Backup a second: Datto aiming to raise half a billion dollars in Oct 21 IPO

A new SEC filing has revealed that Datto aims to sell its shares for between $24 and $27 in an October 21 IPO, valuing the firm at up to $4.25bn if the shares are sold at the top price.

Datto filed for an IPO with the SEC in July. The firm provides cloud backup services to over one million small and medium sized businesses (SMBs) through more than 17,000 managed service provider (MSPs) partners. Of that 17,000, over 1,000 accounted for annual run-rate revenue (ARR) of $100,000 or more. 

With 22 million common stock shares on offer at the NYSE, Datto could pull in $521.7m net. It will use the proceeds to pay off debt. Funds controlled by its private equity sponsor, Vista Equity Partners, will own about 72.2 per cent of the stock if the offering proceeds as planned. Vista acquired Datto in 2017.

Datto graphic.

ARR at the end of 2019 was $474.4m and revenues were $506.7m with a net loss of $31.2m. That compares to revenues of $387.4m at the end of 2018 when there was a loss of $37.2m. As of June 30 this year, ARR was $506.7m, with six months of revenue totalling $249.1m.

Datto provides a suite of cloud-managed and turnkey products and security offerings, including business continuity, disaster recovery and SaaS protection, to its MSPs. It has said MSPs represent the future of IT management for SMBs and claimed they are increasingly adopting digital and cloud-based technologies.

It also said the SMB IT market represents a massive opportunity, with Gartner estimating global SMB IT spend in 2019 reaching $1.2 trillion and growing at a 4.6 per cent compound annual growth rate through 2023. Datto itself will grow by adding more MSP partners, encouraging them to get more SMB customers, and both cross-sell and upsell its product offerings.

To date, the company has claimed to have experienced only a minor disruption in operations from the COVID-19 pandemic, meaning lower sales bookings, and moderately slower ARR and subscription revenue growth. 

A side note: Datto’s CTO is Bob Petrocelli. He was a co-founder of GreenBytes, which Oracle bought for its desktop virtualization software and deduplication smarts in May 2014.