How Backblaze CEO Gleb Budman grew to $100M revenue with a 164 person team in 2024.

hello good morning uh good to see you all right so uh my co-founders and I actually we did two companies before both of them were Venture funded both of them were acquired we when we started backblaze we said you know what there are some good parts about Venture funding there's some bad parts let's do it uh differently so we started by bootstrapping we put our jobs we took uh we said for one year we're gonna do nothing uh in terms of venture funding there's gonna be no PowerPoints there's gonna be no no spreadsheets there's gonna be no pitches there's a focus on product focus on customers see how it goes um so we uh we did that for 15 years we took the company public uh in 2021 I'm gonna try to share 15 years worth of history in 20 minutes uh or less here um so this is what it started like um probably what a lot of you guys uh started like right Five Guys you know uh one bedroom apartment um the uh the the guys the tall guy standing in the in the in the room there in the blue shirt that's his one bedroom apartment he's living in the uh in the one bedroom that's behind the wall over there um all of us are crowded in the reason I'm wearing uh flip-flops and a t-shirt is because it's hot as hell because there was no AC and it's uh and we didn't have enough power to power the servers and the AC at the same time so this is how it started um and then in 2021 uh we were able to bring uh about a third of the team out to New York out from San Francisco uh to ring the bell on the NASDAQ in Times Square uh really exciting day super fun you know the whole the whole shindig so um you know when we started the company we said um hey you know what are we going to do we're gonna run this forever as a private company are we going to uh raise funding are we going to sell the company like we did the last two are we gonna take it public and taking it public was one of the possibilities but it was a little bit like trying on uh you know your your dad's pants when you're a kid you know sure yeah yeah maybe someday will fit into these right um it was uh you know it was still kind of a fiction right um and so uh I'm gonna share what kind of some of the learnings both in terms of um what it took to go public um as well as why bootstrapping is actually a good way to get to be able to go public but one of the I think the um the things I want you know you to walk away with is it's possible to go public right and I think for for um you know at different stages it doesn't feel that possible right um okay so um you know we're gonna talk about how you decide how do you prepare how do you actually execute on that process uh this is our uh path to their revenue-wise and so you know if you look over here let's say you know 2014 we were at about 10 million bucks in in Revenue you know many of you are probably um you know many of you are Beyond this some of you are Beyond this some of you are at the beginning of this some of you in the middle but you know sitting in 2014 with 10 million dollars of Revenue you know kind of going like oh yeah maybe we'll take the company public still seems like a fiction but then you look at it it's only seven years later and you know eight years later and and we're public rights so it you know the thing to walk away with here is you know like at the beginning it's like you know you're just trying to figure it out and you know um I I love the the first Speaker who was talking about you know getting to 50K of mrr like it's awesome um and it you know at that kind of growth rate it's only a number of years before um being public is actually a feasible path um okay so um what do we do we we started off selling computer backup so you know backing up your laptops and desktops seven bucks a month totally unlimited we do that for individuals we do that for businesses super simple and it takes everything a bunch of uh of our customers started coming to us and say hey I love you for your backup service um but I and I trust you for all my storage stuff but I need all these other storage things um give me access to your platform so um you know listening to customers hearing what they wanted we built um B2 which was our second offering it's cloud storage as a service it's like Amazon S3 service for object storage but it's one-fifth the price point um so if you're using Amazon S3 and you want to save a whole bunch of money make it easier you know come check out B2 um so uh deciding um so uh it's it's I think it's a generally there's this there's a belief that if you're going to go public you have to raise money and you have to raise a ton of money because you have to burn a ton of money because that's the only way to go public um I I want to it's it's a contrarian viewpoint but I think Booth shopping is actually many ways a better way to get to be a public company um here's some of the ways that I think it helped us um when we started the company we were going to use Amazon S3 as the underlying way that the in for the infrastructure for our backup service that's what we wanted to do we did the math we said oh we're going to lose money on every customer that didn't seem like a good way to build a business if we had to raise the whole bunch of venture funding we probably would have done it and said we'll figure it out later somehow we'll figure out how to how to make it the math work but we didn't have any money so we have to start from first principles and figure out how to actually make the business work we ended up designing a platform that was uh like drastically less expensive than Amazon which we probably would have never done if we had 10 million bucks to cash in the bank on the first day um it also just continued making us efficient