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Nov 10, 2018 · 18m · top-founders

1204 $30m ARR Cloud Backup Company Almost Bankrupt from Thailand Floods

Gleb Budman · 9m spoken Nathan Latka · 6m spoken
0:00 / 0:00

gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions

In this episode of The Top Entrepreneurs, host Nathan Latka interviews Backblaze co-founder and CEO Gleb Budman to explore how the cloud backup provider bootstrapped to $30 million in ARR, navigated a catastrophic supply chain crisis during the 2012 Thailand floods, and built a sustainable multi-product storage business.

How this conversation actually went

Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 39.1% of the talking time here. How this is scored →

Nathan as informed peer 5.0 Guest teaching 2.5 Guest disagreement 0.7 Nathan pushing back 2.2
05100:0010:001:27–4:22 · Nathan as informed peer 5/10 Backblaze Value Proposition, Pricing, and $30M ARR Latka quickly converts high-level figures into monthly SaaS numbers, but Budman gently corrects him on their actual run rate, updating the revenue estimate from $20M to $30M ARR with 50% year-over-year growth.4:25–6:46 · Nathan as informed peer 6/10 Founder Backstory and Previous Startup Exits Latka probes the financial outcomes of Budman's previous dot-com and security startups, evaluating stock deal traps and 1x liquidation preference outcomes while Budman humorously notes that their first company had zero revenue.6:48–10:48 · Nathan as informed peer 5/10 Bootstrapping Discipline and the 2012 Thailand Flood Crisis Budman provides a detailed breakdown of how the 2012 Thailand floods disrupted global hard drive supply chains and forced Backblaze to raise outside capital. Latka actively calculates the monthly cash burn impact of doubled hardware prices.10:48–13:07 · Nathan as informed peer 4/10 Customer Acquisition Costs and B2 Storage Model Latka explores payback periods and customer acquisition costs across tiered storage lines, following up with a brief commercial segment.13:10–15:59 · Nathan as informed peer 7/10 Churn Metrics, Customer Base, and Team Retention Latka presses for clean SaaS precision, ensuring Budman clarifies that the 10% churn is gross logo churn rather than net dollar churn, and walking through pre- and post-money dilution figures for their 2012 round.16:00–17:47 · Nathan as informed peer 3/10 The Famous Five Questions with Gleb Budman The conversation wraps up with the standard rapid-fire questions, where Latka jokingly ribs Budman for choosing Google Sheets as his favorite business tool.1:27–4:22 · Guest teaching 3/10 Backblaze Value Proposition, Pricing, and $30M ARR Latka quickly converts high-level figures into monthly SaaS numbers, but Budman gently corrects him on their actual run rate, updating the revenue estimate from $20M to $30M ARR with 50% year-over-year growth.4:25–6:46 · Guest teaching 2/10 Founder Backstory and Previous Startup Exits Latka probes the financial outcomes of Budman's previous dot-com and security startups, evaluating stock deal traps and 1x liquidation preference outcomes while Budman humorously notes that their first company had zero revenue.6:48–10:48 · Guest teaching 5/10 Bootstrapping Discipline and the 2012 Thailand Flood Crisis Budman provides a detailed breakdown of how the 2012 Thailand floods disrupted global hard drive supply chains and forced Backblaze to raise outside capital. Latka actively calculates the monthly cash burn impact of doubled hardware prices.10:48–13:07 · Guest teaching 2/10 Customer Acquisition Costs and B2 Storage Model Latka explores payback periods and customer acquisition costs across tiered storage lines, following up with a brief commercial segment.13:10–15:59 · Guest teaching 3/10 Churn Metrics, Customer Base, and Team Retention Latka presses for clean SaaS precision, ensuring Budman clarifies that the 10% churn is gross logo churn rather than net dollar churn, and walking through pre- and post-money dilution figures for their 2012 round.16:00–17:47 · Guest teaching 0/10 The Famous Five Questions with Gleb Budman The conversation wraps up with the standard rapid-fire questions, where Latka jokingly ribs Budman for choosing Google Sheets as his favorite business tool.1:27–4:22 · Guest disagreement 1/10 Backblaze Value Proposition, Pricing, and $30M ARR Latka quickly converts high-level figures into monthly SaaS numbers, but Budman gently corrects him on their actual run rate, updating the revenue estimate from $20M to $30M ARR with 50% year-over-year growth.4:25–6:46 · Guest disagreement 1/10 Founder Backstory and Previous Startup Exits Latka probes the financial outcomes of Budman's previous dot-com and security startups, evaluating stock deal traps and 1x liquidation preference outcomes while Budman humorously notes that their first company had zero revenue.6:48–10:48 · Guest disagreement 0/10 Bootstrapping Discipline and the 2012 Thailand Flood Crisis Budman provides a detailed breakdown of how the 2012 Thailand floods disrupted global hard drive supply chains and forced Backblaze to raise outside capital. Latka actively calculates the monthly cash burn impact of doubled hardware prices.10:48–13:07 · Guest disagreement 0/10 Customer Acquisition Costs and B2 Storage Model Latka explores payback periods and customer acquisition costs across tiered storage lines, following up with a brief commercial segment.13:10–15:59 · Guest disagreement 1/10 Churn Metrics, Customer Base, and Team Retention Latka presses for clean SaaS precision, ensuring Budman clarifies that the 10% churn is gross logo churn rather than net dollar churn, and walking through pre- and post-money dilution figures for their 2012 round.16:00–17:47 · Guest disagreement 1/10 The Famous Five Questions with Gleb Budman The conversation wraps up with the standard rapid-fire questions, where Latka jokingly ribs Budman for choosing Google Sheets as his favorite business tool.1:27–4:22 · Nathan pushing back 2/10 Backblaze Value Proposition, Pricing, and $30M ARR Latka quickly converts high-level figures into monthly SaaS numbers, but Budman gently corrects him on their actual run rate, updating the revenue estimate from $20M to $30M ARR with 50% year-over-year growth.4:25–6:46 · Nathan pushing back 3/10 Founder Backstory and Previous Startup Exits Latka probes the financial outcomes of Budman's previous dot-com and security startups, evaluating stock deal traps and 1x liquidation preference outcomes while Budman humorously notes that their first company had zero revenue.6:48–10:48 · Nathan pushing back 1/10 Bootstrapping Discipline and the 2012 Thailand Flood Crisis Budman provides a detailed breakdown of how the 2012 Thailand floods disrupted global hard drive supply chains and forced Backblaze to raise outside capital. Latka actively calculates the monthly cash burn impact of doubled hardware prices.10:48–13:07 · Nathan pushing back 1/10 Customer Acquisition Costs and B2 Storage Model Latka explores payback periods and customer acquisition costs across tiered storage lines, following up with a brief commercial segment.13:10–15:59 · Nathan pushing back 4/10 Churn Metrics, Customer Base, and Team Retention Latka presses for clean SaaS precision, ensuring Budman clarifies that the 10% churn is gross logo churn rather than net dollar churn, and walking through pre- and post-money dilution figures for their 2012 round.16:00–17:47 · Nathan pushing back 2/10 The Famous Five Questions with Gleb Budman The conversation wraps up with the standard rapid-fire questions, where Latka jokingly ribs Budman for choosing Google Sheets as his favorite business tool.

