Veeam CEO On Latest $2B Funding Round, Cohesity-Veritas Merger, Rubrik IPO And Data Resilience

‘It’s a good time in our company’s life to diversify our investors and bring some blue chips in. An IPO will be a milestone in our company’s journey. Having more diversified blue-chip investors who will be with us for the long term, not just for a specific milestone or a specific exit, is actually a very important thing,’ says Veeam CEO Anand Eswaran.

2024 has been a pivotal year for the data protection and data resiliency industry.

First, February saw Cohesity’s move to acquire much larger rival Veritas in a move that would create a $7-billion data protection business and vault it to the number one position in the market. That move was significant enough to cause Cohesity to delay its IPO for a year or more.

Then in April, rival Rubrik completed its IPO, boosting its funds by $752 million and becoming the first data protection and cybersecurity vendor to complete an IPO in two years.

Veeam this month followed its rivals’ blockbuster financial moves with one of its own. San Francisco-based TPG Capital Wednesday led a $2-billion secondary offering in Veeam which values Veeam at $15 billion, making this one of the largest, if not the largest, investments in the data protection and data resilience market.

CEO Anand Eswaran told CRN in an exclusive meeting that Veeam, which is already profitable and is expected to generate nearly $500 million in cash this year, doesn’t really need the new capital infusion.

“Veeam is a very profitable company,” Eswaran said. “We have 29-percent EBITDA, and generated almost half a billion dollars in cash in 2024. We have $1.7 billion-plus in ARR, so we are extremely profitable. And we have been over the rule of 40 for a long time even as we’ve transformed. So obviously, when we took this investment, it wasn't because we needed to raise money.”

Instead, Eswaran said, the funding will help Veeam someday do its own IPO. “[And] it’s important to have such investors in case we want to do something transformative, not just a large M&A, but massively transformative,” he said. “Having well-capitalized investors is a great thing because it makes that much simpler.”

Eswaran also talked about the planned Cohesity-Veritas merger, saying that he expects Veeam to maintain its number one spot in the data protection and data resilience industry. He also called Rubrik’s IPO a good thing for the industry as a whole as it brings visibility to the issues around customers’ need to manage their ever-growing amounts of mission-critical data.

There’s a lot going on at Veeam and in the industry in general, and Eswaran serves as a guide to what to know about data protection and data resiliency. To learn more, read the entire conversation with Eswaran, which has been lightly edited for clarity.

How do you define Veeam?

Data today is the foundation and the currency of every modern business and government. And what was historically just an IT priority is now a board priority and a government priority because of what's happening around us: exploding data, infrastructure complexity, regulations everywhere, rising ransomware. Over 550,000 customers in 150-plus countries trust Veeam to protect their data and make them resilient, regardless of reason, whether it's a ransomware attack, a geographic disaster, a human error, a tech refresh, or a faulty upgrade like what happened with CrowdStrike. And we call that ability to make sure your data is always available, your service to your users is always available, data resilience. And Veeam is the global number one data resilience platform by market share as defined by IDC and Gartner. So regardless of which industry analyst you go to, Veeam has the number one by market share by a significant margin.

We can’t avoid talking about Cohesity’s imminent acquisition of Veritas, which CEO Sanjay Poonen told CRN will make Cohesity the number one player in the industry. How do you see that acquisition? How might it impact Veeam?

So before I say respond, I’ll say one thing because context is important. I honestly think AI has democratized bad actors and lowered their threshold of entry. Today, even junior people can inflict bad ransomware impacts. Our goal is to leverage AI for good and stay five steps ahead of these folks. And in that context, competition is a good thing because we push each other to innovate faster. But that said, Veeam believes in largely organic innovation with tuck-in of specific IP which are accretive to the customer. That's how we’ve approached it. That's why Veeam acquired Coveware, to have the industry’s only first-party incident response capabilities. Now Veeam looks at threat patterns and we scale it using our Veeam Data Platform to 550,000-plus customers. That’s how we’ve approached scale, growth and innovation, and M&A. We don’t believe in buying share, especially when buying that share felt unnatural.

It’s interesting to see [Cohesity] celebrating buying three-quarters of their company's revenue. There’s no easy path to integration. I see a lot of employee and customer uncertainty. Veritas has always been one of Veeam’s largest share donors. We’ve seen even more interest since the acquisition announcement from the amount of customer and employee traffic we see coming to Veeam. It’s huge. I actually feel this is going to be a good thing for Veeam. We are number one now by a significant margin. Let's see what happens when the new data is published. I expect to continue to remain number one by market share.

