And welcome everyone to another Smart Money Circle episode.
I'm Adam Sarhan. With me today is Gleb Budman
who's the Co founder, CEO and chairman at Backblaze.
Ticker symbol is BLZE Gleb. Thank you so much for taking the
time and welcome to the Smart Money Circle.
Thanks Adam. Good to be here.
Looking forward to the conversation.
So, Gleb, I always like to ask, can you please tell us your
story and how you got to where you are today?
Sure. So I I've been doing this role
for about 17 years. We started the company about 17
years ago and so I was a Co founder of the company.
But I've had basically a trajectory of caring deeply and
being excited about technology and and about business and how
the 2 married together. So before this I worked on two
other tech companies entrepreneurial ventures.
We did an e-mail security company before this one, the
anti spam antivirus, anti phishing.
We raised funding for that one, sold it to another company
called Sonicwall. And that product line actually
might even still be for sale today, but it was for sale years
and years after which I was, I was proud of that.
It continued to be something that provided value to customers
in the fight against spam for many years to come.
Before that worked on another company which was early kind of
machine learning type company. We, we found that there's all
this content out there on the web and yet the search engines
at the time were not ideal in finding that and and bringing it
up. And so we wedged ourselves into
the browser to help you help it learn what you were interested
in and be able to bring those those learnings into your
searches, into your exploration, into your research.
And then, and so that company was started during the crazy.com
days and was acquired by Excited Home, which was one of the large
search and broadband connectivity companies at the
time. So that's kind of the, the more
recent tech journey. But I've, I've been doing some
entrepreneurial something and something with technology pretty
much my entire life. When I was when I was five years
old, I drew a picture for my parents of, of a submarine with
the wires coming out of it and everything.
And they, and they, they said what, what, what's with the
wires? And I was like, well, you have
to breathe underwater. So we need electricity to go
into the water and, you know, create the air for them.
And I'm not sure that any of the physics actually fully worked
out, but but it was just, you know, early passions around what
the possibilities of technology and and marrying that with
business were. Well, I absolutely love it.
And then back Blaze, how'd you get to become, how'd you get the
idea to Co found it and become CEO there and then please tell
us about the company and your unique value propositions.
Sure. So, so I, I feel lucky.
When I was starting a company out of Business School, I ended
up meeting up with some of the people that I started working
with on the first company back in 99.com days.
The some of the people from that company are the same ones that
we did the e-mail security company with.
And one of those people, Brian Wilson was our, was our CTO at
the prior company and he had a friend who had a computer crash
and who called him up and said, you got to help me.
You know, like my computer crashed, I've lost all my data.
You got to help me. And my, you know, former CTO, Co
founder said, no problem, I'll get you in your computer.
We'll get you set up. Where is your backup?
And she starts pounding the table and says, look, what I
don't need now is the lecture. What I need is for you to get my
stuff back. And he's like, well, if you
don't have a backup, I can't help you.
And so he and I started talking about that and said, who doesn't
backup their data? And so we started asking friends
and family and colleagues, and the general answer was nobody
was backing up their data. And we looked at it and said,
everything's going digital, everything's getting laptops, no
one's backing up their data. This is going to be a problem.
And so he and I talked about it and we decided to start backways
together working on solving this problem.
We actually convinced a few of our other people that we worked
with before to join us in that endeavour.
We did something different. So the prior two companies we
raised venture funding from from the beginning for Back Blaze, we
actually said what we really wanted to focus on was what
product do we want to solve and build for customers?
What what use case do they need? We wanted to focus on the
customers and we wanted to focus on the culture.
And to do that we said we're not going to go out and raise
funding, at least not initially. The five of us are going to quit
our jobs. We're going to work together to
do that for one year. We're going to put a little bit
of money and we're not going to take any salary and we're just
going to focus on product, customers, culture.
And as it turned out, we, we went for a year without salary,
then we went for another half a year without salary.
Then we started paying ourselves minimum wage.
We did that for almost a year and we, then we went for almost
another year at 2 times minimum wage.
So it was a turned out to be a much longer journey on the, on
the, you know, not getting a real salary and not getting
compensation front. But we just, we, we, we just
believed in this need like we, we believed we were solving an
important thing. And so that's how we started the
company. It was, it was focused around,
you know, this idea of this one person and, and solving her
problem and where this was all headed.
Initially, we started with the idea that we would build this
backup solution and we would put all of the data on Amazon S3,
which was Amazon's web services storage offering.
We did the math and we realized we're going to lose money on
every single customer. And we said, you know, a hard
drive does not cost that much. It's 100 bucks a TB.
