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Building a Sustainable, Capital-Efficient Business: Backblaze CEO Gleb Budman (Part 1)

Posted on Friday, Dec 4th 2015

I keep harping on sustainable growth, not growth at all cost. Gleb tells the story of his company, built block by block with sustainability in focus.

Sramana Mitra: Let’s start at the very beginning of your personal story. Where are you from? Where were you born, raised, and in what kind of background?

Gleb Budman: I was born in the former Soviet Union in Russia. I was there for about the first five years of my life before my parents were able to get us out, which I’m eternally grateful for. We immigrated through Austria, Italy, and landed in Pennsylvania where we spent about a year and a half trying to make ends meet before my dad got an interview out here in Silicon Valley. He came on a trip out here for the interview and looked up at the sky and said, “There’s this glowing thing in the sky and the rivers don’t catch fire. This is amazing.” We got all of our stuff packed up in a big truck. By 1981, we were in Silicon Valley and I’ve spent most of my time between San Jose and Berkeley and everything in between.

Sramana Mitra: What about college? What did you do after that once you were settled in Silicon Valley?

Gleb Budman: I stuck close to here. I went to Berkeley for undergrad and did Mechanical Engineering for undergrad. I had a lot of interest in robotics, automation, and cars. I did that for undergrad and went to work with GE in their technical leadership program. I applied to business school. I applied to a few different places. One of the places I got into was Berkeley. I was considering going to other places but, at the end of the day, I knew that I wanted to stay in tech. I knew that I wanted to stay in startups. It just seemed the natural place to go. Even though I went there for undergrad, I went there again for grad school.

Sramana Mitra: What year does that bring us up to?

Gleb Budman: I finished my MBA in 1999 right in the heart of the dot-com boom.

Sramana Mitra: What did you do next?

Gleb Budman: I knew I wanted to start a company. When I left GE to go to business school, on the very first day, they asked the question, “Why are you here?” People had various reasons. Some people were there because they wanted a career change. Some people were doing management consulting and it was the next evolutionary step in their career. For me, I knew I wanted to do a startup. I knew I wanted to be in tech.

At that time, for me what that meant was doing something, most likely, in robotics or an automotive type of startup. It was at the height of the dot-com boom in 1997. Responding to the question, I said, “I’m not sure what I’m going to do, but I’m pretty sure it’s not going to be in the Internet because it’s so overblown and overhyped at this point.” I realized within a very short period of time thereafter how far off I was in that assumption. Within about maybe three months of saying that, I was working on a dot-com startup.

Sramana Mitra: What did that startup do?

Gleb Budman: The company at that time was called netRelevance. The idea that I had was that people were having a hard time finding what they needed online. This is before Google existed. Yahoo was there. The internet had grown to a place where there was a lot of content and Yahoo wasn’t doing a fantastic job of servicing what people needed. There was this constant flow where you would start at Yahoo. You would do a search. You would go down the rabbit hole a little bit and realize that it’s not quite it. You have this looping thing until you find what you’re looking for. At that point, Internet Explorer allowed you, for the first time, to build plug-ins in to the browser.

I had this idea that we could build a plug-in into the browser that would watch what you were surfing, develop a better persona of who you were and would co-mingle that data with the search intent that we could see when you were typing the query. By doing that, it would drive you better search results and allow you to access information while you were actually on other websites, and not just going back to Yahoo. That was the company that I was working on during business school. I worked on that right until I graduated from school. If you had a heartbeat and had a CS degree, you were in high demand at every tech startup. Companies were willing to pay you large amounts of money.

I was in business school and I had debts. I didn’t have the resources to just pay for engineers’ salaries. It was tough to get engineers to work on the business. I was working on pitching VCs to try to raise funding but I also knew, through mutual friends, two people who were starting a company and had a similar concept. They had engineers and they didn’t have business people. I actually met up with them and we then worked on a company doing the same thing called Kindara, which had venture funding at that moment. We worked on that company for the next nine months until it got acquired.

Sramana Mitra: What kind of an acquisition was it?

Gleb Budman: This was the heyday of the crazy dot-com boom. We had raised $7 million in funding. We hired 45 people in nine months. We had built two products. People were working crazy hours. We had not launched. We had zero customers. We had zero revenues. We certainly weren’t profitable. The acquisition was for $120 million, which is just a nutty bar.

Sramana Mitra: Who bought the company?

Gleb Budman: @Home. It wasn’t such a bubble thing. It was representative of the bubble in some way. Part of the reason why I believed in @Home was that was one of the two leading web portals. It was clear that the type of services that these massive portals provided were in demand. As the Internet grew, these things and these destinations would be increasingly valuable. On the other side, @Home provided the broadband infrastructure for all cable broadband. If you had cable broadband through AT&T, ComCast, or a bunch of others, it was provided to you by @Home.

It was clear that broadband was the future. People wouldn’t be able to survive without it. In Maslow’s hierarchy of needs, it was going to be food, water, and broadband. @Home had basically a monopoly on cable broadband. The only other option was DSL, which at that point was not as good and not as prevalent. The merger of Excite and @Home seemed like an insanely valuable company which would be one of the backbone companies of the Internet. Of course as you and I know,  the company just managed to vaporize off the planet in 2002.

This segment is part 1 in the series : Building a Sustainable, Capital-Efficient Business: Backblaze CEO Gleb Budman
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