speaking balance: gold is Nathan, purple is the guest (3 minute bins)

0:00 · Nathan 61.2% · guest 38.8%0:00 · Nathan 61.2% · guest 38.8%3:00 · Nathan 24.8% · guest 75.2%3:00 · Nathan 24.8% · guest 75.2%6:00 · Nathan 12.9% · guest 87.1%6:00 · Nathan 12.9% · guest 87.1%9:00 · Nathan 23.1% · guest 76.9%9:00 · Nathan 23.1% · guest 76.9%12:00 · Nathan 60.9% · guest 39.1%12:00 · Nathan 60.9% · guest 39.1%15:00 · Nathan 40.2% · guest 59.8%15:00 · Nathan 40.2% · guest 59.8%18:00 · Nathan 96.5% · guest 3.5%18:00 · Nathan 96.5% · guest 3.5%
Sharpest disagreement ▶ 5:33 Gleb's deadpan response on dot-com revenue

Budman playfully brushes aside Latka's revenue question by asking 'Revenue? What's revenue?' and revealing they had zero customers before being acquired.

 Hardest push from Nathan ▶ 13:40 Host insists on logo churn versus dollar churn distinction

Latka refuses to accept a vague churn metric without clarifying whether the 10% figure represents gross logo loss or net dollar contraction.

 Biggest teaching moment ▶ 9:52 Explaining the systemic supply chain shock from Thailand floods

Budman educates Latka on how concentrated hard drive manufacturing in Thailand caused global prices to double overnight, fundamentally altering Backblaze's unit economics.

