This profitable, Google-backed startup just raised $75 million from Goldman Sachs. Its CEO explains why it waited 5 years for fresh funding

Egnyte

Egnyte CEO Vineet Jain.

• Egnyte, a cloud storage startup, has taken in $75 million investment from Goldman Sachs - its first new funding in five years.
• Egnyte has been cash flow positive for about two years, with investors including GV (formerly Google Ventures) and Kleiner Perkins.
• CEO Vineet Jain tells Business Insider that the momentum comes from a focus on its sweet spot: Selling to midsized companies that are neither too small nor too large.
• Jain says Microsoft is a frenemy that opens doors for Egnyte, but also competes with its core products head-to-head.
• He says an IPO is desirable, but that he's not in any rush.

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 that 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.

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CEO Vineet Jain tells Business Insider that the money wasn't a must-have - the 11-year-old company has 450 employees, 14,000 businesses as customers, and has been cash flow positive for around two years.

But as Egnyte's ambitions grow, he says the company needs more "fuel for the fire" to hire, invest in R&D, 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 loathed 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," says Jain.

Instead, says Jain, the company has found its sweet spot in selling to midsized companies - companies that may have outgrown consumer solutions like Dropbox, but which 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 including 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 of its IPO; Sutter won't go into specifics, but says that Egnyte sees significantly more than that because it has at least one service that 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 that 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," says Jain.

AP

Microsoft CEO Satya Nadella.

He praises Microsoft for helping open up new opportunities for Egnyte. Some customers use Egnyte to secure data in the Microsoft Azure cloud. Microsoft might bring Egnyte into that deal 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.

However, 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 just 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 any time soon, Jain says Egnyte had to adjust to this reality.

"Microsoft is, and will remain, a frenemy for a long time," says Jain.

No rush to IPO

Going forward, Jain says that the prospect of an IPO 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. However, with the new money, and the fact that the company is cash flow positive, he doesn't feel any pressure to move fast.

At the same time, though, he says that the five-year streak may be broken, but Egnyte won't be raising more money any time soon. "This is probably the last round of money we need to raise," Jain says.

Get the latest Goldman Sachs stock price here.