Analysis on Backblaze Getting $100 Million in IPO

An IPO always obliges a company to reveal its financial results. It’s here the case of Backblaze, Inc. – that never reveals figures on its business – in a SEC filing https://sec.report/Document/0001193125-21-327209/(188 pages).

Backblaze CEO Gleb Budman, center, celebrated first day of trading on Nasdaq
Backblaze $100 Million Ipo F1

6,250,000 shares were sold at $16 per share for the $100 million IPO, in the middle of projected range of between $15 and $17 that gave company a valuation of $583 million. It climbed 24% in their debut on Nasdaq on last Thursday and another 12% on last Friday, lifting the price to $22.31 and giving the company a market cap of around $650 million for the public company now listed on under BLZE ticket.

The start-up was incorporated in Delaware in April 2007, founded by 5 people including CEO Gleb Budman, 47 (total compensation of $410,105 as of December 31, 2020), CTO Brian Wilson, 54 ($410,105), and chief cloud officer Tim Nufire, 57. HQ is in San Mateo, CA with two other leased data center facilities in Arizona and Amsterdam, the Netherlands.

The firm raised $5 million in 2012, stakeholders including TMT Investments, Charles Jones and Kwok Hang Ng.

It serves both the Public Cloud IaaS storage and the Data-Protection-as-a-Service (DPaaS) markets. According to IDC, the WW market for Public Cloud IaaS Storage was $27.6 billion in 2020 and is expected to grow to $91.0 billion by 2025. Additionally, the WW market for DPaaS was $7.7 billion in 2020 and expected to reach $18.4 billion by 2025. The firm’s opportunity in the mid-market alone for Public Cloud IaaS is expected to grow to $54.6 billion by 2025, representing a CAGR of 27%, and for DPaaS to $11.0 billion by 2025, representing a CAGR of 19%.

Two company’s services:

B2 Cloud Storage: It provides customers direct access to storage cloud to store, use, and protect data. First 10GB cost nothing, then $0.005/GB/month. Revenue in this business grew by 66% during the year ended December 31, 2020.
Computer backup: It backs up all new and changed data on laptops, desktops, and external hard drives. Customers use this offering in a consumption-based model for $70/year with unlimited capacity, in a SaaS subscription model. Computer Backup cloud service revenue grew by 23% during the year ended December 31, 2020.

As of June 30, 2021, annual recurring revenue (ARR) was $65 million ($22 million B2, $43 million computer backup), and the firm incurred net losses of $6.1 million for the 6 months ended June 30, 2021.

The company has 500,000 customers in 175 countries, including 430,000 customers using Computer Backup and 70,000 customers using B2 Cloud Storage (13,500 customers use both of them).

28% of revenue originated outside of USA in 2020.

The Californian firm had 2,000PB under management as of June 30, 2021, 500PB of which was deployed during 2020 alone. Its storage cloud organizes, safeguards, and keeps over 500 billion files available on demand and is designed to store trillions more in the future. Through a purpose-built software, the platform manages global physical infrastructure of nearly 200,000 HDDs and 1Tb/s of network capacity across 5 data centers interconnected by private network infrastructure. But the company does not own any issued patents.

As of December 31, headcount grew from 82 employees in 2018 to 126 in 2019, 188 employees in 2020, to 228 employees as of June 30, 2021

Over 14 years of operations, Backblaze had an accumulated deficit of $20.7 million. It has a history of cumulative losses, (but a tiny sum in 1Q20) and it does not expect to be profitable and to declare any dividends for the foreseeable future.

Its main partners are Veeam that provides backup, disaster recovery, and data management services for more 400,000 customers’ virtual, physical, and multi-cloud infrastructures, and Qnap integrating B2 Cloud Storage within user interface/

(in $)	Revenue	Q/Q orY/Y growth	Net income (loss)
FY19	40,748	NA	(996)
1FQ20	12,358	NA	13
2FQ20	13,021	5%	(1,358)
3FQ20	13,817	6%	(1,860)
4FQ20	14,588	6%	(3,418)
FY20	53,784	32%	(6,623)
1FQ21	15,312	5%	(3,688)
2FQ21	16,150	5%	(2,418)
3FQ21 (estim.)*	17,000 to $17,300	5%-7%	(6,500 to 7,500)

* This expected net loss is primarily due to investments in growing business and costs related to becoming a public company.

Conclusion:
The pure-play cloud vendor has several hundreds and maybe more than 1,000 competitors in the world, many of them being Web hosting providers trying to diversify using their data center, and especially, above all, huge companies including Amazon, Microsoft, Google or Apple. Its secret to be there in this highly-competitive market: essentially the price. The service costs only $70 per year to backup unlimited storage, the lowest cost as far as we know, with also the possibility to receive a HDD or an USB key with all your data – including OS – in case of a crash of your computer. The inconvenience is that you need several days for the first complete backup, then it’s totally transparent and does not seem to affect the use of the PC.

These cheap prices explain the success of Backblaze but also firm’s low revenue and losses.

We advise everyone to use Backblaze, as we do. The service offers also the possibility to send an USB or HDD with all your data and OS in case of disaster for an affordable price. We test the service but, unfortunately, the disk drive we received was not bootable.