If you consider they bought & added, net of depreciation, about $16M of assets to their balance sheet in 2020, the loss of 6M doesn't seem terrible. Using the bean counter approach - no new marketing, no spending on growth, no unnecessary R&D - they could have cleared about $20-25M of ebit in 2020.
Deciding to use your gross profit to fuel further growth (especially considering they're compounding it at a healthy rate and doing so without giving up equity or interest) is a wise move. If anything, it probably would have made sense to take some debt or finance more of the hardware purchases early on (as I see they are doing now at some scale as of 2020) in order to put those proceeds towards customer growth.
The only thing I see which is a marginal concern with these numbers is that it's difficult to see the split between marketing spend on b2 customers and backup customers (They spent $8M in 2019 on sales and marketing to generate 42k new customers, and $11.9M in 2020 to add 40k). It is very possible and likely that those marketing dollars went towards new enterprise customers (on b2 storage vs backup) and the revenue-per-customer number increasing during that timeframe seems to support that. Are blog posts calculated in the sales/marketing spend? Seems lots of the customers came from the organic content play.
Very cool to see the company who's free blog post about which harddrives are most reliable (when some had >5% annual failure rate and others <1% for the same price) nearly 10 years ago come around to s1.
On a side note, I'm a very happy Backblaze customer and the same time curse Dropbox for not offering a 100GB $5/mn plan. Backblaze pricing is very customer friendly.
As far as pricing goes, $5 per month for 100GB seems steep. SpiderOak offers 400GB for less than that and so does Nordlocker (though Nord has its own problems). On the other hand, iDrive has been offering a whopping 5 terabytes for a whole year for just $3.98 in a deal I saw just a few days ago.
Overall, zero knowledge backup is the best route, Backblaze plays at that, on the other hand I wouldn't touch any backup offering by Google with a 10 meter cattle prod. Grotesque that they reserve the right to snoop right through your files unless you first encrypt them externally via third party apps.
You are not forced to backup your entire hard-drive. There is a 3rd party program called: rclone
That program let's you choose which files/directories get copied over to BackBlaze. We have 150+TB (+10TB/week) stored at BackBlaze and I use rclone exclusively to upload our content for backup.
Note, it's a CLI program that works on Linux/BSD. I'm not aware of any other platforms that it works on.
Idk about on first run, but I'm pretty sure you can pick and choose which drives it scans, including boot drive, and set up excludes as needed (handy to avoid backing up .git or node_modules)
I was thinking about B2.
Unfortunately services where you can backup whatever files for fixed price attract "data hoarders" - people who are storing data just for the sake of storing it.
This is not accurate, please see my response to helloworld11
At some point, I'd imagine it's an optimization problem between (cost of failure) vs (liquidation value) vs (revenue per GB), where running them all the way into the dirt doesn't make sense. Or maybe it does?
But this is a SaaS, working with recurring revenue.
Some metrics to consider are:
- Cost of Customer Acquisition
- Lifetime Value
They could spend 200$ to get an average customer, but they will renew their subscription for an average of 5 years and generate over 2000$ in revenue during that time.
As long as you keep track of these metrics you know you're in a good direction or digging yourself a hole.
Besides other costs R&D, Admin, Marketing and Sales can be scaled up and down as needed, and become a smaller part of the costs as the company grows.
2) I agree: Their incredibly hard drive reliability reports are like catnip! Here is a sample post if others don't know about these reports: https://www.backblaze.com/blog/backblaze-hard-drive-stats-q1...
1) 2.5kWh per month of drive-on power. Datacenter grade power: 30-40c/kWh normalized =~ $1.00 in power per drive. 2) 60 drives per 4U space. 10 storage pods per 1 rack. 600 drives per rack. full rack in a colocation facility: $250-$500 =~ $0.40-0.80 in physical space.
Total cost per year to keep that drive up is, very ballpark, $16-22. The cost of running the drive is minimal vs the initial cost of $500 for the drive and storage server/rack/installation/network equipment etc. Network costs to transfer data from/to that drive are obviously nontrivial but again, the majority of the hurdle is outlay for capital.
https://news.ycombinator.com/item?id=15074289
>Finally, Backblaze is profoundly different than CrashPlan in that we never really raised any bank financing or VC financing. We're 90% employee owned, and there are no deep pockets. CrashPlan raised something like $150 million which comes with "pressure to grow fast or die". Backblaze is free of any such pressure, we own our own fate.
https://news.ycombinator.com/item?id=21006216
> Yev here -> we HAVE to be cash-flow positive since we're not VC-funded. When we started the company it was bootstrapped, so "making enough money to survive" has always been a part of the equation!
That last comment was from 2019, yet according to the S-1, they were actually unprofitable. What's going on here? Were they profitable before, then suddenly taking on a massive loss? Their loss in 2020 was huge compared to the one in 2019.
It looks like much of the difference comes down to stock-based compensation. This doesn't cost the company any cash, but under GAAP, it has to be recorded as an expense. (IANAA, so take what I say with a grain of salt).
Judging from their current numbers the service is profitable on a per user basis, less marketing expenses.
This is a pretty reasonable way to look at it. Being cashflow positive means you can turn up marketing to grow and turn it down if needed.
There are many reasons why cash-flow and profitability can be out of step with each other, for instance, you might have capital expenditures that are going to influence future years' books, you might have an interest carrying bank loan, you may have invested money into acquiring users whose lifetime value is larger than the cost to acquire them but you haven't broken even on that yet, it's possible to have the reverse and so on.
