Fast-growing Code42 software could be a public company within a couple years

CEO Joe Payne, the veteran marketer and technologist who has led fast-growing Code42 for two years, shared the company's strategy shift last week.

Double down on the backup-and-security software for thousands of business customers with an expansion of new products that will double revenue to $100 million-plus this year.

If things play out and the capital markets stay friendly, Payne anticipates taking the 15-year-old company public in an initial public offering of stock within 24 months.

"Our goals are not financial but to be the world's best at what we do," Payne said. "We do have investors who expect a return on capital.

"We don't have to return any capital soon. When we do, the easiest way to return capital is to go public. And the best tech companies go public. That will be a milestone and it's within our control to grow fast enough. We could go public at our size, but we'd like to be larger … more than $150 million."

Payne, 52, who earned an MBA and started out as a product marketer at Proctor & Gamble, has experience in taking a tech company public.

As CEO of Virginia-based Eloqua, he took the marketing-software firm public at $100 million in revenue in August 2012 at $11.50 per share.

Four months later, huge Oracle agreed to buy Eloqua for $23.50 per share, or about $870 million.

Code42 raised $85 million in equity in 2015, in the biggest round of venture capital investment in a Minnesota company since 1999, from existing owners Accel and Split Rock Partners, and two new ones, JMI Equity and New Enterprise Associates Inc.

"Joe Payne has done an excellent job of bringing the management discipline and depth necessary to scale the company," said Split Rock Managing Partner Michael Gorman. "He has enhanced the management team while navigating the challenges of growth.

"Code42 has the ingredients for a potential public company, but we are focused on scaling as a private business for now. With each new headline regarding hackers breaching corporate networks and ransomware, the case for data protection and security provided by Code42 grows more compelling."

Code42 announced last week that it will exit its "CrashPlan for Consumers" software business, which has shrunk to 10 percent of users, to focus on its "CrashPlan for Small Business" of less than 200 employees and "Code42 Enterprise" for large business.

They range from huge Adobe, Samsung, Juniper Networks, Tenet Healthcare and Grant Thornton to National Geographic, MIT and Stanford universities, and seven of the eight Ivy League schools.

The 525-employee company says 47,000 organizations now use its backup-and-security software on laptops, iPads, mobile and other remote devices.

Dennis Magbata, an IT manager at TaylorMade golf products credits Code42 software with catching early and helping the 1,500-employee firm recover quickly from a ransomware attack that could have been far more costly and time consuming.

When TaylorMade's helpdesk workers heard from panicked users about a suspicious link, they figured they had a few rough weeks ahead. An e-mail attachment masquerading as an internal expense report contained ransomware that locked up users' endpoint files, demanding a hefty ransom.

"By the time we started getting the [ransomware] calls, more than 20 users had already taken the bait," Magbata said in a prepared statement. "We would have had to completely start over'' with TaylorMade's previous security-management solution.

Instead of manual device wipes and file-by-file restores, TaylorMade IT used Code42's bulk restore capabilities.

"That meant fewer headaches for our IT team and significantly lower IT costs," including avoiding high-cost outsourced work, Magbata said.

And the clean-and-quick restore meant fully restored devices in employee hands "in a day or two, instead of a week or more."

Payne said now is an opportune time to take market share because competitors, including HP Connected and Mozy, are still getting traction after sale to new owners, Micro Focus and Dell, respectively.

The plan is to:

• Grow share in existing markets with Code42's product that allows customers to "refresh" new laptops with "device-migration" software that transfers backed-up data much faster and simply than competitive products

• Drive sales of a newer product called "Legal Hold" that allows organizations to automatically preserve data for legal proceedings, turning what was a labor-intensive exercise into an automated one that can be handled remotely with no disruption to IT and end users.

•Expand a newer security product that allows companies to trace files that may have been taken by former employees.

"Our software called 'security center' takes every version of every file on the laptop and stores it safely and securely in the cloud," Payne said. "If you upload something to a thumb drive or private dropbox account, our [software] will see it, log it and make it available to company security team.

"This is very important in any IP business."

Neal St. Anthony has been a Star Tribune business columnist and reporter since 1984. He can be contacted at nstanthony@startribune.com.