Datto quietly files for IPO

Datto, which sells data protection software and hardware through managed service providers, reportedly is looking at becoming a public company this year or in 2021.

Bloomberg today reported the vendor has confidentially filed for an initial public offering (IPO) that could be valued at more than $1 billion.

The report said Vista Equity Partners, which bought Datto in October 2017, hasn't decided whether to list Datto's shares this year or in 2021. Vista Equity's portfolio consists of other tech companies, including network control specialist Infoblox and remote access platform SecureLink.

Datto did not provide any further detail when contacted by SearchDataBackup.

"Due to company policy we don't comment on rumors or speculation. Right now, Datto's focus is on maintaining a strong company for its partners, employees and stakeholders," Datto said in an email statement.

Datto sells backup, recovery and business continuity (BC) products. Its portfolio includes Datto SaaS Protection, which provides secure SaaS backup for Microsoft Office 365 and G Suite, and Datto NAS, which is a NAS device that replicates to Datto Cloud. Datto Cloud holds over 300 PB of off-site backups for its customers' BC and DR uses.

Datto bought cloud-to-cloud backup startup Backupify in December 2014 and network device vendor Open Mesh (now called Datto Networking) in January 2017. When Vista Equity bought Datto later that year, it merged with business management software provider Autotask.

Despite the COVID-19 pandemic, recent events have shown that financial confidence in the data protection space hasn't wavered. In late June, DR and continuous data protection (CDP) vendor Zerto raised $53 million in a venture funding round and gained a new investor. A week later, tape vendor Quantum revealed on an earnings call that it had secured an additional $20 million in liquidity from its lenders. In the first week of July, VMware announced its intention to acquire DRaaS vendor Datrium.

Christophe Bertrand, senior analyst at Enterprise Strategy Group, said a Datto IPO is a reflection on the health of the data protection market and its prospects. The demand for BC and DR has only grown as a result of COVID-19, as more businesses find themselves with a decentralized, at-home workforce. He said the market will become even larger once vendors start adding intelligent data management capabilities to their offerings.

"Our research shows that 82% of organizations will not decrease their budget for data protection due to COVID-19, and actually over 1 in 4 will increase their IT funding of data protection," Bertrand said.

Bertrand said Datto is well-positioned for an IPO, as it has a solid lineup of products to offer, a strong channel partner ecosystem and a focus on the SMB and midmarket. He said a successful Datto IPO would allow the vendor to expand its geographical reach and enhance its marketing capabilities.

Krista Macomber, senior analyst at Evaluator Group, said an IPO filing was surprising due to the economic uncertainty at the macro scale, but it makes more sense when looking at what organizations are spending their IT budgets on. In a study published in April, Evaluator Group found that customers were investing more into cybersecurity, data protection and cloud in the COVID-19 era. This is in response to new security holes that opened up with a remote workforce and to bad actors seizing the opportunity of the increased attack surface.

"We are seeing some pockets of IT spend that are favorable for Datto," Macomber said.