Microsoft Invests in Rubrik, Plans Joint Development

Cloud backup company Rubrik has inked a contract with Microsoft (Nasdaq: MSFT) amid a flurry of industry activity aimed at eliminating ransomware.

Microsoft is making an equity investment in Rubrik while arranging joint development and go-to-market strategies that will add Rubrik’s zero-trust data management capabilities to Microsoft 365 and Azure. The arrangement grew out of the companies’ common ground, including 2,000 mutual customers.

The size of the deal wasn't published, but sources told Bloomberg that Microsoft paid “in the low tens of millions” for its stake in Rubrik. The startup is said to be valued at about $4 billion. That's up from $3.3 billion, which was Rubrik’s valuation when it scored its Series E funding in 2019, bringing its total raised to $553 million.

Backup Specialists Spotlighted

The deal is the latest in a series of events highlighting the fight against ransomware, which has reached pandemic proportions. As companies increase their reliance on remote workers, hackers have moved in to steal data through the “back doors” of mobile phones and laptops and hold it for ransom. In the wake of this, companies such as Rubrik, which creates immutable copies of backed-up data that can be retrieved in the event of an attack, have moved into the limelight. Of course, immediate retrieval of data doesn’t keep stolen data from being exposed or sold on the dark web. But it ensures that hackers can’t stop production, as they did during the Colonial Pipeline attack in May 2021.

The growing popularity of cloud backup companies was demonstrated earlier this month, when late-stage startup OwnBackup, which backs up data in software-as-a-service (SaaS) environments, announced a Series E funding round of $240 million, bringing its valuation to about $3.35 billion. Interestingly, OwnBackup, which up to now has mostly backed up Salesforce SaaS, is in the process of adding Microsoft’s Dynamics 365, an enterprise resource planning (ERP) and customer relationship management (CRM) platform, to its compatibility roster. Still, there’s no evidence that Microsoft has taken any stake in OwnBackup.

In another example, late-stage startup Cohesity revealed plans for IPO shortly after announcing a tender offer worth about $145 million. Now valued at $3.7 billion, Cohesity has raised about $650 million since its founding in 2013 by Mohit Aron, who was also the co-founder of hyperconverged infrastructure vendor Nutanix (Nasdaq: NTNX).

Yet another instance: A startup named HYCU was awarded $87.5 million in Series A funding earlier this year. HYCU cited a Markets and Markets report stating that the data and backup recovery market is could top $11 billion by 2022.

Microsoft and Rubrik

Rubrik, featured in the Futuriom 40, works with the full gamut of cloud services, including AWS, Google Cloud Platform, and VMware Cloud. Its database backup capabilities extend to Oracle, SAP HANA, NoSQL, as well as Microsoft SQL Server.

Will the Microsoft relationship affect these other partnerships? Microsoft has taken a minority stake in Rubrik, it hasn’t acquired it. That signals that it aims to be a priority for Rubrik but not a limiting one. That’s no doubt good news for Rubrik’s customers, which include Adobe (Nasdaq: ADBE), Cisco (Nasdaq: CSCO), and Verizon (NYSE: VZ), as well as Allstate, Estee Lauder, HBO, Honda, Home Depot, and Mazda, to name a few. AWS, Cisco, IBM (NYSE: IBM), Oracle (NYSE: ORCL), Red Hat, and VMware (NYSE: VMW), among others, are also technology partners with Rubrik.

Indeed, the Microsoft connection could boost the fortunes of these companies, who also have an interest in running on Azure. It will be interesting to see how the ecosystem actually functions once the Microsoft/Rubrik development is underway. It could prove to be a blueprint for other growing ecosystems. Then again, it could be a path to acquisition.