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eFolder, Axcient Merger: CEO Matt Nachtrab Explains Data Protection Deal

eFolder CEO Matt Nachtrab

Why are eFolder and Axcient merging? Yes, Axcient was up for sale and has been shopping itself for several months, multiple sources indicate. Still, that’s only part of the story. The merger provides several potential upsides for eFolder and its partners. But managing the deal also comes with several clear challenges.

In a conversation with ChannelE2E, eFolder CEO Matt Nachtrab pointed to several merger benefits including:

  • eFolder’s strength with MSPs in the SMB sector. The company specializes in backup, disaster recovery (BDR) — leveraging appliances, eFolder’s cloud and/or partners’ private clouds.
  • Axcient’s technical strength and midmarket focus with services like Fusion Cloud, as well as the company’s technical skill running on public clouds.
  • Axcient also works with some larger midmarket MSPs that are far outside of the SMB sector.

eFolder CTO Kevin Hoffman

There’s some potential product overlap but Nachtrab insists that’s not a showstopper. The eFolder and Axcient portfolios will both march forward, with plenty of cross-pollination on the roadmap, he asserts. A potential case in point: Watch for those on-premises eFolder backup appliances to eventually connect to Axcient’s restore technologies on public clouds.

eFolder Chief Technology Officer Kevin Hoffman, widely respected in the industry, is the person who will need to pull it all together while also leaning on Axcient’s engineers.

No doubt, Hoffman will tap into the mind of Axcient CEO Justin Moore, who remains onboard as chief strategy officer (CSO) of the combined company. Still, I suspect Moore’s tour of duty will involve assisting the M&A deal for a few months before moving on to a new opportunity.

Justin Moore: Big Vision, Big Funding, Early to Market

In many ways, Moore was ahead of his time. Axcient, founded in 2006, pioneered certain concepts and technologies for complete business recovery in the cloud. Lose a network or your data during a hurricane, flood or earthquake? Moore was one of the early people championing a complete way to restore and run that business off-premises in a cloud.

Axcient CEO Justin Moore

Frankly, Moore was one of the people who educated me most about Silicon Valley’s top R&D priorities during the 2009 to 2012 or so timeframe — back when I had my hand in another IT media site’s growth period.

Still, big vision requires big R&D and branding bills. And that meant big venture capital funding. According to Crunchbase, Axcient raised:

  • $2 million in Series A, 2009
  • $10 million in Series B, 2010
  • $15.5 million in Series C, 2011
  • $50 million in Series D, 2013
  • $25 million in Series E, 2015

Nevertheless, Axcient ran into challenges. Much in the way that Steve Jobs was early to market with the original NeXT machine, Moore was early to market with complete cloud business continuity. In some ways partners and customers weren’t ready. And in other ways, the cloud infrastructure market itself wasn’t ready.

I also think Axcient may have underestimated the support costs and technical challenges in MSP market for SMBs. In 2015, the company turned to VARs for help. And by early 2016, the company began leaning more and more on its direct sales force and pushed into the midmarket.

In stark contrast, rivals like Datto remained pure channel — and pursued MSPs in the SMB sector as if the company’s life depended on it. That life-or-death commitment to MSPs, and only MSPs, has served Datto well.

eFolder: The Path Ahead

Yes, this deal is positioned as a merger. But let’s be honest. eFolder, led by Nachtrab, is likely calling the technical and business shots from here forward.

Among the decisions so far:

  • Staff retention: All employees at both companies have been offered positions in the newly combined entity, Nachtrab says. ChannelE2E says: I sense that eFolder is the faster-growing business. Was Axcient growing? I believe so, but not at the pace its venture backers wanted. eFolder will need to be very nimble to ensure Axcient costs don’t weigh down the overall company.
  •  Channel and sales strategy: eFolder’s products will remain pure channel, but Axcient’s midmarket products will continue to have a direct sales team, Nachtrab says. Also, he will personally ensure there’s no channel conflict for partners. ChannelE2E says: This is tricky spot for eFolder. Abandoning direct sales in the midmarket could alienate existing Axcient customers. Keeping direct sales could upset some eFolder partners based purely on perception, even if no channel conflicts ever emerge.

eFolder: M&A Experience

No doubt, both Nachtrab and Hoffman have M&A experience.

Nachtrab previously launched, built and sold LabTech to ConnectWise. From there, he played a key role in a ConnectWise reorganization that moved multiple investments and acquisitions into a single corporate structure. He eventually rose to president of the company before exiting in 2016 to pursue new challenges.

Also of note, eFolder CTO Kevin Hoffman — previously the company’s CEO for roughly a decade — oversaw multiple M&A deals that tucked solid technology into eFolder’s business.

Still, this isn’t a tuck-in deal. It’s global in scale with resources that extend from the U.S. to Russia. There’s some product overlap. There’s direct and indirect sales. And there are aggressive rivals in the market.

I get the sense that this is a three part act. In Act One, eFolder named Nachtrab CEO last week. In Act Two, we get a bit of a cliffhanger — Axcient and eFolder say they’re merging. So what’s in store for Act Three? Stay tuned.

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