Building a Sustainable, Capital-Efficient Business: Backblaze CEO Gleb Budman (Part 2)

Sramana Mitra: What year did this acquisition happen?

Gleb Budman: It happened in March 2000.

Sramana Mitra: Good timing. What happens next?

Gleb Budman: I worked there until it went out of business. It was going to get acquired by ComCast and I was on the team that was working to package the assets for sale. When they shut down fully, I left. This was in 2002. The Valley was pretty much dead. I had been working crazy hours for a few years at that point. I decided to take time off and went traveling for four months. I had a fantastic time on my travels. I was living on $5 a day. I was having a luxurious lifestyle sitting on a beach in Thailand, and traveling to New Zealand.

While I was on the beach in Thailand, I got an email from one of the people from the previous company saying, “Hey, we’re starting another company. Come back.” At this point, I was staring out at a beautiful sea with warm waters. I was certain that at $5 a day, I could pretty much retire here for the rest of my life. I said, “It’s tempting. I definitely want to come back and help, but I’m not ready yet.” About a month or so, I got an email when I was in New Zealand. It was from the same person.

A few months later, I was back in the Bay Area. They heard that I was back in town. At that time, I said, “I’m not sure. I still want to do more traveling.” They were like, “Don’t work. Just come for coffee.” Fast forward two weeks, I was sitting in a chair in a small office helping get the company off the ground. That company was called Mail Frontier. It was started off in the anti-spam space. The two co-founders of that company were Pavni Diwanji and Brian Wilson. I headed up Product and Marketing. It company was a traditional venture-funded company. We raised over $25 million over four rounds and transitioned from being a consumer to an enterprise company. We went from being just a pure anti-spam company to a full enterprise email security company, which provided both inbound and outbound protection from spam, viruses, and compliance. The company grew to be about 100 people. We had several thousand enterprise customers who were using us. It grew quite well. It was a real company with real revenues.

Sramana Mitra: Yes, I remember Mail Frontier.

Gleb Budman: One of the things that I’m proud of with that company was it really provided good service. Customers would regularly email us and thank us. Their CEO or VP would get obnoxious spam emails and would just finally walk into the IT department and say, “I’m done. Fix it.” The IT department would start looking for solutions and they would try a few different offerings. When they tried Mail Frontier, it usually worked great for them. It was easy and it worked. They would send us these love letters saying, “I went from being almost fired to now being a person that people love in the company.” When you’re spending all day and all night working on something, it’s a really nice feeling to get that gratification.

Sramana Mitra: What year are we talking now?

Gleb Budman: That was from 2002 to 2006. Then in 2006, Chronicle acquired Mail Frontier.

Sramana Mitra: Do you remember what price that was?

Gleb Budman: It wasn’t the heyday anymore. SonicWALL acquired Mail Frontier for $31 million. It was an interesting learning experience for us. The company was doing well and growing pretty quickly. It had great reviews and great customers. I think what happened was, at some level, the Board had various reasons, mostly unrelated to the actual company, for which they wanted off of the Board. When there was a deal on the table, the Board wanted the company to take it. It wasn’t the best deal. We probably could have gotten a better deal if we had worked towards it a little more.

One of the VCs really loved consumer products and we had pivoted out of consumer. One of the VCs had left the firm that had invested in the company. The third VC had a portfolio company that, originally, was in a different space. When they shifted a little bit, we ended up as competitors. There were these unrelated things that caused the Board to decide that, all things being equal, they would like to be out of this investment.

Sramana Mitra: 2006, Mail Frontier is sold. What happens to you next?

Gleb Budman: At that point, I was at SonicWALL. They actually let go of a lot of people in the company including most of the executive team with the exception of the CTO who’s one of the co-founders and myself. We were there to basically transition the company into SonicWALL and build it into a new business.

Right around the time of acquisition, I started getting a flurry of emails from recruiters and companies. I thought about it for a day and decided that I didn’t have the bandwidth to be both looking at opportunities that were and also running and building the Mail Frontier business at Sonic Wall. It became even more busy since we had fewer people and needed to both run the business and integrate it into SonicWALL. I had to make a decision. Either I was going to leave and pursue opportunities or stay and try to make it work, and ignore other opportunities. I decided that, after having spent four years of blood, sweat, and tears working on Mail Frontier, I didn’t just want to leave. I basically turned away everyone that was asking to explore opportunities and committed to myself one year to stay at SonicWALL and try to get it all integrated into the new business.

For a year, I did that. We branded the product. They became SonicWALL Email Security. We did the new SKUs, pricing, and changed the user interface. We educated the channel partners. We did all the stuff that you need to do to make a product successful when it gets acquired. We did that for a year and it was successful. We roughly doubled sales. I wasn’t thrilled working there. It wasn’t my world. I started thinking, after that year, that at some point it was going to be time for me to go somewhere.

Around that time, our CTO had quit from Mail Frontier. I started chatting with him. He had a friend that he helped with IT. She had a computer crash. She was a writer and she lost a lot of things. She called him up, “I need help. My computer crashed.” He said, “No problem. We’ll get you set up. We’ll get your apps installed. Where is your back-up?” She pounded the table and said, “Look! What I don’t need is a lecture.” He was like, “I can’t help you if you don’t have a backup. How could you possibly not have a backup?” We started talking about this and wondered how many people don’t back up their data.

We started asking friends, families, and co-workers what they did for back up. We realized that almost no one was backing up their data and everything had gone digital. Everyone was going to lose everything within a matter of time. This is such a huge problem. At that point, we started talking about solving that problem. The two of us convinced three other people that we had worked with before to also quit their jobs. The five of us committed to each other for one year without salary and to put a little bit of money in. That would be the funding round to start something where we would try to solve the problem that people weren’t backing up data.

This segment is part 2 in the series : Building a Sustainable, Capital-Efficient Business: Backblaze CEO Gleb Budman
1 2 3 4 5 6 7