Subscribe To Our Daily Enewsletter:

Datto IPO Filing: Big Vote of Confidence for MSPs, SMB Technology

Datto CEO Tim Weller

Tim Weller, CEO, Datto

Datto has filed confidentially for a potential initial public offering (IPO) with the U.S. Securities and Exchange Commission, Bloomberg reports. Amid the coronavirus pandemic and associated economic uncertainty, Datto’s IPO filing provides a major vote of confidence in the SMB technology sector — and MSPs that serve those customers.

RELATED Updates:

Rumors about Datto potentially pursuing an IPO in 2020 have swirled for a year, but the plan could shift to 2021 pending the coronavirus pandemic and its potential economic impact, ChannelE2E believes.

ChannelE2E asked Datto CEO Tim Weller about the IPO chatter in this May 2020 interview. Also, some clues about Datto’s business growth rate  from 2013 to 2018 surfaced here.

Datto Files for IPO: MSP Market Focus

Rob Rae, SVP, Datto

Datto, owned by private equity firm Vista Equity Partners, develops cloud-based backup, disaster recovery and data protection services. Additional offerings include business automation and IT management tools, along with networking gear.

Datto sells exclusively via MSPs (managed IT services providers) that focus on SMB (small and midsize business) customers. Senior VP of Business Development Rob Rae oversees the MSP strategy — and the entire company is aligned to support that go-to-market effort.

Datto has grown both organically and via acquisitions, including a merger with Autotask that tucked PSA (professional services automation) and RMM (remote monitoring and management) software into the business. Earlier, Datto acquired Open Mesh for MSP-centric networking gear. Another acquisition, involving Backupify, tucked cloud-to-cloud backup services into Datto’s business.

Datto competes most directly against ConnectWise, Kaseya and SolarWinds MSP. But a lengthy list of data protection, cybersecurity and IT management software companies now support the MSP market as well. Moreover, Datto could be on a competitive collision course against data and cloud-centric rivals like Acronis, Cohesity, Rubrik and Veeam.

Datto Files for IPO: From Private Equity to Publicly Held?

Much of the MSP technology market is either private equity owned or venture backed. SolarWinds is one of the rare publicly held players with a heavy MSP focus, though private equity firm Thoma Bravo still has a stake in that software company.

Of the private equity-backed firms, Datto and Kaseya appear most likely to pursue near-term IPOs. Vista has owned Datto since December 2017, and Insight Partners has owned Kaseya since 2013.

Both PE-owned technology companies wrapped up 2019 with considerable momentum. But the coronavirus pandemic caused some stress on the MSP industry during late March 2020 and early April 2020. In fact, Datto cut some staff in May 2020 and rival ConnectWise cut some staff in early July 2020.

Still, the overall MSP market regained some momentum in Q2 2020, multiple sources indicate. And MSPs are largely considered the near-term and long-term doorway in the SMB technology market, since small businesses need external IT guidance for cloud and business automation services.

Amid that reality, Datto has built a strong position — particularly in the data protection market — working with MSPs.

Admittedly, there’s a chance Datto won’t go public. Other options may include remaining under private equity ownership, or considering a potential sale to a strategic buyer. Among the potential players to watch: Large enterprise firms such as Hewlett Packard Enterprise and Cisco Systems, which have been evaluating ways to move aggressively into the SMB sector and recurring revenue models, ChannelE2E believes.

Datto Files for IPO: Bottom Line

Regardless of the path forward, the MSP industry — vendors and service providers alike — are likely breathing a collective sigh of relief.

The reason: Datto and many of its rivals had strong reputations for growth ahead of the coronavirus pandemic. When COVID-19 and associated economic fallout triggered some industry job cuts, it briefly shook some of the confidence out of the MSP industry.

In some ways, the reality check was a good thing — reminding all vendors and MSPs that they need to remain focused like a laser on customer outcomes. In other ways, the pandemic triggered a brief collective pause — forcing many folks to wonder just how well the industry would hold up under extreme economic stress.

Fast forward to present day. An IPO filing is, without a doubt, a sign of confidence from Datto and its private equity backers. Confidence in the SMB technology market. And confidence in MSPs that serve those SMB customers.

Return Home

No Comments

Leave a Reply

Your email address will not be published. Required fields are marked *