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Veeam Software bought by private equity firm at $5B valuation

Veeam is under new ownership. Insight Partners acquired the data protection company for an undisclosed sum. With the acquisition comes a modified leadership team.

One year after investing $500 million in Veeam Software, venture capital and private equity firm Insight Partners acquired the backup vendor at a valuation of $5 billion.

Insight and Veeam executives said the new ownership team will seek to increase Veeam's business in the United States. The deal represents an end of an era as Veeam's founders Ratmir Timashev and Andrei Baronov will step down from the company.

William LargentWilliam Largent

As a result of the acquisition, Veeam Software will become a U.S. company with a U.S.-based leadership team. William Largent, formerly an executive vice president, returned to the role of CEO today, replacing Baronov. Timashev, a former Veeam CEO, will leave his executive vice president position.

Insight did not disclose terms of the deal beyond its valuation of Veeam at $5 billion. Veeam executives expect the deal to close in March.

Baronov and Timashev are voluntarily stepping down, said newly appointed CTO Danny Allan, who previously served as Veeam's vice president of product strategy.

Danny AllanDanny Allan

"They really are excited about this next step in the journey," Allan said of the founders. "So for them it's not stepping away, it's perhaps letting it go with more freedom to achieve the potential they think is possible for the company."

In an email to customers today, Largent wrote there would be no change in the day-to-day operations of Veeam despite the ownership change. Largent called the ownership change part of "Act II" of Veeam's history as it moves from data center to hybrid cloud data protection.

"This marks a huge milestone in Veeam's history and will help fuel our progression through Act II -- the hybrid cloud -- as we look to expand into new markets and continue our growth trajectory," Largent wrote.

Customer increase eyed in move to U.S.

Allan called the acquisition a "growth opportunity." He said Veeam's roadmap of hybrid cloud and cloud data management will look similar, but the acquisition will help it grow faster.

About half of Veeam's revenue comes from Europe, with 35% from the Americas and 15% from the rest of the world. With headquarters in Switzerland, Veeam Software was geographically in a good position to stand out in the European market. However, those revenue figures mark an inverse of a typical revenue line in the data protection market, where 50% traditionally comes from the Americas, Allan said.

Veeam sees an opportunity to grow in the United States, in such areas as the enterprise and the federal government. With major cloud providers based in the U.S., having a base there will also help Veeam's cloud initiatives, Allan said.

"We see Veeam as a tremendous opportunity to take what has been a market-dominant business in Europe and replicate that in the U.S.," said Mike Triplett, managing director at Insight and a Veeam board member.

Veeam has not picked a location for the headquarters yet, but Allan said the company has major facilities in Columbus, Ohio, and Atlanta. Veeam has 1,200 employees in the United States and plans to add to that number, Allan said.

Veeam claims 365,000 customers and 4,200 employees worldwide.

Privately held Veeam claims it broke $1 billion in annual bookings revenue in 2019. Triplett said the company is profitable, a claim its owners have made for years.

Triplett said Veeam is also a candidate to go public, pointing out it is already five to six times larger than the average company that completes an initial public offering today.

Phil Goodwin, research director of cloud data management for protection at IDC, said he was a little surprised by the transaction, as he had expected Veeam to be doing the acquiring. However, it's a benefit for Baronov and Timashev, as they get to cash out on the investment they have made. And Veeam gets both a greater level of capital to make more acquisitions and a U.S. corporate structure that will enable further customer options, including enterprise business.

"In terms of gaining market share, they have a lot of opportunity in North America," Goodwin said.

Timashev has said recently that Veeam Software is looking at acquiring companies itself. Last year, though, Veeam sold back one of its acquisitions, Amazon Web Services data protection provider N2WS, to that company's original founders. Timashev at the time declined to comment on a report that the U.S. government's interest was heightened because it is an N2WS customer and both of Veeam's founders are Russian.

Allan denied that Veeam received any pressure from the U.S. government to sell off N2WS. He said Veeam leadership decided that it would be simpler to design its own products in that area, and has since released its Backup for Amazon Web Services in December, with Backup for Microsoft Azure to come this quarter.

Allan also said that there was no pressure from the U.S. government to become a U.S.-based company.

Firm to provide 'Insight' in growth

In January 2019, Insight Partners -- at the time called Insight Venture Partners -- made its half-billion dollar investment in Veeam Software. Insight first became a Veeam minority investor in 2013 with a smaller undisclosed investment.

Veeam's milestone last year of $1 billion in annual sales and its transition to a subscription-based business were both major incentives for Insight, Allan said. He noted that one of Insight's areas of expertise is helping software companies transition to the subscription model, and the sale will provide Veeam with greater visibility and opportunities.

"It was a natural progression as we go from where we are today to where they believe the company can go in the future," Allan said.

It was a natural progression as we go from where we are today to where they believe the company can go in the future.
Danny AllanCTO, Veeam Software

Triplett said Insight can help bridge the divide between Europe and the United States.

"The team's done a remarkable job being dominant in Europe," Triplett said. "Now we want to dominate in the U.S."

Triplett said Insight will help bolster Veeam's sales and marketing as well as research and development teams.

Insight has over $20 billion of assets under management and has invested in more than 300 companies worldwide. It had investments in other data protection vendors such as Unitrends, which is now owned by Kaseya. Triplett, though, called Veeam its only standalone backup and disaster recovery software company now.

It's a 'cloud, cloud, cloud' world

When asked what's next product-wise for Veeam, Allan said "cloud, cloud, cloud." That push includes infrastructure as a service, containers and software as a service.

Version 10 of Veeam's flagship Availability Suite, set to launch this quarter, will expand on the product's recently added Cloud Tier feature. Allan said Cloud Tier has already helped Veeam customers move "many petabytes" of data into the public cloud. Veeam 10 adds the ability to immediately copy data into the cloud and features immutability.

Goodwin said "cloud data management" can be a nebulous term for customers.

"I think Veeam needs to very clearly articulate exactly what capabilities they're providing in hybrid cloud [and] cloud data management," Goodwin said.

On the business side, Goodwin said he does not expect major issues.

"I think it's really business as usual because of the stability that people like Bill Largent bring to the table," Goodwin said.

Largent has been with Veeam Software since its founding in 2006, and held the CEO role from 2016 to 2017 before moving into another management position. He also worked with Veeam's founders at Aelita Software, which they sold to Quest Software in 2004.

"It was a logical placement for him to take the helm," Allan said. "This is about the most seamless transition that you can choose because he has such a history with the company."

Long-term, Goodwin expects Veeam to make acquisitions. Allan said Veeam is still looking, cautiously -- the company doesn't want technology that overlaps, as integrating platforms is difficult.

Veeam is also planning to add a chief information security officer, Allan said.

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