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Entrepreneur invents his own path

Austin McChord has built Datto into a $100 million company, with some 60 of its 550 staffers here. (Photo by Kimberly McKinzie)

Sometimes it does not take an MBA degree, a business plan or even real office space to start a global, profitable and high-growth business.

For Austin McChord all it took was the desire to meet a challenge, patience and dedication, and often brute force, to start his firm, Datto Inc.

I’m not somebody that’s afraid to go into something blind,” says McChord, founder and CEO of Datto. “Sometimes when you look at it without the benefit of all of this past learning you find a new route forward. In Datto’s history we’ve done that in a bunch of cases … we do things a little differently and those have become assets to us in running the company.”

By age 30 McChord has created a company with more than $100 million in revenue and has given small to midsize businesses the same backup opportunities as Fortune 100 companies.

Datto has more than 550 employees including roughly 60 people at Rochester Institute of Technology’s Center for Urban Entrepreneurship on Franklin Street. Next year the firm plans to expand to another location in Rochester to accommodate growth. McChord anticipates Datto’s Rochester office will double its staff in 2016.

McChord opened the Rochester office last September, starting with fewer than 10 employees as part of Start-Up NY, which allows companies to have access to top talent in the region as well as at universities, to connect with a national and global infrastructure, and to pay no taxes for 10 years.

The Rochester-based team focuses on providing tech support.

In eight years, Datto has brought data backup to the forefront as a necessity for any size business. Datto focuses on providing backup, disaster recovery and hybrid cloud business continuity for small to midsize businesses.

This year McChord was named to the Forbes “30 under 30” list as one of the up and coming entrepreneurs in the tech world.

He is a native of Norfolk, Conn., where Datto has its headquarters.

It’s kind of ironic; growing up with Austin, everyone always told him and our family (that) Austin is going to invent something or he’s going to run his own company,” says Ian McChord, brother of the founder and Datto’s vice president of product management. “And turns out he did both. He’s always been a tinkerer. He absolutely loves taking things apart; he loves to understand how things work.”

As a youth, Austin McChord knew he wanted to make his mark.

“If you had asked me what did I want to do as a career I would have definitely told you I wanted to be an inventor, and I think that I’m pretty lucky because that’s kind of come true now,” he says. “Being an entrepreneur today is about as close that you can come to being an inventor.

“I was the kid that asked for a screwdriver set for Christmas,” he adds.

McChord has built his company around the idea small businesses need backup as much as large firms—no business can be down these days. That thinking has paid off.

Last year the firm grossed nearly $100 million in revenue and acquired Backup-ify Inc.—an Internet backup provider based in Boston. Datto is profitable.

In 2015 in a Series B funding round led by Technology Crossover Ventures, Datto raised $75 million. Two years ago General Catalyst Partners invested $25 million in the company, officials say.

Rochester site
Having a footprint in Rochester shows McChord’s dedication to the city’s future, his brother says.

“He loves Rochester and he is extremely excited about having a strong presence there,” says Ian McChord. “He really loved his time at RIT, and it was just the first place that he wanted to come back to. He sees a lot of talent not being utilized, and a lot of companies went the other direction on Rochester and he’s happy to come in and pick up where they left off.”

Datto’s other offices are based in Boston; Monroe, Conn.; Toronto; London; and Sydney.

McChord moved to Rochester in 2003 to start college at Rochester Institute of Technology. He was originally an electrical engineering major before switching to bioinformatics after his freshman year. The move to bioinformatics came from a disappointing realization from taking a digital systems class.

“I went home and I built a calculator out of the individual low-level chips that you would need to do that,” McChord says. “And that was a fun project for me and I showed it to the professor, and the professor told me well, this would make a great senior project. And that was like the single most de-motivating thing anybody has ever told me.

“That was so sad because it was something that I had already done, and if that was the expected outcome of what I was supposed to do by the time I was a senior I was clearly doing the wrong thing.”