But Amazon is charging orders of magnitude more than that.
And so we said, you know, if we could just figure out how to
take a hard drive and plug it into the Internet, the math
should work. And so we literally started from
first principles trying to figure out how do we attach hard
drives to the Internet. We built our first server out of
plywood and put that in the data center.
And we figured out how to make that work.
And then we cut a steel case version of that before we
started making it in larger volumes.
So we were literally building this cloud storage
infrastructure for our backup service.
And in order to just make it possible, we did that for a
while. Then the consumers who started
using our consumer backup service started coming to us and
saying, OK, look, I use you at home, but I'm also the IT person
for my company. And I'm trying to figure out why
I have a better backup product at home than I have for my
company. Let me use it at the company.
So we started expanding into supporting organizations and
backing up all their laptops and desktops from there.
The next thing that happened was we had the IT people come to us
and say, look, I use you to back up all my company's laptops and
desktops, but I have all these other storage needs and let me
have access to your actual storage platform.
So we launched a service called Backblaze B2 and that became
this cloud storage platform competing with Amazon and Google
and Microsoft. And we now serve about 100,000
customers around the world on that platform.
We we service not only the backup type use cases, but we
also help people with their media production work flows and
their application storage use cases.
And now increasingly with all of the AI use cases.
So we believe we are the ideal storage platform, cloud storage
platform for the all of the AI use cases out there because you
need access to all the GPUs wherever they are.
And we enable that with a really high performance storage
platform that's durable, that's affordable and that gives you
Open Access to all these locations.
So that's the the journey that we were on starting from that
initial need to where we are today.
Today we have in total about half a million customers around
the world in 175 countries. We store about 5 exabytes of
data, that's GB, TB, petabyte, exabyte.
Each is a factor of 1000 bigger than the prior.
Just a lot of data for a lot of customers and, you know,
increasingly supporting all of their customers with all these
AI use cases. Wow, what a remarkable story.
Congratulations on the success. I love the fact that you found
the need a problem and you've came up with a solution for it
way back when and you stayed with it even though you didn't
have the, the salary. And you know you, you did it the
right way, so to speak. And, and it's just grown and
grown and grown. So clearly the market is
rewarding you. Let me ask you a question that I
know comes up a lot from investors.
What makes you different from the other cloud companies and
some of the competitive advantages please?
Yeah, it's a good question, especially with Amazon and
Google and Microsoft, right? So we get the question like, but
you know, there are these huge, huge companies, you know, why do
you exist? And what I will say is they do
200 different things. We focus on cloud storage and we
do a great job on that area. And so just the cloud storage
market alone is about $100 billion, according to IDC,
right? And so it's a big market that
needs a lot of focus to get done right.
Our cloud storage platform is about 1/5 the price point of
those providers. We also offer free egress, and
egress is important if you don't want to be locked inside of the
walled garden of one of these providers.
You need your data to be able to flow other places.
They charge you a tremendous amount to get your data out,
especially in in our AI world today, getting your data out is
increasingly important because you want to be able to use it
with what the GP, us or the AI services that are available
wherever they happen to be. And so we provide a highly
durable and available platform like they do, but we provide it
at a dramatically lower cost with free egress, with often
higher performance than their platforms and the gift and
giving you access to all the places you want your data to go.
Wow, OK, I love that. So it's almost like a doctor, a
generalist makes money, but a specialist makes, you know, a
lot more money. So you're specializing in that.
Cloud storage makes perfect sense.
OK, go ahead. Next to shift the conversation a
little bit, some timeless advice, which is some of my
favorite parts of the show. First question, let's talk about
risk management. How do you handle risk and what
are some mistakes you see people make with respect to risk
management? So what I will say is, you know,
now as a public company, we have a formal risk management
process, we have an enterprise risk management process.
And the way that that process goes is we do we have an
evaluation of risks. So first we think through all
the different kinds of risks that are out there, then we rank
them risk potential and risk impact and then we think through
the mitigation strategy. So that is, you know, there's a
formal risk management process that's, you know, robust and
done. What I will say is that I think
one of the things that people sometimes miss is they actually
miss the risk of addressing the risk.
Nice. And what I mean by that is
sometimes we go, oh, that's a risk.
And therefore we need to do the following things.
And a lot of times the the way that we address risks are don't
do something, slow something down, put in place policies to
prevent it and basically avoid the area of thing that causes
you risk. But business is risk.
And so, you know, I think AI is a great example of this, right?
AI is this absolutely revolutionary technology that is
going to change everything about business.
