CEO Joe Payne On Code42’s March To The Public Markets

Joe-Payne-HeadshotCode42 has reset the bar in Minnesota between their massive $52.5m first round in 2012 and a fresh series B of $85m announced yesterday.

Both are local tech records in their own right and the latter a huge vote of confidence for a CEO who’s officially been at the job less than three months.

Not long ago, amid these two milestones, curiosity was piqued as Code42’s internal growing pains led to some external triage.

A decision to pullout of planned relocation, the quiet resignation of cofounder + CEO Matthew Dornquast and then a President/COO departure left many questioning whether something was fundamentally off with this north star of Minnesota tech.

Then came Joe Payne — an east coast tech executive who previously sold software Eloqua for almost a billion to Oracle in 2012, merely six months after taking it public.

“On an annual return basis, ELOQ was the most successful technology IPO in history,” Payne proudly proclaimes.   The CEO who “likes doing deals and is playing for the championship,” was blessed by the board in July to best serve the interests of Code42 during this middle mile of liquidy, the explicit end game for investors and controlling owners.

Here’s what Payne had to say about the $85m of capitalization and the future of Code42:

What is driving your growth?

Our enterprise revenue is growing 100% YoY with some of the best customers in the world. Data under management has grown 4,900% since 2012 to five exabytes, or 100,000 times the size of the US Netflix movie library for some perspective.  We have also aquired over 37,000 business customers globally, while 7 of top 10 technology companies in the world and 7 of 8 ivy-league schools turn to us for service.  That’s the level we’re on.


Because our ability to support the proliferation of Mac in the enterprise is unparalled.  Over and over again, we get involved after conventional solutions such as EMC, HP, and Symantec fall short.

We started as a consumer product originally, which became a real advantage through this consumerization of IT movement.  For example, 76% of our file restores are being done by the end user; that’s a lot different from backup in a traditional IT role.

Why raise $85m in capital?

The same things that attracted me to this company three months ago also got investors very excited:

There is a great core business that’s growing strong, but also a new area for expansion — the analysis and forensics against the data we are backing up is a treasure trove of information for the security team.  The content of the files that we store is becoming an asset.

What was the new valuation?

It was above the last round.

How will you spend it?

First off, our backers are investing into a growing business and they want us to reinvest behind that growth, so absolutely we will be spending it.

We’re going to continue pouring into the core business…and the new business opportunity in product development with engineering, sales, marketing and security leadership.

We’re not going to spend it all in one year…this is a round of funding that should get us in a position to go public, if we decide to.

How much do you intend to apply over the next year?

I’m not going to share exactly what our plans our for next year, but we’re going to invest tens of millions of dollars above what we spend this year.

What are your thoughts inside growth and/or outside acquisition moving forward?

If you look at my personal track record, I’m not a huge believe in acquisitions to grow a company our size because they are hard to integrate.

Could acquisitions be part of the plan? Certainly they could be, but we love our core business and don’t need to buy something to directly grow revenue, though we might acquire expertise…if we find the right technology partner in the right place, then a small tuck-in may make sense.

How do you see Crashplan fitting into the cybersecurity conversation outside of the internal threats?

We represent one more arrow in the quiver of the security team…we’re not the only or the biggest, but we are a tool for them to better understand their security posture.

I don’t think anyone else has the value that we have…the endpoint backup is a critical part of the security strategy.  The security team invests heavily in various protection mechanisms because and at the end of the day, they want to protect data above all else.  Well, we do that!

One thing we’re all aware of is that no matter how good the security strategy is, the risk for breach is at highest levels ever.

Will there be new products or how will you target the security side more intentionally?

We will be both enhancing the current platform there will be new products and new offerings that will be added to the suite.

Who is on the board right now and what are the new additions?

Ping Lee, Accel Partners.

Michael Gorman, SplitRock Partners

Harry Gruner, JMI Equity

Matthew Dornquast, cofounder and former CEO

Mike Stankey, Workday

Joe Payne, Code42

…and an open seat for a financial expert to lead our audit committee and help us prepare on our march to the public markets.

What does 2016 look like to you?

Growth, growth, growth. We’re adding people, customers, process…the only constant for us right now is change.

In terms of employees, what does that growth look like?

We’re going to be growing a ton of positions in Minneapolis, but we’ve become too big for just the Twin Cities. You’re going to see us adding offices in Silicon Valley, out East, and hiring aggressively elsewhere.

We’re going to meet the talent where the talent is and operate like the global company that we are.

Is there anything else you want to add?

Patting ourselves on the back for raising money isn’t what gets me going. We can breathe our own exhaust, or let the market and our smart investors validate us.  I’m about the latter.


Code42 Collects $85m In B Round

Q&A With Joe Payne, The New CEO of Code42

Where Did Dornquast Go? An Interview With Code42’s Interim CEO Mitch Coopet