Veeam Software Group GmbH, the market share leader in data resilience, today announced a new $2 billion investment from several top investment firms.
The Seattle-based company said its valuation now stands at $15 billion, which is about the same as the valuation of Commvault Systems Inc. and Rubrik Inc. combined. Investors in what the company calls an oversubscribed round are led by TPG, with participation from Temasek, Neuberger Berman Capital Solutions and others. Morgan Stanley managed the round.
Recently, I had an in-depth conversation with Veeam Chief Executive Officer Anand Eswaran and Chief Financial Officer Dustin Driggs about what enabled Veeam to reach this point in its evolution and, more importantly, where the company is going from here.
What the funding will enable
“We have huge ambitions of growth and profitability,” said Eswaran. “Having extremely well-capitalized investors will help us if we want to make some big moves. We can already make small, medium, and large moves ourselves because of the balance sheet and how profitable we are. But if we want to do something Earth-shattering, we have the investors who will be a key part of this process going forward with us.”
Previously, company insiders owned 100% of the Veeam. This round brings in diversified investors that “will be with us for the duration of the journey,” according to Eswaran.
He called the level of investment “great validation” because the firms conducted a “massive independent analysis” of the company before investing. Veeam’s financial results and market share growth, which have been steadily upward, demonstrate why the investors were eager to get on board. Eswaran cited four key reasons for Veeam’s growth and its attractiveness to outside investors:
- “It starts with our best-in-class product, the foundation of our No. 1 market share. No. 1 in scale, growth and profit.”
- “The strength of our ecosystem. 34,000-plus partners and the global scale and reach of more than 550,000 customers, including 77% of the Fortune 500, in 150-plus countries.”
- “Our balance of scale, growth and profitability is unique, not just in our category but across the software industry.”
- “We have a huge TAM [total addressable market]. But at the end of the day, I bet my life on the people I work with. The experience they bring to the table makes a huge difference.”
These concur with conversations I’ve had with customers, partners, resellers and the investment community. Backup and recovery is a well-established market, and the historical market leader is filled with legacy vendors such as Dell Technologies Inc. and Veritas Technologies LLC that brought little innovation, leaving the door open for a company such as Veeam to step in and take share.
The company was founded in 2006 and experienced slow and steady growth. It was wholly acquired by Insight for $5 billion in 2020. The next year, Eswaran joined Veeam as its CEO after successful tenures at RingCentral Inc. and Microsoft Corp. That coincided with Veeam adding several new products, including support for Office 365, AWS, Azure and Kubernetes through the acquisition of Kasten. Since then, the company has not looked back, and about a year ago passed Dell for top dog in backup and recovery, according to IDC, leading to this massive round of funding and high valuation.
Focus on ARR growth — and the enterprise
The Veeam leaders said they expect to finish 2024 with more than $1.7 billion in annualized recurring revenue, 29% EBITDA, rapidly expanding enterprise sales and 129% subscription net dollar retention from enterprise sales.
“Historically, we’ve focused on the mid-market, but over the last several years, the enterprise focus has been paying off, with more than half of our revenues coming in from the enterprise,” Eswaran said. “We have 2,200-plus customers spending more than $100,000 in ARR with us. We have over 80 customers spending a million dollars or more in ARR.”
CFO Driggs said the company’s rapid growth has been done economically. “We’re not incurring additional debt to fuel this growth,” he said. “We also generate significant free cash flow for the business. We’re funding the innovation that we need to continue to grow organically, off of our balance sheet, off of the free cash flow we’re generating. We have a super-healthy business model about the comps we see.”
Eswaran said it takes a different approach to succeed with enterprise customers than in the midmarket. “Companies fail because they try the same approach across their go-to-market for both ends, all customer segments, and that’s a failing proposition,” he said. “We’ve been very deliberate about preserving the strength and solidifying SMB and mid-market, as well as expanding and capturing more share now in enterprise and larger enterprise.”
Veeam has added more than 8,000 new customers in the last two years, according to Eswaran. The trend has been for installed-base customers to purchase multiple products from Veeam. “This multi-product go-to-market portion will be a very key part of how we land and expand. A large part of our revenues will come from expansion” with existing customers.
The importance of data resilience
As Veeam has evolved and expanded, the company has focused on providing its growing and diverse customer base with solutions that enable data resilience. “That’s what we stand for,” said Eswaran.
“For effective data resilience for every company, you need to think about it across this entire lifecycle, starting with ensuring you back up data correctly,” he said. “Then, you can recover instantly. Data is portable across technologies, platforms, everything you need to do on security, well beyond multifactor authentication and end-to-end encryption, and then the very specific use cases for AI, for data intelligence, which is critical. So, all this coming together will create the ultimate resilience posture for companies. And that’s why the entire company is grounded on our purpose, safeguarding the digital world with exceptional resilience and intelligence.”
BaaS is a major growth area
Historically, customers have used Veeam as a service managed and cloud service providers offer. Now, Veeam is focusing on delivering its own backup-as-a-service offering. “This is going to be the first full year of a first-party BaaS service with the new Veeam Data Cloud,” Eswaran said. “It will create the next wave of growth for us.”
Eswaran said the company is bullish on the capabilities of the Veeam Data Cloud. “With just one new workload — Azure, and the entire momentum around Microsoft 365 — we’re going to finish 2024 at $50 million in ARR from Veeam Data Cloud and BaaS and have set ambitious goals for 2025,” he said. “You can expect that every one of the workloads we protect will be offered on Veeam Data Cloud. In 2024, it was just two workloads, but we expect to exceed 10 workloads by the end of 2025, and then it will snowball and amplify and accelerate even more.”
With all Veeam has accomplished — and its potential for future growth — Eswaran’s pride in the organization and its people is crystal-clear. “When we can work with cities such as New Orleans and Fort Lauderdale that have been breached and get service back to the citizens quickly, those are the things that make this feel like a purpose, which our employees have really rallied around, of creating resilience in a digital-first world,” he said.
Financially, next on tap for Veeam is an initial public offering of stock. Although no timetable is set, it should have fleshed out its artificial intelligence story more when it goes public.
I’ve asked Veeam leadership, Eswaran included, about this in the past, and they’ve all echoed the same sentiment. Veeam holds massive customer data, and the company should be able to use AI to see what the naked eye can’t. This could be particularly valuable in the world of cyber, where, through the use of AI, Veeam could find malware that has yet to be discovered, anomalous data patterns could indicate unauthorized access or even malicious insider activity.
I’ve heard that data is the new gold in the AI era. If that’s true, and most industry watchers would agree, then the ability to protect, back up and recover that gold is equally valuable. Proof of that is a massive infusion of funding from many tier-one investment shops.