The bioinformatics major moved at a pace more like McChord himself.

“The director of the program told me that everything that I learn in my first two years as a bioinformatics major won’t really be relevant because it will have changed by the end of the second two years of the major,” McChord says. “That was really exciting to me because it was a chance to do something new, whereas when you think about electrical engineering, unless you’re dealing with the really small or the really large it’s kind of solved—there’s a set way of doing things.”

McChord finished his degree at a community college because of switching his major. By the summer of 2007 he had decided to start his own company.

“I thought I would do some project or something and see if that works and if not I’ll have something else on my resume that will look a lot better than just a GPA,” he says.  “I decided to start Datto and originally had the idea that I could store data cheaper…it was a universal need.”

A professor’s dire assessment of his plan served as the right motivation, he says.

“(He said) ‘you have no chance of being successful here as a hardware company without tons of funding and resources,’ ” McChord says. “So that actually gave me the motivation to go do it and prove him wrong. Sometimes you look at those things in life and you say that was the perfect advice at that time. It energized me to go the other way and make it happen.”

He completed the first product by February 2008 and figured his hard work would be noticed.

But nothing happened.
“Getting the story out was tough,” he says. “I created a website, added an online store, put it up on the Internet and of course absolutely nothing happened. So then I was like, ‘oh, I know the secret is I have to get this listed on Amazon. And so went through the process there, got the product listed on Amazon and also: zero orders.”

Not succumbing to his disappointment, he set out to create some hype himself.

“I decided that I was going to bug the tech press that was out there,” McChord says. “So I pretty much emailed Engadget (tech magazine) every day for a month and eventually at the end of the month they were like, ‘look if you promise never to email us again we will review and write about your product.’ So that was the deal and they did write about the product.”

The Engadget review helped Datto get its first 15 orders. The company began by directly selling its products to consumers—a method that became unsustainable by mid-2009.

McChord had racked up $80,000 in credit card debt and was a month away from going out of business before he decided to switch to selling his products via a channel program. He would rely on managed service providers to help his products reach customers.

“It probably was going to fold in the next month or so,” he says. The channel program “was bit of a last ditch Hail Mary, but it worked and what it did is it gave us enormous clarity of market.”

The change worked and Datto began to gain momentum.

“Our company got into this really great feedback loop of listening to our managed service providers and building great product that really met the needs,” McChord says. “They’d be like ‘we love your product but we wish it would do x or y or z,’ so we’d keep going and we’d keep pushing on that. That’s what really has allowed us to just grow explosively.”

The managed service providers helped the firm gain the credibility it needed.

“When we were very small, they carried the trust burden for us,” McChord says.

When the future of the company was uncertain, McChord often turned to his staff for motivation.

“I think it’s just a journey and you have good days and bad. I think that if anything I’ve been really fortunate that the team that works with me is as dedicated, or more, than I am,” he says. “And so on those bad days what’s incredibly energizing is to see the other people that are so committed to the goal, and that energy from the team has really been essential in me being able to get through all the challenges that come with running the company.”

As a leader, McChord is accessible, says Michael Fass, Datto’s general counsel.

“(He is) hands on,” Fass says. “He likes to understand as much detail as he can. He’s always asking about the why and is very focused on the customer. He’s approachable and fun to work with.”

Industry impact
Early on Datto competed with Zenith Infotech, a firm that was driven out of business in 2014. Zenith was a leader in the backup industry, creating a product called a BDR that took over for a small business server when it failed.

Datto was able to improve upon the product and sell it at a better price, McChord says.

“We adjusted our product to go from just backup to go to this business continuity and to build a better BDR-like product,” he says. “We ended up putting them out of business, which is kind of crazy. But we were able to build a better mousetrap and ship them and make the whole thing happen faster than they could.

“It’s crazy the effect that we had on the industry. We came into the BDR market with very low pricing and I think that Zenith lowered their pricing to try to compete with us, and they lowered it to a point where it was unsustainable for them.”

