SaaS Interviews with CEOs, Startups, Founders
1204 $30m ARR Cloud Backup Company Almost Bankrupt from Thailand Floods
10 Nov 2018
Chapter 1: What led to the founding of Backblaze?
invest more in those relationships that matter. They're doing $30 million today, growing about 50% year over year. They were doing about 20 million just about 13, 14, 15 months ago, but it wasn't always easy. The company was launched back in 2007 with a $5 plan to help you back up everything you've got in the cloud. They have now 500,000 paying customers, paying five bucks a month.
There's a big flood in Taiwan in 2012 or Thailand in 2012 that doubled the cost of the product that they were buying from 200 bucks up to 400 bucks. So they said, you know what? We can't operate on a margin anywhere anymore. We've got to raise some money. They've raised 3 million bucks. So pretty capital efficient. Economics are healthy.
10% gross logo churn annually over 100% net revenue retention with their team of 70 people based mainly in San Mateo. This is the Top Entrepreneurs Podcast, where founders share how they started their companies and got filthy rich or crash and burn. Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines.
Chapter 2: How did Backblaze grow to $30 million in ARR?
We went from a couple hundred thousand dollars to 2.7 million.
I had no money when I started the company. It was $160 million, which is the size of many IPOs.
Chapter 3: What challenges did Backblaze face during the Thailand floods?
We're a bit strapped. We have like 22,000 customers. With over 5 million downloads in a very short amount of time, major outlets like Inc. are calling us the fastest growing business show on iTunes. I'm your host, Nathan Latka, and here's today's episode. Hello, everyone. My guest today is Gleb Budman.
He's the co-founder and CEO of a company called Backblaze, which he and his team grew to $20 million in revenue and profitability while building one of the largest and most cost-efficient cloud storage systems on the planet. Previously, Gleb led two product teams from pre-funding through acquisition and founded three companies. Gleb, are you ready to take us to the top?
You bet.
All right. Tell us about Backblaze. So what's the company do and how do you make money?
So what we do is we provide cloud storage. And that obviously means a lot of different things to a lot of different was very, very simple. We just backed up your laptop or desktop over the internet. It was five bucks a month. It's unlimited backup. We back up all the data on your computer. We back up your external hard drives. And the key thing there was to make it easy.
So what we found was that even though backup options have existed forever, when we asked our friends and our family and our co-workers, what do you do for backup? The general answer was, well, you know, pray. And so people are just constantly losing data. And it's this painful process when they lose their photos or their tax documents or their business files. So we started with this.
You enter an email address, a password. You click install. That's it. You're done. We back up everything. You never have to worry about it. And then if you need your data back, you can either download it, you can access it on your mobile device, or we'll actually FedEx you a hard drive with all of your data on it anywhere in the world.
And then if you get that hard drive back to us, it was free to do. Oh, very cool. Okay. And what's the pricing model? Is it PurePlay SaaS? It's pure play SaaS. It's $5 a month, $50 a year, $95 for two years. And so that's what we do for both consumers and businesses. We back up laptops and desktops. And then to do that, we had to build all of our own cloud storage.
And so people kept asking us for other things for storage. And so we actually introduced a, an offering where you can use storage for anything similar to an Amazon or Google or, or a Microsoft, um, uh, offering, but one quarter of their price point. Okay. And you said, go ahead. Yeah, so you can use that for all sorts of things. You can host your applications. You can upload media to stream.
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Chapter 4: What is the pricing model for Backblaze's services?
Did that, did that deal make you guys rich or no? It was a bad 99 collapse kind of thing.
Yeah, it was a great deal. We started and built this company. There were some other people that were original founders there. In nine months from the first round, the company got acquired for $120 million. How much did you raise? Seven. It was actually a great, quick build.
And I have to ask this because it was 99. Were you post-revenue or pre-revenue?
Revenue? What's revenue? You didn't have any revenue? No revenue, no customers. Unbelievable. Hadn't launched yet. So built a good team, built some good products and bought for a large chunk of change. Now, the problem was that Excited Home, even though they were a public company, ended up going out of business. Most of us had shares in Excited Home.