For Veeam, this is just a reflection of what we do for our customers in terms of innovation and how we work with our partners. We have 34,000-plus channel partners, one of the industry’s strongest partner bases. We are a partner-first company, end of story. We have scale. We’re going to exceed $1.7 billion in ARR (annual recurring revenue) by the end of 2024. Profitability, we’re 29 percent EBITDA. We have 30-percent enterprise subscription growth year-on-year, and enterprise subscription retention numbers of over 120 percent. That combination of scale, growth, profitability, and retention is an industry benchmark for software, not just in the category of data resilience. So I feel really good about where we are. It comes down to a focus on innovation for customers, and I think we do that best.

The other big data resiliency industry news in 2024 was Rubrik’s IPO. How has that affected the data management and data resilience industry?

It hasn’t. I think the Rubrik IPO probably brings even more visibility into the importance of data resilience. Every company, regardless of size, needs to have a data resilience plan and a data resilience posture. IPOs like Rubrik’s create significant attention, which is a good thing for the entire industry. What excites me is, put our scale and everything else aside for a second, Veeam is the only company which protects companies and organizations of every size. We're not just saying we’re protecting large enterprises of 5,000 customers. We are here to protect companies of every size, from small mom and pop shops all the way to the largest enterprises. We are excited because we think our position in this industry is unique. Our innovation velocity is unique, and it's reflected in growth, profitability, scale, and number one share.

Actually, the attention is good. Rubrik raised about $750 million in its IPO. Our secondary offering was $2 billion, one of the largest secondaries you will see in the market. And we were over-subscribed significantly on that $2-billion secondary. TPG was the lead investor. We were very picky about the investors we let in because we could afford to be. The interest we received was a validation of our direction. Each potential investor went through their own deep analysis when they put money in, and the feedback we got was overwhelmingly positive and a validation of the customers and partners. Obviously, for investors, financial metrics matter. But other things, like the channel, the partners we work with, Veeam’s partner-first approach, make a massive difference.

How did the investment get so large? This is one of the most significant investments in the data protection and resilience business to date.

Absolutely. Veeam is a very profitable company. We have 29-percent EBITDA, and generated almost half a billion dollars in cash in 2024. We have $1.7 billion-plus in ARR, so we are extremely profitable. And we have been over the rule of 40* for a long time even as we've transformed. So obviously, when we took this investment, it wasn't because we needed to raise money. We have a very strong balance sheet. We can do large meaningful things on our own. Prior to TPG coming in, we were owned by Insight Partners, and Insight will continue to be the largest investor and controlling investor in Veeam. And we love it because they're a growth-focused investor, and they've added value for us.

But as I look ahead, I see a couple of things. First, it’s a good time in our company's life to diversify our investors and bring some blue chips in. An IPO will be a milestone in our company's journey. Having more diversified blue-chip investors who will be with us for the long term, not just for a specific milestone or a specific exit, is actually a very important thing. [Second,] it’s important to have such investors in case we want to do something transformative, not just a large M&A, but massively transformative. Having well-capitalized investors is a great thing because it makes that much simpler. And of course it also creates a little bit of liquidity as well for some employees and for some of the long-standing investors in Veeam as well.

* Note: Rule of 40 is a financial metric for SaaS companies, looking to see if the combined revenue growth and profit margin totals to at least 40.

Does Veeam have any strategic investors?

We will. We are not ready to share names yet, but that is something we will come back and share in a short order of time.

You talked about that IPO milestone. We saw Rubrik close its IPO this year. Is Veeam going to be the next data resiliency company to do an IPO?

The good thing for us is an IPO is not going to be driven by an urgent need for liquidity. We don’t need to do that. But an IPO is a good milestone, I would say, an inevitable milestone, at some point because of the credibility it brings to a company. It is certainly a path, but we have not put a stake in the ground or defined a period of time. We'll watch the macro, we'll watch the markets, and we'll make the decision in due course. But that is absolutely something in our path, and one of the reasons why we went down the path of welcoming new investors.

With the new investment, you mentioned looking at doing some ‘massively transformative’ things. …

It’s a nuance. This is a secondary offering, not a primary. We were very intent on making it a secondary, because a primary is for when you need cash and you want to use the cash. Our balance sheet is strong. There's no point in adding $2 billion more to the balance sheet on top of the extensive strength we already have. As I said, we're going to generate almost half a billion in cash just in 2024. So that's why we went down the path of a secondary where Insight sold some of their stake. They still continue to be a significant majority investor, but they sold some of their stake which accomplished everything I talked about, which is welcoming new investors who will stay with us on the longer part of the journey, an IPO being one of the milestones on that journey. And there’s some liquidity for investors and some employees. And then, very importantly, if and when there's a transformative thing we want to do, having those investors makes it much simpler, but there's no concrete plans as such.

