Backupify Bought by Datto Amid Consolidation in Cloud Companies

The cloud is a good place to build data-storage startups—but it’s also a sector that’s seeing a lot of companies get snapped up or fall by the wayside.

Backupify, a six-year-old startup in Cambridge, MA, is getting acquired by Datto, a Connecticut-based data-protection company. The terms of the deal aren’t being disclosed, but the acquisition could be significant for the field.

Most of Backupify’s 70-odd employees will join Datto’s 350-person staff, according to the companies. The Cambridge data-backup startup will keep its office in Central Square, though CEO Rob May says his team may move to a new space soon. In his new role, May will run corporate and business development for Datto and its founder and CEO, Austin McChord.

The companies share a lead investor, General Catalyst Partners, which put $25 million into Datto last year; the Norwalk, CT, company has been around since 2007. Meanwhile, Backupify has raised $22 million from General Catalyst, Avalon Ventures, Symantec, and other investors.

May wouldn’t comment on Backupify’s financial outcome except to say, “My investors were very happy.”

The deal adds to a flurry of activity in storage-related startups this year. IBM bought Cloudant for its online database software. EMC recently acquired Spanning, one of Backupify’s competitors, in an effort to strengthen its offerings in cloud-data protection. And just this week, New Hampshire startup DataGravity raised a $50 million growth round to advance its “smart storage” products.

Some bigger news this month is that cloud-storage veteran Carbonite (NASDAQ: CARB) received a $400 million buyout offer from J2 Global (NASDAQ: JCOM), an Internet services company. Boston-based Carbonite also replaced its longtime CEO, David Friend, with IBM and HP veteran Mohamad Ali.

The genesis of the Datto-Backupify deal was a dinner meeting at Alden & Harlow in Harvard Square. May and McChord met there after being introduced by their mutual investor. They talked about possible partnerships, and it became apparent that the two companies were complementary enough to warrant an acquisition, McChord says. They brought the idea back to their investors, including General Catalyst’s Steve Herrod, the former CTO of VMware. Apparently the discussions went well.

McChord says of Backupify, “We’re not competitors at all. I’m not sure you could find a single other backup company that’s as non-competitive. We protect systems, and they protect [software as a service] applications.” In addition, Datto targets small and medium-size businesses as customers, while Backupify evolved in recent years to go after bigger companies that use apps like

“I didn’t want to be bought by an old-school tech company,” May says, adding that Backupify turned down acquisition offers before. “Austin and I clicked, and we saw the same future for our stuff.” (I had previously speculated that Backupify might be acquired by a big company like EMC, IBM, or Symantec.)

The goal now is to build what the companies call a “total data protection” product—software that backs up and recovers business data across the cloud, on-premise systems, and business apps. On a technical note, Backupify’s data service will move off of Amazon Web Services and onto Datto’s private cloud system, McChord says.

Datto still faces plenty of competition from the usual players, including EMC/Mozy, Symantec, Box, and Carbonite. But the company has proven itself so far, growing to $48 million in revenue last year and being profitable for a few years, McChord says. Not bad for a business that McChord says he started on credit-card debt and might be the “biggest data-protection company you’ve never heard of.”

For his part, May started Backupify in Louisville, KY, and moved it to Boston in 2010. The company evolved from helping consumers back up e-mail and social media to targeting Google Apps business users. Then it moved up-market to tackle data backup and recovery for enterprise customers. As of last summer, May told me Backupify was pushing $10 million in annual revenue. His vision was to create a “data protection layer” for the Web. That hasn’t changed, but now he’ll be pursuing it with a bigger company.

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