Building a Sustainable, Capital-Efficient Business: Backblaze CEO Gleb Budman (Part 7)

Sramana Mitra: Where are you now in terms of the scale of the company? Are you doing over $10 million?

Gleb Budman: We’ve crossed over $10 million a year and a half ago or so. It’s still growing quickly. We now store over 150 petabytes worth of data for customers, which is about a fourth of data that Facebook stores. It’s a pretty significant scale. We’ve done over 10 billion restores. We’ve also helped a lot of customers in getting their data back. The big opportunity for us now is this new offering. We certainly still are going to keep focusing on the pure $5 a month unlimited backup. It’s a good growing business. It provides the revenue and cash flow for the business.

We’ve been investing heavily into this new product. When we announced it about a month ago, over 10,000 people signed up on the waitlist to get in. They have over 250 petabytes of data that they currently store with other cloud storage vendors. They spend about $16 million on that cloud storage. It’s a big focus for us. I think it’s a tremendous market opportunity.

Sramana Mitra: You can move customers off expensive storage and offer them storage at a much lower cost.

Gleb Budman: I think we’ll do two things. I think we’ll move people off more expensive storage and we will provide storage for people who couldn’t afford it before. In this case, it truly is a market expansion play in addition to a competitive replacement.

Sramana Mitra: What do you want to do with the company? When you look at five years out, do you want to sell the company? What are your thoughts?

Gleb Budman: When we started the company, we said that our goal is optionality. We didn’t want to feel forced into something. We wanted to have the option of either running it, selling it, or taking it public. We wanted to be able to make those decisions. By raising venture funding from TMT Investments, we have taken some options off the table. We have to provide an exit for the investment in some shape, which means two things most likely and a third possible but not very likely.

The two most likely are either M&A or going public. The third one is a leveraged buyout where we grow the company into a large company and we buy out the investors at a return that is interesting to them. At this point, we see this very exciting opportunity in front of us. In something like a five-year time frame, I think we can go public. Based on the growth rates that we’ve seen in the company, we think that in the five-year time frame, there is the opportunity to go public. That is what we’re going to aim for. We’ll see how things go as we head there.

Sramana Mitra: Congratulations. It sounds like things are going really well. You’re growing really nicely but without burning huge amounts of capital. It’s very much consistent with our philosophy in One Million by One Million. We really emphasize capital-efficient entrepreneurship instead of this ridiculous amount of financing and spending unreasonable amounts of money.

Gleb Budman: Sometimes raising a lot of funding is required. Companies like Uber simply can’t work. A lot of times, you can do the same thing without raising the funding. You’ll certainly give up a lot in terms of time, focus, energy, management efficiency, and dilution by raising funding. You should only take it if it’s really going to provide a lot of critical value.

Sramana Mitra: Also, what entrepreneurs forget is there are only about 15 companies a year that hit really big in the venture industry. For the VCs, they’re playing this portfolio game and they just need to hit one of those in the portfolio and the portfolio is all set for the next five years. Entrepreneurs are not playing that game. Entrepreneurs are building one company. If that company fails, then it’s several years of their lives written off, resources, and energy. All these things are very valuable and they’re not things that you want to write off that callously. I don’t think entrepreneurs have any awareness of this issue.

Gleb Budman: I think you’re right. A lot of times, especially in Silicon Valley, where there’s so much focus on fundraising, a lot of the entrepreneurs see funding as a goal to and in of itself. What few of them realize is that funding is a responsibility. When you raise funding, what that means is that you have taken on the responsibility of not only providing salaries for your employees and services for your customers, you’ve also taken on the responsibility of providing an exit and return to your investors.

Sramana Mitra: Exit and return at a scale that is not easy to provide. It is not easy to grow a company at an exponential scale. That is the whole point of the venture capital industry. It’s to grow things exponentially. Things just don’t grow exponentially that often.

Gleb Budman: I think what you’re doing with One Million by One Million is interesting. There are an infinite number of businesses that can be started that would provide a fantastic life for the person starting it.

Sramana Mitra: Yes! You can build $5 million businesses. Even if you look at just technology businesses all around the world, there are a million opportunities out there. Those are worth building instead of chasing venture capital at all cost. That’s the point that I’ve been making for many years now. It’s a hard point to make for some reason because the entire media is focused on this funding news.

Gleb Budman: I wrote a blog post a while back called “Don’t Build a Billion-Dollar Business”. It’s not that building a billion-dollar business is a bad thing. It’s a great thing for many people. Because of so much focus in the media on unicorns and billion-dollar companies, you are taught to believe that success is only if you’ve done that. For many people, if that is what they aim for, what they’re mostly doing is increasing their chances of failure as opposed to increasing their chances of building a successful company. A company that’s generating $10 million to $20 million in revenue that never raised funding is an incredibly successful company for a lot of people. If what they do is only aim for that billion-dollar exit, you’re basically playing the odds that it’s going to land on the red and you’re going to hit this one narrow window.

Sramana Mitra: Success has many definitions. You don’t need a billion dollars to have a very good life and make a big difference in a lot of people’s lives. It was a pleasure talking to you.

This segment is part 7 in the series : Building a Sustainable, Capital-Efficient Business: Backblaze CEO Gleb Budman
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