Just weeks after landing millions of dollars in fresh capital to fuel its big scaleup dreams, Ottawa data protection software startup Rewind has pulled the trigger on its first acquisition – a deal the firm believes could bring hundreds of thousands of new users to its platform.
The 65-person local company, which makes a subscription-based platform that backs up customers’ sales and financial data, announced this week it has acquired German software firm BackHub. Financial terms of the transaction were not released.
Founded in 2014, BackHub serves as a backup service for GitHub, a subsidiary of Microsoft that stores software source code in the cloud. GitHub is one of the largest source code repositories on the planet, hosting the building blocks of software programs produced by some of the world’s most valuable companies.
Rewind co-founder Mike Potter has been following BackHub’s progress for years. While the German firm is much smaller than Rewind, with just three employees and 1,000 customers at the moment, Potter believes its customer base could soon dwarf the 20,000 active users that now subscribe to Rewind’s platform.
“This is a massive market opportunity,” he says.
Founded in 2015, Rewind backs up data for customers who run stores on e-commerce platforms Shopify and BigCommerce or have a QuickBooks account. Most of its revenues come from merchants who use Shopify’s platform and want to make sure their accounts are protected from events such as power outages or cyberattacks.
40 million users
To gain a sense of the opportunity Rewind is chasing, consider this: roughly one million businesses use Shopify to power their storefronts, while QuickBooks has about five million total accounts.
By contrast, GitHub has more than 40 million users, including most of the Fortune 50 companies. “GitHub is an order of magnitude larger in terms of the potential number of customers (than Shopify),” Potter explains.
Besides opening the door to thousands of potential new customers, the deal also gives Rewind a foothold in Europe, where BackHub will remain based. For the fast-growing Ottawa firm – which currently has about 15 job openings – access to a new source of talent across the Atlantic couldn’t come at a better time.
“Now we’re able to hire developers in Europe, which is great from an opportunity perspective for us to be able to grow our business,” Potter says. “It opens us up to a whole other market of talent that we didn’t otherwise have access to.”
The seeds of this week’s deal were originally sown about four years ago, when Potter first connected with BackHub founder Daniel Heitz. The pair started trading ideas and sharing insights on the backup-as-a-service industry.
“I’m often reaching out to companies to just try and gauge the market and see what everyone is up to,” Potter says.
The two founders began mulling over ways of working together last summer. After looking at various types of partnership arrangements, they concluded that an M&A play made more sense.
“We’ve got this vision … to back up the whole cloud,” Potter says. “When we couldn’t figure out a way to partner with them, that was when we started to get more serious about (an acquisition).”
As it happens, Rewind’s financial warchest was about to get a major boost in the form of a US$15-million funding round that closed last month, making the prospect of such a deal even more attractive.
More deals to come
Still, Potter says trying to finalize a multimillion-dollar funding round while buying another company for the first time made for its share of stressful moments.
“I would highly not recommend, for anybody who wants to keep their sanity, to be working on a fundraising and an acquisition at the same time,” he says with a chuckle. “There were a lot of legal meetings, a lot of work. But we’re super happy to have (BackHub) on board.”
Potter says Rewind expects to keep adding more technology platforms to its stable over the course of the year. He’s not ruling out additional M&A deals as a way to make that happen.
“What we hear from our customers is that they want one company to back up all of their cloud services,” he says. “Clearly, we know how to do that. It’s really just a matter of how quickly we can get out on all the platforms that our customers are looking for us to back up. If we can do that through acquisition… we’ll absolutely be looking to do that.”