And a lot of businesses are looking at it and going, What we
need to do is protect ourselves from the risks of AI.
So we need to make sure our employees don't use it in the
wrong ways. We need to make sure that the
the the models don't get access to our data.
We need to make sure of all of these ways of protecting from
the risks of AI. That's not unreasonable, right?
Especially the public company, we have to do those kinds of
things, but you it has to. But it's an even bigger risk to
not adopt AI and not adopt it rapidly and not go after that
opportunity because the risk there is obsolescence, right?
And and so I think we have a very robust process for managing
risk, but it's also really important to focus on not over
addressing the risk and and lose the benefits of those things as
well. Yeah, I know.
That makes perfect sense. I love that you're looking at a
holistic view of risk and business itself.
Is risk life? Is risk also crossing the
street, right? So, yeah.
OK, perfect. Next question for you.
What are some timeless lessons that you've learned along the
way that you'd like to share with the audience?
So you know, a funny 1 is just don't run out of cash.
You know, so much of start-ups are focused on growth and people
talk about revenue and revenue growth is absolutely important.
But you know what few companies go out of business because they,
their revenue doesn't grow fast enough.
They run out, they go out of business because they run out of
cash. So I think we we were very we
had very, very little cash for many, many years because we are
a bootstrap company and we always had basically $1.00 in
the bank account. But you know, we were very
focused on building the business in a sustainable way, right and
focusing on having it so that we had the ability to play again
tomorrow. And so I think that that is just
a concept, right. And a lot of the way that
technology companies especially are designed and the whole
venture industry is designed is raise money for the next 18
months. Run at that wall as fast as you
can with the idea that you're going to run out of money at
that 18 month marker. And you're either going to raise
another round or you're going to go out of business.
And there are some advantages of that, but those advantages tend
to be for the VCs because they have a portfolio of companies.
If you're an entrepreneur, you actually have this company that
you are trying to make successful and so you have to
balance that to not run out of cash.
Yeah, I I love that. I think that's absolutely gold.
So thank you for sharing that. I How about the other side of
that timeless mistakes either you've made you see other people
make besides running out of money that you'd like to share
with the audience. So I, I think a mistake that
often people make in, in at least the kind of Silicon Valley
area is believing that you have to raise funding.
Most entrepreneurs in the Bay Area seem to have this belief
that the first thing they need to do is raise funding and the
second thing is figure out what they're going to build, right.
And, and so, you know, because of the whole venture capital
industry that the TechCrunch articles that everything success
is raising funding. And, and the thing with raising
funding is it is a means to an end for a, for the types of
businesses where raising funding is the right answer.
And that's not for all businesses and that's not at all
times. So we bootstrapped for many,
many years and that was a choice.
And by bootstrapping that allowed a lot of benefits.
Number one, it allowed us to focus on the business, not on
raising funding #2 everybody that was involved was aligned
around the success of the business as opposed to having
what is sometimes can be misalignment with with
investors, right? And it also meant that we had
more control of our destiny and it meant that we didn't give up
as much of the equity. So there are certain businesses
where raising funding is absolutely critical or the right
decision. But I think in Silicon Valley
all too often it's viewed as the only path, right.
And the a corollary I would say to that one is believing that
success is being acquired. So in Silicon Valley, so much of
the belief is how do I get build a business that's going to get
acquired. And you know, having been
through two acquisitions prior to backways, what I would say is
there are there are some nice things about being acquired, but
the first company that we sold was acquired by Excite at home.
Excite at Home went out of business and so they took
everything that we had built and it vaporized out of existence.
The second company that was acquired they that product line
like I said, still still was for sale for a while after which is
great but it it you know they they moved all the people into
all the different groups and departments.
It was no longer the same thing. And so with, with Backlaze, one
of the things that we said at the beginning was, you know, we,
we may end up in a direction where the company gets acquired.
That might be a possible outcome, but the, there are
other possible outcomes. It could be a company that we
just run forever as a private company.
It could be a company that we take public.
You know, there are other directions.
And if you're going to put blood, sweat and tears into
something that you are passionate about for years on
end, being acquired is the end of that existence, right?
And so part of the reason for us decided to take back was public
was we we wanted to establish that this is a company that's
going to be here for the long term and you can trust us with
your cloud infrastructure. Part of it was that we wanted to
make sure that people had some liquidity and ability to flow
the flexibility there. Part of it was to raise the
additional capital to invest. But it was also this idea that,
you know, we had spent 15 years. Being passionate about the
customers and the employees and the partnerships and the things
that we were building, and if the company gets acquired, so
much of that just potentially vaporizes.
