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Actifio CEO: We’re a “Sleeper Company” Worth $500M in Enterprise IT Market

March 7, 2013

Actifio might be the Boston tech scene’s greatest paradox.

The Waltham, MA-based data management startup just raised $50 million in venture capital(it has raised $107.5 million total) at a valuation of around $500 million. It is one of the fastest-growing software companies in town, with just over 200 employees worldwide (80-plus in Waltham).

Yet, founder and CEO Ash Ashutosh says his company is “a drop in the big ocean of where we need to go.”

That’s not false modesty. Despite its lofty financing—Actifio is, by my count, the most heavily VC-funded tech company in Boston after Wayfair, Jumptap, and—the firm is still in its early days of landing customers and gaining attention in the IT industry. And make no mistake: this one will be a smoking crater if it fails.

Actifio got started in 2009 with the idea of applying virtualization technology to data management—separating data backup and protection from the storage infrastructure. The goal is to make big companies’ lives easier by providing one software system to manage all copies of business data so it’s all easy and fast to access. A retail store, for example, can analyze sales from last month, or last year, very quickly by having all its data across different applications in one place.

As Ashutosh (pictured at left) frames it, all companies need to protect, analyze, and share their data. Traditionally, there are multiple copies of data for the software tools associated with these needs (and others, like testing and development). So that’s the wedge the company has been using to enter the market. “We replace backup software,” he says. “When we walk in, you don’t need it anymore.”

But once a customer buys Actifio for backup or disaster recovery, he says, it realizes it can use the software across its whole IT infrastructure to unify its data management. And that’s the big opportunity here—the $44 billion “copy data” storage market, according to analyst firm IDC.

By contrast, Actifio had only $17 million in sales bookings last year—and that was an eight-fold increase over the previous year. Which is why Ashutosh is telling everyone to keep their pants on. “We are still a small player in a gigantic market. It’s not like we’ve suddenly become a big competitor,” he says.

Some of that might be posturing. Because if you want to disrupt an industry (in theClay Christensen sense), you don’t start by getting lots of attention from big incumbents, like EMC in this case.

Instead you lay low, pick up customers at the lower end of the market, and build up until you have enough strength not to be crushed or bought out by a bigger player. That would seem to be Actifio’s route. Ashutosh even calls it a “sleeper company” that has been “quietly built in a market that’s non-obvious.”

So what’s the main challenge now? The same as for any emerging enterprise IT company, he says: “It’s how many people we can touch.” And how to make the sales and support process more efficient; selling can still take anywhere from two weeks to nine months. Actifio modified its pricing at the start of this year, and it’s moving toward more of a subscription model, he says.

One issue that has come up often: convincing big customers that Actifio will survive as an independent company and not be acquired anytime soon (in which case there would be questions about product support). Ashutosh says the startup’s latest fundraising and valuation should quell those fears.

Its longer-term strategy is to prepare to file for an IPO in the next 18 months or so. “The enterprise space is all about being a public company,” he says. And for Actifio, “it’s all about being ready.” (Though in some cases nothing says, “We’d like to be acquired” more than talking up an IPO.)

Meantime, the company is selling in 16 countries, including Australia, the U.K., Germany, Japan, South Korea, and parts of the Middle East. (The U.S. accounts for just over half its revenue.) Interestingly, Actifio is not trying to sell in China or India yet. “We can only grow so much,” Ashutosh says. The firm has worked out its own model for expanding to new regions with small sales and support teams, he says.

Actifio now has a couple hundred customers including Boston University, Audax Group, and NaviSite (part of Time Warner Cable). That number will need to grow a lot over the coming years, but for now, Ashutosh is emphasizing quality over quantity.

“It’s not about signing up 5,000 customers,” he says. “It’s about making the next one happy.”

And what kind of revenues would make Ashutosh happy, in such a big market? “All I have to do is get to $100 million,” he says.

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