Backblazerevenue, market cap & funding

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