Code 42 Software's CEO is reluctant to tap venture capital, for his firm's sake and the state's.
If Matthew Dornquast, CEO of Minneapolis-based Code 42 Software, ever writes his autobiography he could call it "I Was a Teenage Software Engineer."
A successful one at that, making thousands of dollars building and selling software to high school classmates and people around the world in those pre-Internet, mail-order days. And that was before he had interned and later worked at Control Data and studied computer science at the University of Minnesota.
He's not doing so bad these days either: Code 42 Software, the Minneapolis-based software company Dornquast co-founded in 2001, has a rapidly growing hit on its hands with CrashPlan and CrashPlan Pro, its on-site, off-site and cloud-based data backup software for consumers and businesses.
Users include some names you just might recognize: Apple, Google, Adobe, Groupon, LinkedIn and, closer to home, Carlson Marketing Worldwide and the U of M's College of Biological Sciences. Some companies pair CrashPlan software with storage servers, designed by Dornquast, that the company began selling last year.
Code 42 has 48 employees and ended 2010 with more than $10 million in revenue. Those numbers likely will double by year's end, Dornquast said, as they have in each of the previous two years, despite the recession. Growth is likely to continue with the introduction soon of a CrashPlan version designed for small and medium-sized businesses, with 10 to 100 computers to back up, Dornquast said. He's also looking for possible acquisitions, to gain more engineering talent to work on new products and upgrades.
What Dornquast, 44, really has his sights set on running, in his words, is a great Minnesota software company, one that's part of his larger vision of a Silicon Prairie. He'd like to see new high-tech ventures building on the heritage of Control Data, of disk-drive maker Seagate, which once did major manufacturing in Bloomington, and of Compellent Technologies Inc., the Eden Prairie-based data storage system maker recently acquired by Dell Inc., much to Dornquast's disappointment.
"We don't need one, we need a hundred of these," Dornquast said of such high-tech companies and the typically clean, high-paid jobs they create. "A lot of my success was due to the seeds planted by the big guys that are gone."
Dornquast's desire to keep Code 42 here and promote expansion of Minnesota's high-tech economy is one reason, aside from a disagreement on valuation back in 2008, that he's been skeptical of venture capital.
"If you take venture capital, one of the commitments you're making is, you're saying, 'I will sell,'" Dornquast said. "Is a company in Minnesota going to acquire my technology? No. Where is it going to go? East Coast or West Coast. Whose students are going to benefit? East Coast or West Coast."
Code 42 started as a consulting company, building projects for other companies such as Midwest Airlines' former ticket booking engine, Dornquast said. It then carried out a "controlled transition" to a products company with the 2007 introduction of CrashPlan.
The basic consumer version offers free, unlimited backup to your own computers and hard drives or those of friends and family. CrashPlan+ adds secure cloud-based storage beginning at $1.50 a month per computer for up to 10 gigabytes of storage and $3 a month for unlimited storage. The business version, CrashPlan Pro, is the big moneymaker. It offers clients unlimited storage on the client's hardware or on backup severs available from Code 42. Prices depend on the number of users.
Eighty percent of the company's revenue comes from business users, with the balance from consumers, Dornquast said. But consumers provide valuable feedback and often challenging operating environments (underpowered, virus- and spyware-infected) that lead to improvements that benefit all users in future upgrades.
CrashPlan has been an excellent backup solution for the 800 computer users at the University of Minnesota College of Biological Sciences, said Craig Bantz, the college's associate director of information technology.
Backing up the college's desktops and laptops presents different challenges than in a traditional office, Bantz said, with professors often traveling overseas, working in diverse environments and time zones and handling large amounts of confidential data.
"It blends two different product segments, cloud products and enterprise products, into one solution that bridges the gap and brings the best of both to the table," Bantz said. "They've made something that's the holy grail of IT inside of U of M and a lot of institutions, which is something that actually is backing up everything."
Dornquast said he shares his vision with employees, who have received stock in the company and who last year got profit-sharing checks of $30,000 to $35,000 deposited in their retirement accounts. (Employees with three or more years at the company qualify for the profit sharing plan.)
"This isn't a get-rich-quick scheme," Dornquast said. We're not going to sell for $150 million to Oracle tomorrow. This is a long-term investment that can reap huge rewards."
The expert says: Mike Harvath, president and CEO of Revenue Rocket Consulting Group in Bloomington, said Code 42 Software appeared to have been reading from the "playbook" he uses in working with technology and technology services companies.
"Don't take outside money, look for acquisitions, run a very profitable business and have a little fun along the way," Harvath said, broadly summarizing where his philosophies overlap with Code 42's. "I think these guys have a very successful future ahead of them."
Accepting outside investors may be easier but also increases the risks for companies, Harvath said. "I've said my entire career, the wrong thing to do in cultivating a business is to grow it to sell it," Harvath said. "It doesn't put you in the right mind-set to make the best decisions. ... Failure is not an option when you're running a small company. ...That adds a degree of clarity to your thinking."