Data backup plan
Founder and CEO of Datto Inc. Austin McChord: << We can beat the bigger of the biggest – Symantec, HP, EMC >>
Austin McChord makes a lot of money by selling reassurance to small businesses that aspire to avoid disasters caused by data loss.
Businessman Austin McChord offers me a cup filled with liquid nitrogen. << Put your finger in. The Nitrogen will immediately begin to evaporate. >> We dip our fingers into the cup and that is what happens indeed. << We bought a tank to make ice cream but we do all kinds of odd and unusual things. We froze a number of computers and they simply dissolved. >> He pours the liquid nitrogen on the floor and commences to show me around the office that is like a paradise for computer admirers: an LED wall for Super Nintendo tournaments designed to remind of Times Square, a collection of hand-made autopilot aerial vehicles and Japanese capsules for overnight accommodation which are << convenient for single occupancy, but too small for double >>.
Apart from these technological miracles the 29-year-old manager of the data backup company Datto is based far away from glorious Silicon Valley – nearly 5,000 kilometres. Datto, which is located in an insignificant office district in Norwalk, Connecticut, deals with data recovery. Datto supplies businesses of all size with low cost high performance hardware power by using the cloud services, just like Amazon Web Services; it powers a client’s network in case all goes South.
In a time like now, when applications like Snapchat and Whatsapp are in the centre of attention as they attract hundreds and millions of users; in contrast, in business like McChord’s the income is generated without much advertising. The displays in his office, along video game screens are displaying the daily sales volume to the last penny. In 2014 McChord’s revenue was close to 100 million dollars, which is 32 times more than in the year 2010. Today Datto has over 400 employees that support over 5 million clients all over the world, even Greenland. Some big companies have noticed it. In the beginning of 2013 a security services company (McChord does not disclose its name) made an offer of100 million dollars for his company. McChord who at that time owned 100% of Datto turned down the offer. Instead he partnered with General Catalyst Partner for 25 million dollars in autumn 2013. As a result of this deal Pos Seigan (former CEO of Akamai ) and Steve Herod (former CTO of Vmware) were included in the board of directors to help transform the dispersed Datto into a solid billion dollar company. << We can compete with bigger of the big ones – Symantec, HP, EMC >> says McChord.
We are mysterious and mad but that is the goal.
McChord got where he is today – by providing small companies such as law offices, construction shops, dental practices with such secure data backup which was previously only available to large corporations. With the hardware and software created by Datto one can obtain a snapshot of the IT system every five minutes. Since this system is located on the client’s premises and in the data cloud, this company can back up its data anywhere as long as it has an Internet connection. Datto representatives refrain from talking about prices but as one partner says the one terabyte of data is about $ 350 a month, or $ 2,800 per year if paid in advance. When a powerful tornado surged through Joplin, Missouri in 2011, Datto immediately restored access to medical records for a local hospital. When Hurricane Sandy flooded the system of New York Hedge Fund Richmond Hill, Datto brought it back in the market in a few minutes. << Austin told the small business: you only pay me a subscription fee and I’ll take care of all those complex things >>, says Seigan from General Catalyst. << He mastered a niche that nobody was interested in before >>.
McChord has been dealing with technical matters since the beginning. In his senior years in school in a Newton elementary school, Connecticut, he just like the American cartoonist Rube Goldberg designed sophisticated devices to perform simple activities. He created video editing software for his high school and repaired TVs collected from the town skip. Austin studied electrical engineering at the Rochester Institute of Technology but it seemed too simple for him so he switched to bioinformatics – a combination of computer science and biology.
In the summer of 2007 McChord started to build data backup devices working with Linksys circuit boards and developing software in the basement of his father’s engineering company. In 2008 his first customers were attracted by an article posted on the Gizmodo tech blog.
He then created a system that allows you to synchronize data between two computers (imagine Dropbox without the data cloud). At the Consumer Electronics Show (CES) in Las Vegas he bought two stands spending 80000 dollars from his credit card. One distributor ordered 2000 devices. McChord was still assembling them by hand and was up to his ears in debt. << I could not fall asleep. I had something in my chest, >> he says. << I thought that I have some kind of heart disease but problem was only in my head. >>
Unable to execute the order McChord just ended the attempts to conquer the market and began to think about a product that could ensure regular income. He took the Zenith Infotech backup system operating in the Windows operating system and created improved model operating in Linux. Marketing is a big problem for millions of small businesses so McChord focused on a few distributors who would take care of the new product sales. In late 2009 his monthly sales volume was 70,000 dollars. In 2010 it reached three million dollars.
Then a misfortune occurred. He had created a new product Aurora that was capable of restoring a system in about an hour. It worked great on new computers but it damaged the old ones. This caused problems in customer service. He had to develop another product from scratch while selling the faulty systems in order to be able to pay salaries to employees. After a few months he created Siris a system which reduced data recovery time to six seconds. Customers who had previously bought Aurora received this advanced system for free. Sales amounted to nine million in 2011 but in 2012 reached 25 million dollars.
At the beginning of 2013 McChord was offered 100 million dollars for his company. At that point a decision had to be made. << It was very clear that their plan was to liquidate the company. I did not want to see people being laid off >>, he says. << I declined. I have been given a rare opportunity it seemed silly not to fully use it. >>
That meant reaching for other types of information. In December McChord bought a new company – Backupify, that backs up date in cloud based environment, such as Salesforce and Google Apps. << You don’t have to create Snapchat to become a billionaire >> – says McChord << Start an incredibly valuable business by choosing a product, making it 30% better and 10% cheaper instead. >>
