How Datto's Austin McChord Brings IT Systems Back From the Brink of Destruction

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Austin McChord is the master of disaster. His data backup, recovery and business continuity company Datto defends customers around the globe against the threat of network catastrophe, safeguarding information everywhere it resides.

Datto’s Total Data Protection platform encompasses a suite of proprietary software and hardware alongside a 140-petabyte private cloud to store and restore data across a client’s physical and virtual servers as well as SaaS applications, promising near-instantaneous end-to-end recoverability if and when misfortune strikes.

“We can restore machines faster than anybody else on the market today,” says the 29-year-old McChord, Datto’s CEO. “Most people are looking at a matter of hours to bring back a failed server, whereas our average restore time is about six seconds, regardless of the server size or complexity. Being able to bring systems back right away is a really big deal, because time is money, especially in the technology industry.”

McChord founded Norwalk, Conn.-based Datto in 2007 after earning a degree in bioinformatics from the Rochester Institute of Technology in New York. “I had this idea around building a mass device that replicated data to servers in the cloud, and I thought I could build it cheaper than anything that was on the market,” McChord recalls. “My academic advisor said, ‘There’s no way you can be successful building a hardware company without a ton of startup money’ and ‘Good luck selling into the consumer market.’ That was all the motivation I needed to get started—to prove him wrong.”

McChord spent the summer writing code and building data backup appliances, later developing the framework for Datto’s signature Inverse Chain Technology, which converts customer data into a universal file format each time backup occurs. Because the most recent backup image is at the top of the chain, data is always available for immediate virtualization, on- and off-site.

“It’s a big technology differentiator that we have,” McChord says. “The way we store the backups is what enables us to do the fast restore, and we do it fundamentally different than anybody else.”

Datto’s first commercial product, the NAS on-premise backup unit, hit the market in early 2008, and coverage in tech blogs like Engadget helped the company land its first customers. The turning point was McChord’s decision to forgo direct sales in favor of partnering with managed service providers who resell and install Datto technology alongside other complementary IT offerings; thousands of international channel partners now market Datto products like the Siris enterprise business continuity family and the Alto small-business continuity solution.

A June 2015 partner conference further expanded the company’s catalog, introducing the Datto DNA Router, which offers remote configuration and 4G failover to protect data in transit, along with Backupify for Office 365 (a cloud-to-cloud backup service for Microsoft users) and file syncing and sharing capabilities delivered in collaboration with open-source enterprise software provider ownCloud.

Datto now serves more than 5 million clients worldwide. McChord declined to disclose pricing details but says customers purchase the physical on-premise devices and pay a recurring charge for cloud backup services. Those fees are responsible for the overwhelming majority of Datto’s annual income.

Datto generated close to $100 million in revenue in 2014 and is on pace to do “way over $100 million this year,” McChord says. General Catalyst Partners invested $25 million in growth capital in fall 2013, just months after McChord declined a $100 million buyout offer from an unnamed security firm.

McChord deliberated that bid for about a week before turning it down. “My ultimate goal is to build a big, meaningful, iconic technology company. That’s what drives me,” he says. “But it was a tough decision. At the time, I was a 100 percent shareholder of the business. My lawyer has the best quote out of the whole thing. He said, ‘Austin, you could regret this deal for the rest of your life—from the beach of your own private island.’”