and Backupify creates the first platform that protects business information, no matter its location, Datto said in its press release announcing the transaction. To that point, the business data landscape “is rapidly changing,” McChord told Channel Partners, since, in the past, data were housed on a server in the office.

“Now, with the growing adoption of the cloud and SaaS, critical data is living in more places,” he said. “This diversity only increases the need for businesses to have a comprehensive protection plan as they decide which workloads to protect and where.”

Together, McChord added, Datto and Backupify “will bring new services to customers through the channel by offering instant recovery and protection of data in the face of any disaster or IT failure.”

Those new services will be sold through its MSP partners, McChord said.

In terms of changes, there shouldn’t be much that impacts partners or their users. Perhaps the biggest difference will be that, over time, Datto will move Backupify’s customers to its cloud. However, Datto’s platform meets the same or higher security and redundancy levels as Backupify’s, McChord said, and the switch will give Backupify’s former clients more ability to restore and interact with their data.  

Beyond that, partners and customers will work with the same sales, account management and support teams, Datto said. Backupify’s employees, which number around 70, will join Datto, with CEO Rob May becoming head of corporate and business development. Also, expect to see Datto expand to new markets, including Asia, Europe and Latin America.

The value of the Datto-Backupify transaction was not revealed, as both companies are privately held. They share the same lead investor, General Catalyst Partners. Since its founding in 2008, though, Backupify had raised $19.5 million over five rounds. Datto, which started in 2007, secured $25 million last year in its first-ever venture capital financing round.