Minneapolis data backup company Code42 had been making waves for years with the success of CrashPlan well before they raised a first funding round of $52.5m. Yet from that moment forward, it became crystal clear to the rest of the world that Code42 was headed to the next level.
Fast forward a few years to the surprise of many that cofounder Matthew Dornquast had suddenly stepped down as CEO. ‘The real story will be my replacement, the next CEO,’ he had said at the time.
And find a replacement they did, with the announcement of CEO Joe Payne yesterday. Payne is a serial SaaS executive with an extensive resume of enterprise software experience. Above all, his rise at B2B marketing automation firm Eloqua speaks for itself: he joined in 2007, and over the next six years, grew from $11m to $125m in revenue, completed a $92m public offering ($11.50/share) and sold to Oracle for $871m ($23.50/share) six months later.
“On an annual return basis, ELOQ is the most successful technology IPO in history,” reads Payne’s LinkedIn Profile. We connected with the new CEO to learn more about Code42’s next chapter:
Based on your professional experience and track record, you could do a lot of things with your life. Why Code42?
I’ve spent the last two years on four different software as a service boards, from a $4m to $1.2b company and in-between. This has given me a chance to meet a lot of great people and consider a variety of opportunities.
I believe that the growth opportunity at Code42 is truly unique and maybe even somewhat underappreciated. Normally, a software company is thrilled to be growing 40-50%+ YoY, and at Code42, the enterprise business side for endpoint protection business is growing over 100% per year.
Then when I looked at who is buying the product…Expedia, Target, Lockheed Martin, etc. — these are some of the best brands in the world.
The backup data we have, in and of itself, is a really good asset. By applying some forensic tools we can get a much better idea of what’s happening on the perimeter and inside the network. And that’s a very interesting market to get into.
The people involved include a world-class set of investors and a really hard working employee base. The people here are committed to working here long term and less transient than the Bay Area or another tech market.
The way I run a company, with a heavy emphasis on culture and customer orientation, that plays much better in a market like Minneapolis.
All that adds up for me to be really happy to be here.
OK, to make sure we’re on the same page, when you say 100% growth, what measurement are you referring to?
And what does the next stage of growth look like to you?
We’re really going to emphasize the enterprise market and focus on that. It’s a great place to sell to because when those customers invest in you, they can buy more product, they can co-develop, etc. The business relationships in the enterprise space are very satisfying, I love that.
You can expect a lot of investment from us into that side of the market.
I think this business has the potential in just a few years to be a $100+ million dollar business from a revenue standpoint. The worlds best software companies ultimately do go public, so I think someday there’s an opportunity for that if we execute well. I should point out that I don’t consider that to be the goal, it’s just a stop along the destination.
I just took a company public and the thing is, you wake up the next day and you’re still serving customers. Being public can be a measuring stick for that.
Lots of empasis on security coming from Code42 as of late, can you elaborate on the company’s direction?
Once you have and store all the endpoint data in one location, there’s a lot you can do to understand the security posture by leveraging data.
When we do that, we open up to a whole new buyer, the CISO. That’s going to require new messaging and techniques, but it’s a huge opportunity for us in the future. The CISO is under siege out there, they are all looking for tools to improve their security. That’s what you’re hearing.
In line with that, are you planning any new product releases or acquisitions?
New products, yes, but not sure about acquisitions? I just got here six hours ago and didn’t bring any acquisition ideas with me, although it’s possible we could pickup some security products aligned with what we do. We are certainly developing internal expertise and new products.
What’s the biggest challenge or uncertaintly regarding the future of Code42 and your vision?
Anytime your in a market and killing it, there’s risk in going into a new market. We’re not abandoning our old market, but we’ve got a new one to figure out now. On a personal level, the hardest part is going to be learning and remembering everone’s name.
With respect to your previous experiences, what would you say is most relevant to Code42 as a company?
It’s about leading a team in an emerging market to realize growth. If you look back at Eloqua, the revenue before I started there in 2007 was $11m. When I left in 2013, we did $125m. That kind of growth is really challenging for any organization. There’s constant change because what worked yesterday doesn’t work tomorrow. That culture of embracing customers and change, it can be a ton of fun.
The big parrallel will be in the emergence of a new market and rapid growth. Along the way, we’ll have to raise money and maybe we’ll go public someday, but that’s all part of the journey.
What is Mitch Coopet’s role/title moving forward and will the company be seeking a replacement for the departed COO Brian Bell?
Mitch will continue as the CTO. He was the lead recruiter and safe to say that because he brought me here, we already have a great relationship. He’ll be leading up the security side of things.
We’re not replacing the COO. I’m an operationally oriented person, I like to manage sales, engineering, product, finance — and so I won’t be hiring a replacement COO.
On that note, do you have intentions of bringing in new executive management from outside?
I don’t have any plans to do that. At my last company, Eloqua, I didn’t bring in a single person that I had worked with before. It’s not really my style, although I am going to be hiring a new CFO that I’m currently looking for right now. Will that come from my network? Not necessarily because I want the best person for this company, regardless of the source. In a growth company, if you’re doing the job right, there’s constantly new expertise coming on board.
It says on your LinkedIn profile that Eloqua was the most successful technology IPO in history, based on annual return to shareholders (IRR from IPO to Oracle acquisition). Do you want to top that with Code42?
I would love to! If you’re best in the world at something, no-one can take it away from you. That was based on research from Morgan Stanley who said that during our seven months being public we had the highest IRR.
We went public on a Thursday and literally on Monday Oracle called us. I thought really? We just got $100m so why sell? They kept knocking and eventually we had an offer that excited our shareholders.
Good companies are bought, not sold. As long as I’m CEO, you’re not going to see us hang up a sale sign or hire a banker. Someone may come along and make an irresistible offer, but really I’m focused on aquiring new customers and serving all of them well.
What motivates and inspires you?
It’s been interesting for me to just be a board member for the past two years and what I’ve missed is really solving problems. I love working with teams to solve problems, there’s nothing more satisfying for me.
I like doing deals and what we’re playing for now is the championship, we want to win together. We’re not playing for anything less.
And if you weren’t running a software company what might you be doing?
I enjoy playing basketball — I’m a huge sports fan, especially Duke. And when I’m not working I enjoy my family and traveling with them.
You currently reside in the Washington DC area, are you staying there or moving to Minnesota?
I’m staying here, we’re too entrenched as a family. My last four jobs I’ve been a commuting CEO…I’ll be in Minneapolis quite a bit.
Is there anything else you’d like to add?
If you’re among the best and brightest in Minneapolis and you want a great home, it’s going to be very exciting over here for the next phase.