 Nathan holds their own ▶ 15:24 Rapid calculation of pre/post-money valuation and dilution

Latka instantly calculates the exact math behind a $2.5M investment on a $25M pre-money valuation, assessing that the founders only gave up roughly 10% of equity.
the scores for every segment, with the reasoning behind each
ChapterTopicNathan as informed peerGuest teachingGuest disagreementNathan pushing backWhy
Backblaze Value Proposition, Pricing, and $30M ARR 5312 Latka quickly converts high-level figures into monthly SaaS numbers, but Budman gently corrects him on their actual run rate, updating the revenue estimate from $20M to $30M ARR with 50% year-over-year growth.
Founder Backstory and Previous Startup Exits 6213 Latka probes the financial outcomes of Budman's previous dot-com and security startups, evaluating stock deal traps and 1x liquidation preference outcomes while Budman humorously notes that their first company had zero revenue.
Bootstrapping Discipline and the 2012 Thailand Flood Crisis 5501 Budman provides a detailed breakdown of how the 2012 Thailand floods disrupted global hard drive supply chains and forced Backblaze to raise outside capital. Latka actively calculates the monthly cash burn impact of doubled hardware prices.
Customer Acquisition Costs and B2 Storage Model 4201 Latka explores payback periods and customer acquisition costs across tiered storage lines, following up with a brief commercial segment.
Churn Metrics, Customer Base, and Team Retention 7314 Latka presses for clean SaaS precision, ensuring Budman clarifies that the 10% churn is gross logo churn rather than net dollar churn, and walking through pre- and post-money dilution figures for their 2012 round.
The Famous Five Questions with Gleb Budman 3012 The conversation wraps up with the standard rapid-fire questions, where Latka jokingly ribs Budman for choosing Google Sheets as his favorite business tool.

Statements from this episode (12)

Assertion Supported
Budman: Backblaze Storage Costs One-Quarter of AWS and Google
“And so we actually introduced a, an offering where you can use storage for anything, similar to an Amazon or Google or a Microsoft offering, but one quarter of their price point.”
Gleb Budman Nov 10, 2018 ▶ 3:17
Assertion Supported
Budman: Backblaze Has Reached $30 Million in ARR
“Yeah, it's actually thirty million ARR today.”
Gleb Budman Nov 10, 2018 ▶ 3:58
Assertion Supported
Budman: Backblaze Is Growing Revenue at Roughly 50% Year-Over-Year
“We're growing about 50% year on year.”
Gleb Budman Nov 10, 2018 ▶ 4:18
Assertion Supported
Budman: First startup had zero revenue when acquired for $120M
“No revenue, no customers.”
Gleb Budman Nov 10, 2018 ▶ 5:36
Disclosure
Budman: Backblaze has raised only $3 million in outside capital
“So we've raised a total of three million.”
Gleb Budman Nov 10, 2018 ▶ 7:49
Assertion Supported
Budman: Backblaze stores about half as much data as Dropbox
“And at this point we are storing about half as much data as Dropbox.”
Gleb Budman Nov 10, 2018 ▶ 8:21
Assertion Not checkable as stated
Budman: Thailand flood came closest to putting Backblaze out of business
“And the thing that came closest to putting us out of business in all 10 years was actually a flood in Thailand, which was not anywhere on anyone's radar screen.”
Gleb Budman Nov 10, 2018 ▶ 9:35
Disclosure
Budman: Backblaze spends 6 to 12 months of revenue on CAC
“So it depends on the product line, but in rough numbers, we'll, we'll spend about somewhere between six and 12 months worth of revenue to acquire a customer.”
Gleb Budman Nov 10, 2018 ▶ 10:53
Assertion Not checkable as stated
Budman: Backblaze has approximately 500,000 customers
“They're about half a million.”
Gleb Budman Nov 10, 2018 ▶ 13:12
Assertion Not checkable as stated
Budman: Backblaze consumer churn is only about 10% annually
“Our consumers churn at only about 10% a year.”
Gleb Budman Nov 10, 2018 ▶ 13:36
Assertion Not checkable as stated
Budman: Backblaze consumer customer lifetime value is roughly $400
“So in, in rough numbers, a consumer is worth about 400 dollars in lifetime revenue to us.”
Gleb Budman Nov 10, 2018 ▶ 14:33
Assertion Not checkable as stated
Budman: Every person who started at Backblaze 10 years ago remains
“Yeah, it's a great team, and we, and every single person that started with us 10 years ago is still here today, so.”
Gleb Budman Nov 10, 2018 ▶ 15:51
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