throughout the years every single day the culture was built up that you have to focus on the efficiency of building the business that is a fundamental thing that comes with bootstrapping um it also I think drives your go to market approach um for us we couldn't spend money on ads we didn't have any money so we built a really efficient go to market which was self-service and Pog based and um we started writing a Blog that was focused on storage um and had about three million people a year that started reading it that drove a lot of people to come and check out the the the the company um didn't really cost a lot of money because we didn't have a lot of money so I think bootstrapping has lots of advantages that actually help you build a business and especially in today's environment where uh companies care about profitability and a bit of margins and cash flow in in the public markets um it's a it's a value and it's hard to build that value after you've been after you've raised tons of money for years and years and years to change the culture to do that um so you know and this is kind of the last one which is like that whole culture of establishing of a bootstrap is part of that okay so those are some of the advantages I think of building bootstrapped as a path to going public now um on the on the comment of the when do you actually go so what all the company you know experts that we spoke with said was uh you've got to wait until at minimum minimum your 100 million in revenue and will you should be at 300 million because that's the size companies that go public and they're right that's the average size of company that goes publicly you know why because the banks make more money that way um but when when we went public this was the chart that we went out on the Roadshow with um a few different numbers on there but focus on the one that says 65 million of ARR it was not 300. um we still went public um it's uh you can take the company's public at smaller scales then the banks are leaning into taking companies public because they make a fee on on the amount that you raise okay so um what about in terms of costs um so it it is expensive to go public so you know we talk about um you know backlights cloud storage really easy really inexpensive going IPO not easy not not inexpensive but um it is possible um and uh so it cost us you know 10 to 15 million dollars to take the company public kind of a big number most of that went to the banks because they take seven percent of what you raise but there are lots of other places where um you actually have to spend money lawyers accountants uh you know directorate office insurance is a whole bunch of stuff um so it's expensive but if you're raising 100 million and you give away 10 million you know it's a little bit of the cost of doing business um okay uh when do you do it so um part of the the thing is that when you're actually going public you it's it's when you're uh uh the you're going to be talking to investors about if you give us money we're going to do the following things with it so you need to have metrics and a story around um this is the right time for you to change that trajectory for us it was because B2 cloud storage was growing really fast and there was this big market for it and everybody was we had lots of people that were switching off of Amazon web services and coming to B2 and we were talking to investors about that they saw that growth and they said yep that makes sense so thinking about the kind of the story timing and the metrics but you got to start early because it still takes off in like two years to actually get ready okay uh preparing so how do you actually do the preparing part of it so uh first of all um you have to reframe this story but not rewrite the story so one of the things that will happen is um when you start down this path there's a whole machine bankers and everybody else that want you to tell a different story than the one that your company actually is they want you to be a different company because it looks better on a spreadsheet or it looks better in a pitch um you want to reframe your story because you're speaking to a different audience you're not speaking to your customers you're speaking to investors but it still has to be the real company it's the company that you built so if you have a ton of upsell then talk about the the amazing ways you upsell if you don't have a ton of upsell because most of your business is selling to new customers talk about how you get new customers don't tout how you have tons of upsell focus on kind of like what is it that makes your company special don't necessarily don't fit into the rubric that the bankers and everybody else are going to push you into so this is a this is a smidge from our S1 this is kind of the lessons you know the starting bits of the outline um and then that's one of the first pages on it um uh the team so the you know this is probably the part that everybody's most set up for right which is um make sure that your team itself running the business is prepared and ready to actually go down this path it's going to be distracting it's going to take a lot of time it's not just a Finance and Accounting thing that was one of the mistakes we made we said oh we think you know this is really going to take be mostly about the Finance and Accounting teams but it actually does suck up a lot of the rest of the company to get involved in the whole IPO process uh know that know that up front make sure your team is ready for them um uh Finance uh this is on the left the two little two boxes that's what our finance team looked like before we started down the path on the right that's what our finest team looked after the path uh yeah Finance is kind of an important part of going public it takes