Most of that deal was a stock deal?
Yeah. I see. So, you know, some people made money off it. Some people made nothing off it. But that was the first company. Then we did another company called Mail Frontier, which was an email security company, which was, again, it was a traditional venture fund company, went through four rounds of funding. How much total raised? 23 and a half. And so that company was acquired in 2006.
We worked at the acquired company for about a year, and then the five of us decided to start Backblaze. And we did this one differently. Hold on, before we get into Backblaze, what was the sale price in 06?
About 30 mil. Okay, so that one was about flat, assuming one explanation preference. That one you guys made some money, but not fly around in a private jet money.
Definitely no private jet money.
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Chapter 5: How does Backblaze ensure customer retention?
And all of a sudden I'm going, wait, why am I getting notices from all these states? And that's because I had to file payroll and stuff in these states as we started hiring people from remote locations. It was the biggest pain in the butt. I hated the paperwork. I hated the payroll. And so now today when I'm launching new companies, hiring new remote employees, I use a company called Gusto.
It's very simple. Payroll benefits in HR for modern small businesses. What I like most, and I've timed this, it takes about seven minutes on average for my folks to run payroll. It's got fast, easy to run payroll, including W-2s and 1099s. I love that they have health benefits and 401ks all built in for nearly any budget. So you kind of just pick what you want. And then go to
expert HR support just to call away so you don't have to hire you know HR people in-house but most importantly it frees up my time so I can go back to my monday.com kanban board print you know plan the next sprint you know put the next spec out on the line and talk to three more customers so
If you want more effective payroll, you know, a lot of people change payroll providers at the end of the year. Now is really the best time to switch. So listeners of the podcast, you can go to nathanlaca.com forward slash gusto to try a demo and test it out. Again, that's nathanlaca.com forward slash gusto, and you'll get three months free once you run your first payroll.
All right, I'll see you there. What's the customer count today? How many? They're about half a million. Yeah, 500,000 times five bucks is about 2.5 million a month or 30 million in ARR. That's where you get that? In rough numbers, yep.
Tell me about churn. So in general, you probably know this, but consumers in general on SaaS services tend to trend the highest, and businesses churn at a much lower rate, and larger businesses churn at an even lower rate. Our consumers churn at only about 10% a year. That's gross logo churn? Gross individual customer churn.
But you're not adding up the revenue. That's just logos. It's a number of logos, not dollars.
Exactly. And so revenue on the business backup side is actually increases, does not decrease. So we make more money from customers that add more licenses than we churn.
So what's net revenue retention across your entire base each year?
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Chapter 6: What strategies did Backblaze use for funding?
Number four, how many hours of sleep do you get every night?
I actually sleep okay. I get about seven, seven and a half hours of sleep. My wife's actually incredibly helpful in allowing that to happen. So married and how many kids? Two.
Two. Okay. And how old are you? I'm 44. 44. Last question. What do you wish your 20-year-old self knew?
My 20-year-old self, you know what I really wish that I knew was to be more conscientious about friends and coworkers. So I'm generally a friendly person, and if people are friendly, I'm friendly with them.
Um, but I, you know, there, I wish that I had been more specific about, um, the people that I really liked and that, um, felt like they were just great people, um, in, uh, more consciously investing in those relationships.
Guys, there you have it. Invest more in those relationships that matter. They're doing $30 million today, growing about 50% year over year. They were doing about $20 million just about 13, 14, 15 months ago, but it wasn't always easy. The company was launched back in 2007 with a $5 plan to help you back up everything you've got in the cloud.
They have now 500,000 paying customers, paying $5 a month. There's a big flood in Thailand in 2012 that doubled the cost of the product that they were buying from 200 bucks up to 400 bucks. So they said, you know what? We can't operate on a margin anymore. We've got to raise some money. They've raised 3 million bucks. So pretty capital efficient. Economics are healthy.
10% gross logo turn annually over 100% net revenue retention with their team of 70 people based mainly in San Mateo. Gleb, thank you for taking us to the top.
Thanks a lot. Good chatting with you.
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