Egnyte, a cloud-storage startup serving business customers, has raised a $75 million round of new funding with Goldman Sachs as the sole investor. It's actually the first new money Egnyte has taken in since 2013, when it raised $29.5 million from ...and more »
Egnyte, a cloud-storage startup serving business customers, has raised a $75 million round of new funding with Goldman Sachs as the sole investor.
It's actually the first new money Egnyte has taken in since 2013, when it raised $29.5 million from investors including Google Ventures (now known as GV) and Kleiner Perkins. All told, including the new influx of capital, Egnyte has raised $137.5 million.
CEO Vineet Jain tells Business Insider that the money wasn't a must-have — the 11-year-old company, which has 450 employees and 14,000 businesses as customers, has been cash-flow positive for about two years.
But as Egnyte's ambitions grow, he says, the company needs more "fuel for the fire" to hire, invest in research and development, and expand. Jain won't disclose the company's valuation but says it's a significant up-round from 2013.
Jain characterizes the company's momentum to date as a matter of slow and steady focus on the business. He's been loath to go after too much money too fast because he hasn't wanted Egnyte to get swept up in the relentless drive for growth that characterizes many buzzed-about startups.
"We haven't tried to swim with the tide, in terms of going after top-line growth at any cost," Jain says.
Instead, Jain says, the company has found its sweet spot in selling to midsize companies — companies that may have outgrown consumer solutions like Dropbox but don't necessarily need heavy-duty enterprise solutions for storing their data from the likes of Microsoft, IBM, or Citrix.
"We're not going to go after the big, blue whales," Jain says.
Microsoft is a frenemy
Egnyte's product, which can help secure stored files so only certain employees and organizations can view them, also integrates with those products, Jain points out — meaning that even when customers are using cloud storage from other companies, they're still Egnyte customers. Plus, Egnyte integrates with other cloud software, including from vendors such as SAP and Salesforce, extending its reach even further, Jain says.
Egnyte CFO Steve Sutter says the broader product portfolio has helped it reach new customers. He notes that Dropbox averaged some $111 in revenue per user at the time it went public; Sutter won't go into specifics but says Egnyte sees significantly more than that because it has at least one service the IT department wants for every employee.
Those integrations, however, come with a certain cost: It means that in a lot of ways Egnyte is hitching its wagon to those of its rivals. And few rivals to Egnyte loom as large as Microsoft.
"Microsoft, like a lot of other vendors, can be thought of as a frenemy," Jain says.
Microsoft CEO Satya Nadella.APHe praises Microsoft for helping open new opportunities for Egnyte. Some customers use Egnyte to secure data in the Microsoft Azure cloud. Microsoft may bring Egnyte into such deals directly, in a process called co-selling. As interest in Microsoft's cloud has grown, Jain says, so too has Egnyte's business. In that sense, Microsoft is a friend.
But Microsoft is just as much an enemy, Jain says, given that its OneDrive cloud-storage product is included with the Office 365 subscription suite. While Egnyte does integrate with OneDrive, Jain says some customers never believe they need more than what's included in the cost of their Office subscription. And given that Microsoft isn't likely to discontinue OneDrive anytime soon, Jain says Egnyte had to adjust to this reality.
"Microsoft is, and will remain, a frenemy for a long time," Jain says.
No rush to go public
Going forward, Jain says that the prospect of an initial public offering is "very attractive" but not in the cards in the short term — contradicting comments he made last year about aiming for a 2019 IPO.
Jain wants his employees to be able to cash out their shares in the company. But with the new investment, and the fact the company is cash-flow positive, he says he doesn't feel any pressure to move fast.
At the same time, though, he says Egnyte won't be raising more money anytime soon. "This is probably the last round of money we need to raise," Jain says.
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