a lot of people you have to have a whole structure processes systems people um yeah don't don't think you're going to go public with a part-time CFO um uh the other part The Syndicate um the banks so um there's a whole Art and Science of picking the banks that take you public uh you know you hear about Goldman Sachs and JP Morgan those are are appropriate uh potentially if you are going out and raising a billion dollars in capital if you are uh you know 50 60 100 million dollars in in revenue and you're raising 100 million dollars those banks are going to give you the C team um if you go with them and they will drop you at the uh in a second if they have a different opportunity they're not the right fit um so you have to find the right banks these are the actual banks in the ordering and everything um there's a whole ton of crazy stories around how you how you pick the banks but the one thing I'll leave you with is um the I didn't make this quote up somebody else did but it wasn't with me which is you date your Banker you marry your analyst um so the bankers they drop in they take you public they leave the analysts at these banking firms are who are hopefully going to be with you quarter after quarter after quarter after quarter and so when you're picking your Banks you're actually picking your analysts um so start with the start by looking at the analyst then pick the banks um okay other things uh building teams um so the board um we had five Founders the five Founders were the the board members for like you know 12 years with me um when when you go public you have to have an independent board the Insiders are not independent um so you have to have Recruit new people who are going to be your independent board members um lots of interesting tidbits about how you pick board members one thing that I'll share with you is uh I had a friend who said oh I know the you know this board member who's a board member of Google do you want to an intro and I was like yeah that sounds amazing to get a board member from Google and then what I realized talking to to some people who've gone through the experiences that's not who you want um because if they're the board member of Google how much time and focus are they going to give you as a board member of your company right so um you want board members who are really going to be deeply invested and care about you and your success and become prepared and everything else um so those are the pick those kind of board members um okay the other the the rest of the team Auditors lawyers um as part of it um we picked BDO one of the things I learned is we had an auditing firm uh you know what you can't have just any auditing firm when you go public you have to have a pcaob auditing firm there are only certain auditing firms that are that do that so yeah you have to pick one um Gunderson Detmer was our lawyers love them they did a great job with us um uh certain lawyers have gone through the process of taking companies public they have to be have have done that for this part of it um I also really loved Third Creek advisors Adam he's an IPO advisor he helped us learn a lot of this stuff he was awesome I totally recommend uh him if he uh if you're going down this process um okay um so those are that's the team right so the inside team the the bankers the lawyers the accountants and Etc um building resilience so like everything and like many of you probably experience day-to-day something goes wrong all the time right um so uh in our case a few of the things that went wrong uh The Syndicate of banks collapse we have to redo The Syndicate uh we had a keyboard member that had to leave uh during the during the IPO process one of our key Partners who was involved in our IPL Road show uh launched a competitor like a week before we uh we were going public wait what um uh the SEC the person who was in charge of reviewing our S1 document after years and years and years that the SEC leaves right and retires Midway from the SEC um during the process um disappearing banks no this is not svb um this was uh you know a couple years ago one of our banks decided Midway through the process you know what we don't want to be in technology anymore we're getting out of the tech space what um something's going to come up you have to keep kind of plowing forward um okay executing uh so the actual process you've got your S1 you've reframed your store you've got your team you've got your Banks you got all that um uh testing the waters in 2012 the jobs act allowed companies to file confidentially and talk to investors about the process of going public yay so the you know the bank said hey this is testing Waters you're just kind of getting feedback and everything else um the testing the waters you're talking to investors and when you talk to the investors if those investors don't come back and tell the banks hey we're very excited about investing in this the banks go and I don't think that there's an IPO here to be done so you're not you're not just getting feedback this is a real real trial run kind of like the law speaker said about whenever you're talking to VCS it's it's not just coffee same thing with the with this process um uh the road show itself so this is a screenshot of the S1 most of the pages not all of them um the key thing with the road shows you've got to to convert this you know 150 pages of uh S1 document is something that is a compelling story and um and uh two that you can tell to investors in something like 20 30 minutes it's like a lot of other pictures you have to convince them that the money they're going to give you means you're going to um grow and perform faster uh the one of the differences potentially is that the that story they're going to follow up on every single quarter and go