Can you see Veeam making a large strategic acquisition or two in the near future?

We never say no. I’ll start with that. Our principles for acquisition are very clear. Number one, it’s got to be accretive to the customers. We’re not going out to buy share and put our stakeholders, customers, and employees through the pain of a period of significant uncertainty if there's no simple accretive way to think about the acquisition. We never buy share for the sake of buying share.

Number two is, there’s been an inflection point in this industry where all SaaS workloads need to be protected. Historically, companies thought with Microsoft 365 that Microsoft is responsible for data protection. They're not. They’re responsible for the service and availability. Every SaaS app needs to be protected. So the second lens for us is, what are accretive workloads which add meaningful value for customers and which could accrue to our platform and culturally to the company.

The third is security adjacencies. This is the path we went down when buying Coveware. When we talked to cyber insurers, we saw they had a small list of companies they would bring in after a ransomware breach when they got the call from their customers, and Coveware was at top of that list. Coveware gets involved in everything from forensic analysis, which is done up front, all the way through extortion negotiation and helping customers post recovery. And by the way, two-thirds of the companies where Coveware does this triage become retained customers of Coveware and now of Veeam. Not only is Coveware the only first-party incident response service in our category, but it sees so many ransomware threat patterns. Coveware is now integrated into the Veeam Data Platform v12.3. We now call it Recon Scanner. A customer can run Recon Scanner in their environment and get a very comprehensive report of their infrastructure and whether there are any dormant threats waiting to be activated. We take advantage of those threat patterns from the incident response service and scale it across our 550,000 customers. We're looking at what other adjacencies like that which could add accretive value for our customers.

How about Veeam’s use of AI?

We’re very specific about how we're approaching AI, where there’s a lot of hype right now. Our approach is a very simple one. We're building a proactive AI-based threat detection into our Veeam Data Platform 12.3. We have Veeam digital assistants, where we use AI to free admins from menial routine tasks so they can focus on what adds more value. We announced the launch of AI Copilot for Microsoft 365 which in a generative way, a conversational way, provides customers with insights and makes sure they have the best security posture possible. We have a lot of roadmap things we're working on to use the insights and intelligence from our rich repository of data addressed over a long period of time, and we’re even working through how we need to protect the LLMs (large language models) and SLMs (small language models) which fuel AI in the first place. AI is one more interesting tech which allows us to add accretive value to our customers’ use cases

Veeam historically has been 100-percent channel-focused, or close to that. Going forward, does that change at all? What are your thoughts in terms of Veeam’s approach to the channel?

No change. We are a partner-first and a channel-first company, and there’s no intent to change this. We’re layering in more and more sophisticated partnerships, like Microsoft, Kyndryl, Lenovo, and so on. We’ll remain a partner-first company. Whether it's resellers, distributors, or VCSPs (Veeam cloud and service providers), they’re all a very important part of how we offer our products as a service to our customers, in addition to offering it as a first-party service. We are a partner-first company, and we will always be a partner-first company.

There are three ways a customer can use Veeam. One is to buy a self-managed software subscription. If you want to consume our products as a service, historically you would work with our partners, cloud service providers, or MSPs. This year, we also launched Veeam’s first party backup as a service. And if customers are intent on consuming first party services for backup, they can come directly to Veeam. And even in that instance, we're working to launch our first party BaaS service to the VCSPs so they can leverage and build on top of it as well. VCSPs and MSPs are very critical Veeam channel partners.

Anything else we need to know about Veeam?

I would just go back to where I started, which is data is the foundation and the currency for every modern business, and a priority for any city, any government, any company. The key is, every company, regardless of size, needs help in getting resilience. Not just the largest ones, but everyone. Large and midsize enterprise is 60 percent of our business. We're going to finish this year with more than 2,200 customers spending more than $100,000 on ARR with us. I feel Veeam is the best data resilience platform in the world. It's reflected in the numbers: number one in share, scale, growth, and profitability. It's a consequence of our mission, which is very simple: Safeguarding the digital world with exceptional resilience and intelligence and relentless customer innovation. And the new $2-billion secondary led by TPG validates our direction and the customer value we offer.