Datto always has focused on running efficiently, McChord says.

“We had started at that pricing because we didn’t take any real cost into account, because originally when we set it we were in the basement. But then (we) just worked really hard to run a lean company and be super smart about how we spend our dollars and be very efficient,” he says. “And (we) managed to build the business from the ground up that could be profitable at that price point.”

An MBA would not necessarily help him, McChord says. The risks have been worth it.

“It cuts both ways and so it’s tough because you think I probably wouldn’t have taken a lot of the risks that I took if I had a business degree and understood everything,” he says. “But at the same time, if I didn’t take those risks it’s unlikely I would be as successful as I am now. It’s like if I knew how difficult and stressful starting a company was I’m not sure I ever would have started one.”

McChord turned down a $100 million deal to sell the company to an undisclosed security firm in 2013.

“When we met him he had already turned down an offer to sell the business,” says Paul Sagan, former CEO of Akamai Technologies Inc. and investor and non-executive chairman of Datto. “(He) could have retired in his 20s, and he decided that he really thought that there was so much more potential to build a great company and to serve so many more customers and in doing so create many more jobs in Rochester and Norwalk.

“It’s just been really successful and he thrives on that and he thrives on being challenged. He likes people to challenge ideas and to challenge the conventional wisdom.”

McChord feels Datto is capable of achieving much more than that, he says.

“The way that I look at it is, I’m here and committed as long as it’s still fun, and I love coming to work every day,” McChord says. “We challenge new problems, we’re building new things—and as we get bigger it means that we can be more aggressive and really go after all kinds of stuff that we had never really thought about before.

“I’m energized to come to work and I think that if ever it changed and I didn’t feel that way then I wouldn’t be the right person to run the company. But as long as I feel that way I think I am the right person to run the company and I’m excited about its future.”

One thing about companies that is a constant difficulty is keeping the spark of a startup intact.

“(The challenge is) making sure that we keep the same spirit that we had when we were 10-20 people,” McChord says. “It really does take work and investment to keep the business special as it continues to grow, so that’s something that I definitely think about; it’s one of the things that keep me up at night.”

Still a tinkerer
When he is not working, he is still tinkering. The Norfolk, Conn., resident always is working on a project. He also enjoys skiing, traveling and spending time disconnected from technology.

“I like to travel and (to get) outdoors and outside of cell service range,” he says. “There’s always something that I’m working on; I’ve got a bunch of projects in the garage.”

Rochester has something special right in its center city, Sagan says.

“(Rochester) should embrace Austin and people like him,” Sagan said. “The best way to get a second company like Datto there is to treat the first one well. I know the economy there flew high for a long time with a lot of other iconic companies, and then they didn’t have the next act as the time was up for some of those companies.

“Datto represents this next generation and a whole new opportunity and I think making Datto successful will make it obvious that other people should do the same thing.”

Today, McChord cannot believe the success the company has achieved in the past few years. He wants the company to reach its full potential.

“I think that a lot of it (is) you don’t necessarily need the experience; you just need to roll up your sleeves and do it,” McChord says. “That’s the big piece of advice that I give to lots of entrepreneurs is really just don’t overthink it. If you really are super passionate about it, just jump in and make it happen. 

“In Datto’s early days we never really had a business plan or went through a whole bunch of stuff with investment; we just figured it out and said we’re going to make this happen. We just did it through brute force, and it is possible,” he adds.

Austin McChord
Title: CEO and founder
Age: 30
Education: B.S. in bioinformatics, Rochester Institute of Technology, 2007
Residence: Norwalk, Conn.
Hobbies: Drones, robotics, travel, photography, skiing
Quote: “I’m not somebody that’s afraid to go into something blind. …Sometimes when you look at it without the benefit of all of this past learning you find a new route forward. In Datto’s history we’ve done that in a bunch of cases, and we do things a little differently, and those have become assets to us in running the company.”

1/4/2016 (c) 2016 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email rbj@rbj.net.


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