Sees an expanded role for MSPs with SMBs when COVID-19 pandemic passes
Datto, which makes cloud-based technology that MSPs can sell to SMBs, is planning to raise $561 million when it goes public next week, the 13-year-old company said in a filing with the Securities and Exchange Commission (SEC).
The Lowdown: The Norwalk, Connecticut-based company notified the SEC in July that it was filing for an IPO, which now is scheduled to take place Oct. 21 on the New York Stock Exchange (NYSE).
The Details: Datto officials said the company plans to sell 22 million shares of common stock at a price of between $24 and $27 per share and another 3.3 million shares to underwriters, who will have a 30-day option to buy shares. The IPO will give Datto a market value of as much as $4.25 billion.
Investment firm Vista Equity Partners, which bought Datto in 2017, will own at least 72.2% of the outstanding common stock after the offering, according to the SEC filing.
Datto offers a cloud-managed platform that includes such services as business continuity, disaster recovery, and backup to MSPs, which can use it for their customers, primarily smaller businesses. The company has more than 17,000 MSP partners, more than 1,000 of which provide more than $100,000 in annual recurring revenue (ARR).
Datto’s overall ARR stands at $507 million, and in 2019 the company, which has more than 1,600 employees, saw a 19% year-over-year growth, according to the filing. It also sustained a net loss of $31 million.
The Impact: The IPO comes during the global COVID-19 pandemic that has hit the United States particularly hard and battered the economy. Despite that, Datto CEO Tim Weller said SMBs will rely more on MSPs as the public health crisis lifts, which will increase demand for the company’s offerings. In a report released in June, Datto said that MSPs were playing a critical role in helping SMBs adapt to work-from-home business models and accelerate their digital transformation efforts.
The company also found that opportunities in the cloud could help offset some of the challenges posed by the economic uncertainty caused by the pandemic.
A Datto with more cash in its pockets could prove a stronger competitor to tech vendors such as VMware and other channel players like ConnectWise and Kaseya.
Background: Datto was launched in 2007 by founder Austin McChord, who steered the company for 10 years through growth and international expansion until it was bought by Vista Equity. Weller took over the CEO spot in 2017.
The Buzz: “We believe SMBs will adopt technology faster than ever as the world emerges from this pandemic,” Weller wrote in a note as part of the SEC filing filed this week. “We expect MSPs will help them more than ever. Datto will be there as technology creator, thought leader and support partner as they deploy new applications; navigate technology on-premises, in public clouds and in hybrids of both; and continue to defend against proliferating security threats. Our journey forward is as a leader in an ecosystem comprised of global partners, employees and other vendors that created our success to date.”