- Backblaze IPO’d at $16 per share after taking in little funding and revenue for a cloud company.
- The company sells itself as an affordable cloud storage solution, competing with the Big Three.
- Backblaze’s CEO says he wants to prove high revenue and VC backing aren’t needed to go public.
Cloud backup and storage service Backblaze debuted on the Nasdaq exchange Thursday, priced at $16 per share and popping 24.38% by the end of the day. But unlike most cloud software startups, it got there without taking on the bonkers levels of venture capital that has become commonplace in the industry. By the closing bell on Friday, Backblaze was trading at $22.04 a share, giving it a
market cap
of $645.18 million.
Between its founding in 2007 and 2020, San Mateo, California-based Backblaze raised less than $3 million in outside equity, followed by $10 million in convertible notes in August. And regulatory filings show that last year, Backblaze booked a net loss of $6.6 million on revenues of $53.78 million — nothing to sneeze at, but it only represents a small piece of a market worth tens of billions.
So what’s the motivation for Backblaze going public now? “We’re actually hoping this shows that it is possible for companies to successfully become public companies without having to wait as long as some companies are feeling they need to wait today,” Gleb Budman, CEO and co-founder of Backblaze, told Insider.
For comparison, DigitalOcean, which offers cloud storage competitive to Backblaze’s B2 offering, raised $456.4 million before going public earlier this year. Another competitor in the backup and storage space considering an IPO, Veeam, was funded to the tune of $500 million. And they each far surpassed Backblaze in revenue, reporting $318 million and $1 billion last year, respectively.
From B2 to IPO
Backblaze sells itself as the affordable cloud storage alternative. Its B2 storage service is comparable to that of cloud giants, but is much cheaper. According to Backblaze’s website, B2 costs $0.005 per gigabyte of storage each month compared to $0.021 with AWS, $0.017 with Azure, and $0.020 with Google Cloud.
Now fourteen years after its founding, Backblaze believes its established the product and cultural foundation to go public, partially because of B2. Revenue for the service grew 65% year over year, bringing in $14.2 million for the company in 2020.
Backblaze, however, isn’t alone in IPOing with limited funding and revenue. Spanx, though in another industry, went public just last month without taking a dime in outside funding. And 16 companies valued at $1 billion or more have gone or are expected to go public in 2021 despite having zero revenue, marking an all-time high since the dot-com boom. On the flip side, other companies like Uber and WeWork, which have each raised billions only to struggle to find business models and turn profits, have shown that VC dollars don’t guarantee a road to success.
Backblaze intentionally sought to avoid VC funding, even though it took some over the years, according to Budman. The decision was partially a cultural one, as Budman thought employees would be more motivated to focus on efficiency and the product. It’s hard to do so “when you’re sitting on a large pile of cash on day one,” he said.
Besides making a statement, an IPO provides the opportunity to raise additional funds and invest in the company’s products and go-to market strategy. But Budman said he hopes going public “both means a lot and very little” to its employees. Backblaze offers stock options to all of its 228 full-time employees, according to Budman, but the company intends to keep the cultural status quo it built.
“What this doesn’t change, is that we’re committed to having a great culture. And what it does is hopefully provide us more opportunity to bring more people in to work with us,” Budman said.
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