hey you told me this story how's it going um okay um then you're you get to ring the bell by the way it's really fun you know in Times Square you get to actually point the button I don't think it's actually connected to anything but it's fun they have the whole um they have the whole like uh pop thing and everything um I'm pretty sure it's not connected to anything because if it were then if you missed the button um which you do practice by the way um uh uh the market wouldn't close at uh on time and that's probably not what they they're gonna what happened um but there's a whole process in picking um uh like the day of the Russia like uh the day after virtual you have to decide who are you actually going to sell your shares to so you've gone out you've pitched a whole town of investors some subset of them have said yes I mentioned that I would like the following allocation and there's a whole Art and Science around um these investors have said I want 20 million dollars and these investors have said I want five million dollars do you give them five do you give them 20 do you give these five do you give these a million um and and you uh something that was non-intuitive is you want some of the investors who are actually going to hold for the long term but you want some investors who are absolutely not going to hold for the long term and part of the reason you don't want to hold for the long term is if all of your investors held for the long term there are no shares on the market no volume no trade um so it's a you actually want a mix of of types of investors um okay so yay went public you know what happened the day after we went public the market exploded and everything went to um so uh you have to get ready for the fact that you know the market conditions change and and when we were on the road show every single solitary conversation was hey how can you spend more money to grow faster that was the only thing anybody cared about our very first earnings call which was like two months uh later nobody was asking that you know what everybody was asking how can you spend less money so that you can get to cash flow break even faster right um you're still building the the company so you got to just kind of focus and make sure that you're you're continuing to execute on whatever makes sense for your company being careful not to get too swayed in any direction by what what's happening in the public markets um so for us what that meant was you know just continuing to focus on we've got this computer backup business we're going to keep continue to sell Cloud backup we've got this B2 business we're going to continue to focus on cloud storage the one of the things that it changed was you know we leaned into the fact that a lot of customers started saying how can we save money off of our existing infrastructure and we're like hey you know what B2 is a great way to do that and that's how we can continue to execute into that um Okay so I think that was 18 and a half minutes um or 15 years going from bootstrapping to IPO um so talking a little bit about why you can bootstrap why that's a good path to IPO which most of the banks will be like no no no you have to raise money um how you prepare for it how you execute on the IPO um obviously there's lots and lots of stuff behind here I'm starting to write a little uh blog posts on our back boys.com blog going into more detail on each of these things so if you're interested in these paths you know come come check out our blog on the various pieces um all right I'm going to be here for the rest of the day happy to answer questions and and anything okay thank you guys [Applause]

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 boating one of the largest and most of 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 back place 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 a lot of different people what we started doing was very very simple we just backed up your laptop or desktop over the internet it was 5 bucks a month it's unlimited backup we backup all the data on your computer we backup your external hard drives and the key thing there was to make it easy so when we what we found was that even though backup options have existed forever when we asked our friends and our family and our Coker's what do you do for backup the general answer was mmm yeah 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 of their business files so we we started with this you enter an email address a password you click install that's it you're done we backup 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 will 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 so very cool ok and what's the pricing models if your place asks it's your place ass it's 5 bucks a month 50 bucks a year 95 for two years and so that's what we do for both consumers and businesses we backup 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 Microsoft offering but one quarter of their price point and so and you said he's good yes you can use that for all sorts of things you can you can host your applications you can upload media to stream you can backup and sync your NAS devices your knowledge boxes all sorts of things and you've said you've scaled today up to 20 million in ARR is that accurate today yeah it's actually 30 million ARR today oh great look we're growing quick very good so 30 million a day it's about 2.5 million per month and where were you about a year ago so we closed last year 20 million in revenue okay got it 2017 growth rate was about a what 60 70 percent we're growing about 50 percent you're on your yes for every percent here that's that's great so walk me through more of like the growth strategy let's start from the beginning when did you launch the company we launched a company