Backup and managed service company could make Wall Street debut this year
Datto, Norwalk, Connecticut, is looking to trade its unicorn start-up status for a spot on Wall Street. The company filed confidentially for an IPO that could be worth more than $1 billion and come to fruition before the end of the year.
The Lowdown: The potential for an IPO comes as no surprise, as Datto is one of the darlings of the technology start-up cohort. Valued at more than $1 billion when Vista Equity Partners acquired the company in 2017, the unicorn — a moniker given to high-value start-ups — was always expected to find a spot among the publicly traded technology companies.
The Details: The question is the timing of the IPO. Given the recession caused by the COVID-19 pandemic that rocked Datto’s downstream SMB and midmarket customers, an IPO this year hadn’t looked feasible. However, the stock market remains strong and demand for managed services is increasing. Wall Street loves recurring revenue, which makes Datto a potentially attractive offering. Reports indicate that Datto is still evaluating the timing of the IPO, but indications are it could come before the end of 2020. Datto hired banking heavyweights Morgan Stanley, Bank of America, Barclays, and Credit Suisse to underwrite the IPO.
The Impact: If Datto goes public with a billion-dollar offering, it will change the dynamics of the managed services segment. The IPO would give Datto ample cash to invest in expansion and would put pressure on rivals such as ConnectWise and Kaseya.
Background: Founded in 2007 by entrepreneur Austin McChord, Datto started up as a scrappy cloud-based backup vendor that catered to the SMB managed services segment. By 2015, the company was among the fast-growing start-ups and expanding internationally. In 2018, McChord stepped down as CEO after the sale to Vista; Tim Weller has run the company since.
While Datto is a gem among the managed services vendors, it’s also not insulated from disruptions. It took some heat this spring for layoffs to cut costs. Many were quick to blame the pandemic for the reorganization, as Datto said it was eliminating redundancies. In hindsight, it’s possible that the layoffs and reorganization were the first step in the IPO process.