How Wasabi CEO David Friend grew Wasabi to $160.1M revenue and 23K customers in 2024.

just got done editing this interview you guys are gonna love it before i do that though i want you to know that i'm going to be in the comments for the next 30 minutes or so answering your questions if there's additional questions you want me to ask the ceo next time i interview them leave them below or if you're just loving the data points i get ceos to share click the thumbs up button below that's your way of telling me you're loving this stuff and i'll get you more of it additionally again i'll be in the comments answering any questions you have all right for 30 minutes enjoy the interview hello everyone my guest today is david friend he's the co-founder and ceo of wasabi the hot cloud storage company that delivers fast low cost and reliable cloud storage prior to wasabi david co-founded carbonite one of the world's leading cloud backup companies he's been a successful tech entrepreneur for more than 30 years david you ready to take us to the top you bet all right you win the award for the most bankable last name i've ever had on the show so you're already a step ahead huh yeah but don't make any jokes the second step is you co-founded carbonite so you are not new to this space what is wasabi doing differently than carbonite and other cloud providers well wasabi is just plain storage so our product is exactly the same for all practical purposes as amazon s3 which is amazon's uh leading cloud storage product uh but wasabi is one-fifth the price okay and help me and i kind of put this on a timeline for me when do you launch the company so uh the company was launched about three years ago we we brought our product to market about two years ago and uh since then um you know we've grown rapidly we have about 100 employees now we have about 15 000 customers and uh and about 1700 channel partners and technology partners people who sell wasabi bundled with uh with various products how do you structure the the agreements with the 1700 partners um the the partners are for the most part resellers msps and so forth so they might be selling backup products like veeam where they might be selling video surveillance products like uh milestone for example and um and the technology partners are asked to provide a complete solution to the customer so they might say okay to do your backups we're going to sell you veeam software and we're going to sell you wasabi as the storage place to store your backups okay and can you give me a general sense i know with hosting you can have people spending a dollar a month or a million dollars a month where's your sweet spot on average what are customers going to pay you per month well typical a customer doing backup for example uh might be storing 50 or 100 terabytes of data and wasabi is six dollars a terabyte per month uh compared to twenty three dollars per terabyte per month for amazon s3 for example and uh so you know a customer with 50 terabytes or 100 terabytes might be spending 300 to 600 a month but we have some very large customers as well you know people like some big universities and so forth who are storing many petabytes and uh you know so petabyte is a thousand terabytes so the six thousand dollars a month for uh a petabyte of storage that's a million gigabytes so it's a lot of storage any customers where you look at the annual contract value and it's north of a million [Music] um don't know yes but yeah and of course there'll be more and more of those because the amount of data being stored in the world is just exploding and uh a petabyte of data used to seem like an unimaginable large amount of storage but we sell that much storage every couple of days now and is it really just price point or are there other kind of feature based reasons people are are coming to you it's primarily price and performance so we're we're cheap and we're fast and we're extremely durable we have what's called eleven nines of durability which is the same as amazon s3 and uh if you put that in human terms if you gave me a million files to store the probability of my losing one would be once every 659 000 years so unlikely let's put it so david if that's the case i mean what prevents amazon can afford to lose more money than you so why don't they why doesn't amazon give up all their margin undercut you and take all your customers well i wouldn't want to be the person that walks into the cfo's office at amazon and says uh gee i think we ought to wipe uh four or five billion dollars off the top line because some little company in boston is running annoying advertisements um you know that that typically doesn't happen and you know the history of american uh industrial history is is full of cases where companies come in and sell something that is similar to what somebody else has but at a disruptive price and it's very hard for the incumbents to just drop their price and see their whole business model have to change well it's easier to do that in software though amazon's done it in diapers which have a higher cost of goods sold than software so it might not be four or five billion a market cap but if you go to a significant scale amazon would pull this trigger into i mean they wouldn't hesitate i don't think or they might buy us there are lots of solutions so why would they buy you when they can just decrease their price it's probably cheaper to decrease their price and just undercut you on price we have a technology advantage amazon's product okay you didn't i see you didn't tell me that what's the technology advantage and the technology advantages we've written our own file system which takes advantage of some new kinds of storage technologies and at carbonite where we were backing up a half a billion files every day we learned how to do storage really really well and really efficiently uh so we use a very high percentage of the available disk space we make the disks we have some tricks that we do that make a disk last significantly longer than it's supposed to last uh so the amortization spreads out over a longer period of time so there's a lot of things we learned at carbonite as to how to really cut the cost of cloud storage and we've implemented that and for amazon to simply drop price they could do it but unlike diapers you know storage is a