Backblaze wants flames in an IPO – Blocks and Files

Backup and cloud storage provider Backblaze has filed for an IPO and launched its roadshow.

It plans to offer 6,250,000 shares of its Class A common stock to the public at an expected price between $15 and $17 per share.

Backblaze was founded by seven people: CEO Gleb Budman, VP of sales Nilay Patel, chief cloud officer Tim Nufire, server architect Billy Ng, CTO Brian Wilson, VP Casey Jones and software engineer Damon Uyeda. The website lists and lists seven founders:

Information about the founders of the Backblaze website.

However, the SI filing states, “Backblaze was founded… by five founders… Gleb, Brian and Casey, joined shortly afterwards by Tim and Billy. … The first two [co-workers] after the five original founders deserve special mention as demi-founders: Damon Uyeda and Nilay Patel. That clears that up.

Backblaze’s filing also says that the founders “formed a salary tontine in which, until the public offering was completed, a core group of the original founders and some other very early employees agreed to earn the same salary. This solidarity has helped us build and sustain our culture during the first 14 years of our evolution.” This provides insight into the somewhat unique corporate culture at Backblaze.

The company was founded in 2007 and decided not to go the venture capital route, preferring to start its business. Consequently, funding events are scarce: $300,000 in 2009, a $5 million A round in 2012 and a $2 million event in 2020 plus a $10 million convertible bond round in August of this year. That’s only $17.3 million over 15 years.

The filing states: “Our operations have been historically efficient with limited outside investment. Prior to the issuance of $10 million in convertible bonds (which we also refer to as a Simple Agreement for Future Equity (SAFE)) in a private financing round in August 2021, we had less than $3 million in external equity raised.”

hmm. A 2012 Budman blog states that Backblaze has received $5 million from TMT Investments.

There are two main products: B2 Cloud Storage and Computer Backup. The main competition comes from the three major CSPs: Amazon, Azure and Google. Backblaze also lists on-premises offerings from Dell EMC and NetApp as competition.

Backblaze has gathered more than 500,000 customers, mainly in the mid-market, located in more than 175 countries. About 28 percent of revenue comes from outside the US – this is a global business. It says it has an annual recurring revenue (ARR) of $65 million with a net retention rate of 100 percent. Backblaze’s current annual revenue is $64.6 million.

Backblaze earnings and profit/loss figures from the S1 application.

The company has relatively low sales and marketing costs. The filing states, “We have a highly efficient go-to-market model based on a cash-and-carry sales movement. Potential customers find us through a variety of channels, including our website, partners and brand advocates. We’ve fostered deep community engagement with valuable content we share on our blog – over 3 million readers have used content we shared there in 2020 alone.Our content drives organic, inbound traffic that we believe serves as our greatest source of advocates and referrals.”

And: “In recent years, we have begun investing in a sales-enhanced sales movement to identify opportunities to increase business with existing customers and help larger customers adopt our services. Our sales-supported sales movement has seen significant growth, helping customers who in 2020 were approximately 20 times larger in terms of average revenue per customer than our cash-and-carry customers.”

Virtually all of Backblaze’s earnings are recurring. It has a land-and-expander strategy: as customers generate, store, and backup more data, they use Backblaze more.

Each cohort represents customers brought to the Backblaze platform in that year.

Here we are looking at a steadily growing company with loyal customers. Backblaze expects to launch new products alongside its current offerings, giving it the ability to further cross-sell and upsell — and grow more.

We think a similar and likely competitive company is that to be owned by private equity. It provides cloud backup services to more than a million small and medium-sized businesses (SMEs) through more than 17,000 Managed Service Provider (MSPs) partners. Datto held its IPO in October last year, raising $549 million.

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