Yeah, I love what you're saying. It almost reminds me a little
about the go back a little bit with the money.
So people in Silicon Valley specifically where you are only
focused on raising money and then like you said, 18 months
money runs out a money, money, money.
And it just scrambled eggs or brain as you're saying the same
thing here where it's like, no, hold on a second pause.
It's not about the acquisition. You know, Warren Buffett has a
great line. He goes, you know, once you have
a great business, never sell it. So I fully, fully understand
what you're saying. OK, let's talk about leadership.
As the chairman of the board and CEO and founder and so on and so
Co founder so on and so forth. What makes a great leader, and
what are some lessons you've learned about leadership that
you'd like to share with the audience?
So what I would say is I, you know, different leaders I think
have different value and different companies build
different cultures. And I think companies can be
successful with very different kinds of leaders as as I think
we've all seen and one of the things that I've learned is that
the company needed different kinds of leadership from me at
different points. And that is that's actually
been, I would say somewhat challenging because, you know, I
think we generally speaking, we all are whoever we are.
And so early on, there were five of us that started the company
together. We were very collaborative.
We were in person sitting originally in one room together.
And the way that the way that I engaged was a we're all in this
together. We're going to make these
decisions collaboratively together.
And you know, we'll, we'll vote and we'll figure things out.
And over time, the company grew. There were more people that we
worked on things in parallel. We had people who came in who
we've never worked with before. They were the, the company
changed. And with that, like I needed to
change because in part we needed to change the way we were
operating as an organization. And so it became more focused on
rather than collaborative decision making, which works for
a team of 5 or 10 to a, a path of how do we make decisions
where we empower individuals at different parts of the
organization to own decisions. And how do we make sure that
they know what decisions they can make and what decisions they
have to engage others in making? And how do they collect the
information they need to make a good decision?
Right. Early on, I remember hearing one
of our employees said, hey, you know, I'm trying to decide what
color T-shirt we should get for this event.
And I'm like, great. And she said, well, I'm waiting
until Monday to make that decision.
And I'm like, what happens on Monday?
And she said, well, you know, you and the other founders are
meeting and so I'm waiting for that meeting so you guys can
decide on the color. And I'm like, you have to be
kidding me. Like we are the blocker for a
decision for a week on what color T-shirt to make, like
something's broken, right? And so it was just, there was it
was a light bulb moment for me of saying we're now at a
different phase. We need to make sure people know
you can make those decisions. You can make these decisions.
You can go off and and spend that amount of budget.
Don't wait for me or for us to to, to be a, a a point in that.
I love that I've interviewed over 250 people.
Glad I think you're the first person when I asked that
specific question about leadership that speaks about
shifting gears almost where sometimes you've got to be this
type of leader, sometimes you have to be that.
You have to be able to adapt and grow, which I think is is
absolutely brilliant. So thank you for bringing that
up because that's really, really, really powerful.
So next question, adversity being successful, we've got to
handle adversity. So how do you handle adversity?
And what are some obstacles you had to overcome that you'd like
to share? So I, I would say one of my
stronger suits is, is steadiness, which, you know, I
think a lot of times people talk about resilience and it's, it's
maybe a little bit of resilience, but I would, I
would, I would say it's slightly different than that.
It, I, I tend to be calm through things.
And that's just, I don't know if that's biological or what, but
that, that's been the way I've been long before I was ever
ACEO. And I think that that has been
helpful because sometimes things happen and for the most part I'm
like, it's OK, we will figure it out.
We will take one step in front of the other.
And you know, I think fundamental, I, I think of
myself as a pragmatic optimist, I generally believe the future
is going to be better than the present or the past and that we
have the ability to make it so. And not from a Pollyanna
perspective, but just from a, if we try to make good decisions
and we keep taking one step forward, we will keep improving
things. And so that's just from, I guess
an approach perspective. I'll, I'll tell you one crazy
story. So this was 10 ish years ago
when then almost 15 probably. So we have been building the
company for years, bootstrapped and like I said, $1.00 in the
bank account. And you know, as a cloud storage
company, we buy a lot of hard drives and you know, we would
think about our risks. There's a risk that we may not
be able to hire the right people with.
There's a risk that we may not find customers.
There's a risk that, you know, we're not going to be able to
have enough money. Like there's, there's a variety
of risks, right. One risk we've never
contemplated was the risk of a flood in Thailand.
And you know, we didn't have customers in Taiwan, we didn't
have partners in Taiwan. There was, I mean, what?