multi-billion dollar product for for amazon and it just seems unlikely to me that they're going to do that so david i think you're going to say unlike diapers uh cloud storage is not a shitty business that would have been a home run that would have been a home run when i would have ended the interview right there done uh credit for that joke all right so uh now look can i do the math 15 000 customers 300-ish sweet spot per month you have some that are probably way bigger and you have some maybe that are smaller but that puts you at like 4.5 million a month in terms of recurring revenue is that about right well i can't talk about our revenues because we're still privately held and you know i just don't want to go there okay well i'm only kind of multiplying numbers you already gave me though right so we asked arpu and you said it was around between 300 and 600 bucks and you said 15 000 customers so i'm not i don't want to make up any data here i'm just multiplying those numbers you gave me is there any reason those wouldn't be accurate uh no but okay you know you're trying to force me to tell you what our revenue is i can't do that i'm not necessarily looking to do that but you already gave me two hard data points you said 15 000 customers and a 300 rpoo the way you'd calculate revenue is multiplying two numbers you already gave me so since i'm only multiplying because you already gave me them all i'm asking is is there any reason that i asked what our sweet spot is and and i'm just saying that we have lots of small customers we have a small number of big customers but the customers that we like the customers that we go after in that sort of 10 to 100 terabyte range that's where most people tend to end up we don't we don't actually go after smaller customers but you know anybody can go to our website put the credit card in and uh and sign up and start using wasabi so so where did you get your first one you said you kind of started writing code and for this in 2017 went to market in 2018 is that right yeah and then well my my co-founder jeff flowers who's our cto had been thinking about this new storage architecture for a number of years so uh you know this was something that had been bubbling up in his mind and i i don't know when he started thinking about it but clearly quite a long time ago what i'm trying to get at is when i when our interview entrepreneurs especially an entrepreneur has already been through the ringer once is trying to understand how they think about risk pre-revenue in other words how much money they're willing to spend to build up the mvp before their first dollar revenue i'm curious how intensive that was for you do you have an idea did you spend two three five million building the mvp more than that okay um and we've raised 80 million dollars to date and uh you know we funded the development pretty much out of our own pockets for a while we made a lot of money off carbonite and in fact jeff and i have had five companies together prior to to wasabi so uh you know we don't really need to go raise money to start a new venture and in in addition to that we have a lot of investors who've made money with us in the past and they typically are standing there with their open wallets saying whatever you guys are doing next let us know because we'd love to invest um so but it's it's uh to build a product at this scale takes a lot of money uh can you quantify that a range is fine i mean we're talking like 10 to 20 million or something on mvp yeah yeah that's right in that range to build the product and then you know and and to and market it and to get it stable is is a lot more you know our business model is a lot like building apartment buildings you know you build the building you fill it up with tenants when the building's 70 percent occupied it starts making money and then you build another building and we build a data center we fill it up with customers bits and when it gets to a certain uh occupancy level so to speak uh we build another one so that data center sits on your balance sheet then oh yeah so i mean you we're we'll have hundreds of millions of dollars worth of capex on our on our balance sheet um you know within a short number of years yep was there no way to do this leasing space why was it important for you to actually own the data centers oh we don't actually own the buildings i mean we go into equinix and flexcentral and iron mountain so we're in a number of uh of different companies data centers around the world so we have data centers here in the us we have data center in europe we have data center in japan um sorry david when you say you have a data center that means you own the data center right no no we're in a colo facility where we own a cage it's a wasabi data center but we're in somebody else's building we don't want to be in the physically in the real estate business okay so the 100 100 or millions of dollars of capex on your balance sheet if it's not the real estate of the data center is that just like add up all the cage the cage infrastructure inside each data center thousands and thousands of disk drives computers all kinds of other stuff networking yeah i see okay so let me just repeat this fair to say you spent you guys spent between 10 and 20 million bucks pre before you had first dollar revenue just to build the infrastructure you then start bringing on customers how did you get the first 100 do you remember the first hundred customers yep uh we started to advertise people came to our website put their credit cards in and that was that what terms did you target what how did you how did you ever where did you advertise in what terms if it was like a google ad what terms did you target yeah we did a lot of google advertising so if you went to search for amazon s3 wasabi would show up if you went to search for object storage wasabi would show up and we did radio advertising we were on npr we advertised in lots of computer publications both online and in print uh so you know we just we spent uh you know a couple million dollars and blasted our name out there and continue to advertise fairly heavily although nowadays more and more of our business is going through the channel and so we're we're de-emphasizing that and spending more money now supporting our channel partners so would you say last year