ten plus years ago in 2007 2007 and where were you at that point I mean were you like a were you like a broke college student needed to do something so you jumped into this or what were you doing before that no we actually so five of us started Backblaze together we were we all have actually worked together for about 20 years so we did a company back in 99 during the first dot-com boom it was a traditional venture funded company we built it it was bought by excite at home at the time we worked there than we did another did that did that deal make you guys rich or know it was a bad 99 collapse kind of thing yeah it was a great deal we 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 so how much raised seven hmm it's actually great quick build and I have to ask this because it was 99 where you post revenue or pre revenue revenue what's revenue you'd have any revenue no revenue no customers unbelievable hadn't launched it so built a good team build some good products and bought by for a large chunk of change now the problem was that excite at home even though they were a public company ended up going out of business most of us had shares in Excel most of that deal was a stock deal yeah I see so you know some people made money off it some people made nothing offered but the that was the first company then we did another company called male frontier which was an email security company which was again it was a traditional venture fund company went through four runs of funding how much total raised twenty three and a half and so we that company was acquired in 2006 we worked at the acquired company for about a year and then the fiber was decided to start back plays we and we did this one differently so well hold on before he in the back place what was the sale price in oh six about 30 mil okay so as that one was about flat assuming one excavation preference that one that one you guys made some money but not not fly out on a private jet money all right so Backblaze is your jet money that's what we're building today so the so we decided to do back ways differently we instead of raising funding from beginning we five of us actually quit our jobs we committed to each other for one year no salary put a little bit of money into the company and it's a little bit how much it was a couple hundred K total between all of us time so really not I mean not a lot and the the idea was that if you try to raise funding from the very beginning one is you end up giving away a lot of the company you spent a ton of time trying to raise funding you end up giving away control as well as well solution and you start building a culture which ties yourself to raising funding all the time yeah and what we really wanted to do was build a culture where people all felt like we need to build a business where each customer matter is revenue from customer matters margin matters and you and it's a real business and so what have you raised to date still bootstrapped mostly so we've raised a total of three million okay that's fair and so you're trying really hard to hold out but something gave way you had to raise a couple million when was that what year in my days so we went for one year with no salary put a little bit of money in no raise we and then we decided that every half year we would me as a management team and talk about whether we should raise our businesses is very capital-intensive we have to buy storage servers and hard drives for all of our customer data and at this point we are storing about half as much data as Dropbox so it's it's a huge amount of infrastructure and so we have to pay for that somehow and so we we raised a small 350 K round in 2009 from friends and family angel type people including the co-founder of VMware the head of adwords engineering at Google some other friends and family and that was the only funding for the first five years of the company in 2012 we decided to raise around we took two and a half million into the company and from a company called TMT investments and the reasons we did that were a couple fold one was that at that point the company was doing millions in revenue had a lot of customers that dependent on us and we were still operating in much the same way that we had originally which is spending every single dollar that came in on either servers or salaries and so we had no money in the bank account at any given time and the thing that came closest to putting us out of business in all 10 years was actually a flood in Thailand which was not anywhere on anyone's radar screen so what happened so what happened was it turns out that half of the world's hard drives were made in Thailand and when that flood hit all of a sudden the the global supply of hard drives dried up it became very very expensive to buy hard drives and so all of a sudden we're buying a thousand drives a month and our price doubles what was the price of a hard drive before the flood so call WA 200 bucks and after yeah so you know you're looking at spending an extra 200 grand a month in cash to support the business you're buying a thousand we're writing about a thousand yeah and so it's a lot of money all of a sudden to come up with him and we just felt like we were running it a little too close to the - not bad the the amount so we wanted to read little bit money to put some money on the balance sheet we also wanted to try to run some marketing experiments we had grown completely organically up into that point what's your what's your attack today what are you spending to acquire customers so it depends on the product line but in rough numbers will will spend about somewhere between six and twelve months worth of revenue to acquire customers okay so if it's five bucks a month your spend and call it anywhere up does maybe sixty