Backblaze Revenue & Funding (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]