in terms of oh sorry go ahead yeah i was just gonna say you have to get some customers before the channel partners are going to get interested in you but we're a completely channel focused company got it when you were ramping up ad spend on the early days uh let's just look at last year 2019. it sounds like you spent a couple million on ads but obviously that's declining this year more reseller focused yeah instead of advertising on npr we might be advertising in channel reseller news or something like that i see or co-op advertising with our channel partners or working in trade shows things of that sort so we're redirecting more and more of our marketing dollars towards the support of our channels so if i'm a reseller for you what does the resell agreement look like is it a 30 kickback or is it paid per lead or how do you incentivize them um yeah they get a a a a a discount or or a margin on any channel any cloud storage that they sell and so typically our resellers are people who might have sold uh an emc box or a netapp box or something like that as a way to provide storage to their customers customers are coming back nowadays and say gee do i really want to own all that hardware or is it time to start thinking about moving our storage to the cloud and we want to make it possible for the channel partner to sell cloud storage and make the same kind of margins that they would make if they were selling hardware okay and at the same time the customer saves a lot of money typically you can store a petabyte of waste of data in wasabi for less than just the annual maintenance on a on the equivalent amount of hardware can we quantify this so if a customer goes direct to your website and buys the equivalent of 100 or a month worth of storage if they go through a reseller partner instead how does 100 flow through the system do you sell it for 100 to the reseller the reseller can mark it up whatever they want the reseller typically will sell it for the same price that we would sell it for they get a discount so you know they get a a reasonable margin on that is reasonable like you're talking like 30 40 50 something like that similar to what they would get on hardware okay i'm not familiar with what that is it can vary from 15 if you're a very small uh reseller up to a higher number and i i can't disclose the highest number but nothing nothing above like nothing above like 50 right okay got it so between 15 1 5 and 5 0 depending on how big a reseller you are that's the discount you're giving and if you're a technology partner for example we have some companies that bundle wasabi in to uh into their products and sell a complete solution wasabi is kind of hidden behind the scenes so to speak so they can charge whatever they want for the storage so you know there are products out there that you would you would probably buy or use and you would never know that it was wasabi that was storing the data um you know like photography programs and things like that and the cost of the wasabi is bundled into the into the uh to the vendor's product and they can they can make whatever they think the market will will bear yep no this is obvious this is obviously a hot space you know one of the companies a lot of people are watching very closely is snowflake uh in this space for potential you know s1 filing this year they really only price against again one utility metric it sounds like you're doing the same you're pricing against kind of one utility metric is that accurate yeah i mean i think wasabi is uh is uh probably a forerunner in the sense that we are we see storage as being a commodity it's like electricity or bandwidth you know it's just something that should be available to everybody there's no reason why people should have to go out and buy their own storage hardware any more than they would want to build their own electric generating plant you know out back i mean that used 150 years ago people did have their own generators out back you know every one of these old brick factories in new england had a power plant out back but you know nowadays you wouldn't think about that and i think if you look forward five or ten years in this market when people need to store data they're just going to assume that there's something someplace out there that's cheap and fast and and accessible with a standard interface that everybody can use and that's kind of our vision of where the market's going to go david as we move towards dropping up here a couple last questions for you 100 folks on the team right now how many are engineers i would guess probably 40 50 something in that nature and it sounds like most your sales are coming from resellers but do you have any people full time that are account executives you know quota carrying sales reps yeah uh in europe we're 100 channel uh because we started that way but we already had primary demand built up in europe in the u.s uh we still have an in-house sales team that sells direct and i think there may be a dozen people on that team and so forth so maybe 10 12 people that actually carry quota right okay and then fast forward other economics here uh any storage business you always like to look at what expansion revenue looks like right they get addicted to you they start using you more and they expand hopefully naturally without you having to touch them when you look at those numbers free what does they look like i mean do you have a net revenue retention in the 121 30 range um yeah the the 2018 cohort of customers grew 70 from 2018 to 2019 and it looks like they're going to grow about the same amount from 2019 to 20 to 2020 as well okay so ever every customer we have almost without exception is adding more and more data um david is that 70 on a gross or net basis uh well that's gross i mean most people are paying the same price they're all paying six dollars per terabyte per month whether they buy through a reseller or whether they buy direct i guess my question is of the cohort from 2018 that was paying you some of them potentially paid for less storage but others expanded to the tune where when you add those two together it's 70 percent growth or 70 before you take away any any lost revenue downgrades oh no the uh the average 2018 customer grew the amount of storage seventy percent year-over-year net so that if they've deleted