bucks to buy to acquire them you put the computer back up customer yeah okay got it and a cheaper customer might be you know okay I guess five times yeah I mean it still fits six months obviously it's thirty bucks that's that's you're talking about your lower our pool customers yeah and on the beach you side the cloud storage side that one is completely usage dependent so some people so you can use it would be two for free will give you ten gigabytes you can just use it for free as long as you want and so for that for that service it scales you know some people use it for free and somebody will pay us a hundred grand a year and what what's the customer account today how many they're about half a million yeah five hundred thousand times five bucks is about 2.5 million a month or 30 men in ARR that's we get that in numbers you know tell me about churn so on the so in general you probably know this but consumers in general on saw services tend to turn the highest and businesses churn it at a much lower rate and and large business return an even lower rate our consumers churn at only about ten percent a year that's gross the logo churn gross individual customer churn so they but you're not adding up the revenue that's just logos it's a number of logos not dollars exactly and so so revenue on the business back up side is actually increases doesn't not decrease yeah so we make more money from you from customers that add more license then we turn yeah so what's so what's net revenue retention across your entire base each year over 100 I don't actually have that at my fingertips I do different things for different product what it's over 100 yeah okay very good and then in terms of obviously talked about payback period and kind of your propensity their lifetime buy is always tricky do use lifetime value at all to guide your decision making so we do for the business racking computer backup consumer computer backup side of things so in in rough numbers a a consumer is worth about $400 in lifetime revenue to us and on the business side it just depends how many licenses they sign up or how much storage they decide to purchase from us yeah make sense let's wrap up here some team questions how many folks on the team today they're about 70 70 and or is everybody based people are based mostly in headquarters in San Mateo California though we have a number of people near our data centers out in Sacramento and in Phoenix Arizona and then we have a smattering around other places I actually won't ask one last question I think it's important you guys put off raising any significant capital for as long as you possibly could which ideally gave you should have given you leverage in terms of you know getting less dilution when you did raise are you comfortable sure when you raise that 2.5 what valuation we're able to raise that back I guess it was in 2012 so in 2012 was about a 25 million valuation pre or post mm-hmm I think that was pre Sousa pretty money name I thought I might that's okay so good yeah 25 pre 27.5 post 2.5 million raised look that's really healthy right so you're only selling 10% of the company that's not a ton of although you have five people so that's you're already kind of diluted but it sounds like it's a rockstar team yeah it's a great team when we every single person that started with us ten years ago is still here today so it's amazing it's it's it's been a good a good group all right Gleb let's wrap up with the famous five number one what's your favorite business book so one that I really liked that a recently read was called five dysfunctions of a team yeah that's a good read cover a good one number two is our CEO you're following or studying right now there is a CEO that I'm a huge fan of his name is Tim eaves he's not famous he doesn't read business books or anything but he's an amazing CEOs company so he's done a few his current one is the armor the armor very good number three is there is a favorite online tool that you have for building your business I have favorite online tools for building the business you know I have to say that a Google sheets okay hey revolutionary stuff here globe thanks for an answer all right number four how many hours of sleep to get every night I actually sleep okay I get about seven seven five hours of sleep I we have my my wife's actually incredibly helpful in in in allowing that to happen so married and how many kids - two okay and how are you I'm 44 44 last question what he was your 20 year old self new my 20 year old so you know what I really wish that that I knew was to to be more conscientious about both about about friends and and co-workers so I'm generally a friendly person I'm and and if people are friendly I'm friendly with them but I you know they're I wish I had been more specific about the people that I really liked and that felt like they were just great people in more consciously investing in those relationships guys there you have it invest more those relationships that matter they're doing thirty million dollars today growing about 50 percent 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 five dollar plan to help you back up everything you've got in the cloud they have now five hundred thousand paying customers paying five bucks a month there's a big flood in Taiwan in 22-hour Thailand in 2012 that doubled the cost of the product they were buying from Twitter books up to four hundred bucks so they said he know we can operate on a margin anywhere anymore we've gotta raise some money they raised three million bucks so pretty capital efficient economics are healthy ten percent gross logo turn annually over a hundred percent net revenue retention with their team of 70 people based mainly in San Mateo glub for taking us to the top Pink Floyd sheriff you