But it was one of the biggest risks in the entire history of
the company. And what happened was there was
this flood in Taiwan. And it turned out that hard
drives, while they are built globally in lots of places, have
this area of Thailand where they build certain components that
are used in most of the hard drives out there.
And the factory was flooded. And so all of a sudden you
couldn't buy hard drives. Those hard drives cost hundreds
and hundreds of dollars more than normal.
And as a bootstrap company buying 1000 hard drives a month,
we looked at it and said, Oh my God, what are we going to do?
We can't afford to pay three times the price for all these
hard drives. And at the time there were
twelve of us and we said, what are we going to do?
So one of the things that we noticed and, and, and by the
way, so we, we, we, you know, our first thing was let's
brainstorm ideas. What do we, what could we
possibly try to do? Well, option one was we have a
recurring business. Maybe we, we raise prices on our
customers. We didn't want to do that.
That's not great. But you know, if to survive,
that was a choice. Option 2 was we, we had a blog
that was really popular and we said, you know what, maybe we'll
put a virtual tip jar and say, Hey, you like us, kick in a few
bucks, you know, But you know, the, the core thing was like, is
there any way we can keep buying hard drives at a reasonable
price? So one of the things that we
found was that while these enterprise hard drives that we
were buying were 3-4 times the price, the consumer hard drives,
the ones that you would go to the store and you would buy and
you plug in as a USB hard drive, those only were maybe 25% more
expensive. And so it's, well, that's
interesting. So we bought a few of those hard
drives and we cracked them open like shucking them like a heart,
like a oyster. And we looked like it's the same
drive, right. And so we're, I don't know why,
but for whatever reason, those drives are not as expensive as
the, the enterprises, which is weird because they take the same
drive, wrap it in plastic, stick a power supply on it, put a
manual, put it in the box and sell it at retail for less.
And we said, OK, all we need to do now is buy 1000 of these
retail drives a month, crack them all open like like oysters
and shovel men to servers. The, so we started, we, we, we
drew a map on the, on the wall, on the whiteboard, and we
pointed where every single person lived in the, in the San
Francisco Bay Area. And we wrote out where the
different electronic stores were and said, congratulations.
As part of working here, you need to stop by that store on
your way in and pick up as many of these drives as you can.
And we'll to keep doing this. And that worked for a while
until they changed it and said limit 2 per person.
And so then we, we got our customers involved and, and said
if you can ship us hard drives, we will reimburse you for those
hard drives. And people started sending us
hard drives from all across the country.
And it was this whole thing of basically community building to
get supply chain from across the country to ship us hard drives.
So it was, you know, to your, I guess your thing of like
obstacles when we overcome that was a scary moment for the
company, but it was also a moment where it brought us
together and it brought a lot of our customers in as part of our
community. I love that.
What a great and crazy story. You're right, this is a crazy
story. Who would have thought a flood
in Thailand and all of a sudden you were able to take it
pragmatically and turn into something positive.
So there's a pragmatic optimism. I love it.
All right, Glenn, final question for you.
What is the best piece of advice you'd like to give the audience
or your 30 year old self? So one thing I would say is, you
know, think about the people that are being and around you
and who you want to have in your life for a while.
When I, when I look back, I, you know, I said I feel lucky that I
was able to start this company with my Co founders.
Those people are ones that I worked with at the prior
company. And some of them were people
that I worked with all the way back in 1999 at the company
before that. And I would say, you know, I
kind of fell into that first company, right?
But the fact that I was able to work with them really set me
down this path in this trajectory.
And you know, they were amazing Co founders for for me with back
ways, you know, back ways would not have existed if it weren't
for them, right? And, and so just, you know, if
if I were telling my 30 year old stuff, I would have said be even
more thoughtful, be even more focused on who are the people
that inspire you or the people that, you know, bring out the
best version of you, that compliment you, that challenge
you, you know, who are those people and actively work to keep
them in your life. I, I feel like I got lucky to
have fallen in with some of those people, But, you know,
being thoughtful about it would have, you know, probably paid
off dividends. Absolutely love it.
So you're saying relationships, right, like the power of
relationships? So I had a doctor on a few
months ago and he said the number one most common trait for
success, successful longevity and happiness.
It's healthy relationships. So it speaks right to your
point. All right, beautiful, glad.
Thank you so much for coming on the show.
Take your symbol as BLZE and hopefully Congrats on all your
success and hopefully we'll have you on again soon.
This was fantastic. Sounds great.
Thank you for the time, Adam. Appreciate it.