stuff uh that would come off okay so that's that is that is a net number that's great so basically what i'm hearing you say is about 170 net revenue retention uh which is obviously i would consider that world class very rarely do i hear anything above 140 in the sas space so it's a testament to the business model and the product market fit all right you know every time you turn around you need to store more stuff so it's it's surprising how fast if we never sold another customer uh you know we think that kind of growth with the existing customers would continue for some time yeah that's good no it sounds like obviously you're burning capital to drive this kind of growth a guy like you that's been through the ringer many times many many financial encyclical cycles what are you comfortable with right now burning per month to drive this kind of growth well i wouldn't disclose that but it's it's probably less than you would think what do you think i'm thinking well you know you know what the revenue numbers are you know we have 100 uh 100 employees so the burn rate is going down the real burn rate for wasabi is just capex okay and and you know so in the future you know the charge for my cfo will be can we get debt financing yeah that was my next question why take dilution on 80 million when you have so much on capex why not keep your equity and do debt financing from the start exactly you need a certain amount nobody's going to lend you money if you don't have some equity capital underneath yeah you're david friend though you're going to whatever you touch is going to turn to gold i'd give you debt on day one we're actually doing pretty well on the debt side but you have done already maybe not for that very reason but perhaps that has some contribution there we have good relationships with lenders who made uh a good a good amount of money on carbonite and they're back to back the next thing that's very good uh in terms of growth rate year over year is it basically that 70 percent you're going 70 year over year well our revenue growth rate's about 5x year over year so uh we're growing very rapidly we're growing you know typically 15 to 18 month over month right now okay now that's obviously easy with smaller numbers if you're at a 50 million run rate right now you're not going to five x year over year i don't think correct well we'll see what happens i mean we have some uh we have some uh customer prospects right now that if we win them are bigger than the entire company so you you feel like it's possible then but i do see i i do see that a business like this can scale pretty quickly because it's really just a matter of deploying more storage that's right and so if a customer shows up today that is bigger than the whole company we'll scramble around and figure out how to add more equipment it takes about 90 days to build a new uh a new storage facility and so that's not a whole lot of time yeah so it is possible for this thing to keep growing at a a multi-hundred percent uh annual growth rate yeah just obviously it gets harder right i'm taking your three hundred dollar kind of sweet spot times fifteen thousand you won't confirm this but i'm pegging your revenue somewhere around 50 million right now and if it was 10 or 5x year over year growth it means you're doing called a 10 million run rate 12 months ago if you 5x 50 million your 250 million run rate and you'd be ipo'ing right so i would just i would be very impressed if you're at 50 right now in arr and you 5xu over a year that would just be incredible well we'll see what happens very good david all right let's wrap up with the famous five number one favorite business book um i don't have a favorite quizzes book but i i would say getting to yes by roger fisher the harvard law school guy was probably the most influential business book for me because it taught me a lot about how to how to negotiate how to get agreement number two is there a ceo you're following or studying uh no number three what's your favorite online tool for building wasabi online tool for building wasabi something easy i don't know you'd have it's been 30 years since i've done any engineering so any kind of there's all kinds of tools besides engineering tools though just name something you use to keep the company built growing um well you know i mean our financial systems uh net suite which we're putting in is really the key to you know allowing the company to build and operate like a real business and it's a big investment in time and money but um you know we're going to be a big company someday and you know we need tools that are our world-class jewels number number four david how many hours of sleep are you getting every night sleep yep i never use an alarm clock so it's as as long as i as long as it takes for me to wake up which is about how long seven typically seven hours i would say something like that and david what's your situation married single kiddos i'm married four kids i bike i run i hike i win certified i love that how david how old are you my wife describes me as a gerbil and uh i'm 72. well i love this okay take us back to your 20 year old self last question what do you wish he knew what do i wish i knew when you were 20 oh what do i wish i knew when i was 20 um to relax um not take things too seriously um i was a little frenetic guys there you have it wasabi founded carbonite now getting back into the game 15 000 paying customers today launched in 2017 spent between 10 and 20 million dollars to build his mvp with his good buddy they've launched five companies together had their first paying customer in 2018 now scaling sweet spot for them is caught 300 to 600 rpoos they see 70 expansion on cohorts the company grew over the past 12 months over 5x year over year they've raised 80 million bucks in funding have hundreds of millions of capex sitting on their balance sheet because they actually own cages uh sorry computers hardware et cetera discs inside of these data centers david we're rooting for you thanks for taking us to the top thanks good talking to you these ceos rarely give these kinds of interviews i hit them hard i get the data and i want to do it more so if you want to get more of this stuff make sure you subscribe up here and then additionally go check out one of my other ceo interviews right now