Accounting for all this - and doing so properly - is not as easy as it may seem to be for an outsider or someone who is used to just sell their own hours, where you can immediately see the difference between income and costs and label that profits.
And even there the situation can get more complex, for instance, if work is done in one year but the invoice is sent in the next. Profit wise you are booking that money in the year the work was done, even if the actual cash only lands in the next. Pre-paid services are even more complicated (here you typically partition a chunk of the income month-by-month until the total amount is accounted for).
It’s also important to note that being cash flow positive is not the same as being GAAP/IFRS profitable (Net Income).
I had a drive fail and I thought I was OK...and then I discovered that my Crashplan backup archives on my own server were unreadable after they shut down Crashplan personal backup services.
I couldn't even install the client, either - they silently updated the client to have a logic time bomb and refuse to install.
And the cost of the pods will be capitalized and depreciated so a large surge in buildings won’t necessarily lead to bad financials.
I was curious about this as well:
Cost of revenue consists of expenses for providing our platform and cloud services to our customers. These expenses include operating in co-location facilities, network and bandwidth costs, and depreciation of our equipment and capital lease equipment in co-location facilities. Personnel-related costs associated with customer support and maintaining service availability, including salaries, benefits, bonuses, and stock-based compensation are also included. Cost of revenue also includes credit card processing fees, amortization of capitalized internal-use software development costs, and allocated overhead costs.
We intend to continue to invest additional resources in our infrastructure and related personnel, and our customer support organization, to support the growth of our business. Some of these investments, including costs of infrastructure equipment (including related depreciation) and expansion, are incurred in advance of generating revenue, and either the failure to generate anticipated revenue or fluctuations in the timing of revenue could affect our gross margin from period to period.
50% gross profit is not great compared to a SaaS company, but still not terrible compared to <insert literally any other company that isn't enabled by tech>.
They also generate ~$12M in net cash from operating activities. So "profitable" is a weird one here. They'll have to continually invest in data centers and hardware, but generally speaking they are turning cash pretty well.
The extra fun bit is that just exfiltration will cost you.
We use multiple great SaaS tools that in the last two years have removed DIY 'tiers' or 'plans' billing you can do online and forced us to sign yearly contracts, deal with pushy sales reps, and changed to opaque and stupid complicated pricing.
Oracle behavior! we have no choice but to bend over.
They are great tools which is why they can do this ;)
Sure, you can probably do it cheaper with your "friend with a hard drive" solution, but there's zero redundancy there, you'll need to replace the hard drive when it eventually goes bad etc. etc.
For some people that's a tradeoff worth making, but for me, a few extra $ a month for peace of mind is worth it.
I recently evaluated a bunch of cloud storage/backup services. rsync.net is a ssh-accessible ZFS filesystem (including support for zfs send/recv) in the cloud, B2 is object storage.
rsync.net has a cheaper version aimed at people doing borg backups. Unfortunately it's still 3x the cost of B2 for 1TB of data.
I looked at rsync.net and really liked the idea, but costing 5x as much just doesn't justify the features.
Where do they offer the 3x cost solution? Cheapest pricing I can find is 2.5cents/GiB/mo (the 5x price).
I'm currently doing borg backups to a local server, then using restic to back up my borg backups to B2. My reason for using restic over rclone is so that if the local backup is corrupted I've got history on the remote to fall back to.
I'm hoping to find a less cumbersome way to do this.
Some use-cases, like photo libraries, won't benefit much from compression, so I may use restic directly for those.
I'm sure there are ways to manage this though, I just haven't figured them out yet.
I've done borg for local backups for a while and figured I could just replace it with restic, then I discovered that restic doesn't do compression so I just pointed that at the borg repositories.
I'll probably use restic directly for things that don't benefit from compression and continue to use borg for things that do.
I'm open to better options though, layering two tools that basically do the same thing seems like a bit of a hack job.
The original backblaze was literally Time Machine in the cloud.
Granted, there are more Apple device customers than any other possible bucket, but is it enough to drive economies down to the point of competing on cloud pricing?
And if not, then they're still stealing iDevice margin to price cloud competitively.
More than Enough. When you have 1 Billion iPhone customer who are also in the highest paying basket. The purchasing power is likely over 50% of the total market. As similarly shown in App Store market.
The problem is Apple has always had an Asset Light strategy. Keeping many Datacenter of Storage running just isn't their thing. That is why they are still relying on Azure, AWS for iCloud Storage.
>And if not, then they're still stealing iDevice margin to price cloud competitively.
Currently the iCloud Services ( or in fact all Services Revenue ) are masked by App Store profit and Google's Search Engine Deal. i.e most of their other Services like Apple Music, iCloud, News+ are low margin business but are used to dilute down their extremely high margin profits from App Store and Search Engine.
If it costs them $1.25, and everyone else can do it for $0.75 because they have scale and capital... that doesn't seem long-term stable.
If one cloud provider becomes dominant, Apple loses. If Apple loses market share, they lose negotiation power, and Apple loses.
The only way Apple wins is if cloud stays a multi-polar race AND Apple stays cloud-portable AND Apple retains significant market share AND cloud stays commoditized.
I'm not saying it's a bad bet (I'm sure Wall Street loves the resulting financials), but it does seem like a dangerous long term strategy, if cloud becomes more of product.
Apple has been basically funding Azure Expansion. Microsoft needed Apple to scale their Cloud business in a multi-year contract. And Apple using Microsoft to drive AWS price down. I think for one reason or another ( politics, strategic, or technical ) they have avoided GCP. Apple also partner with other Cloud Services Provider in different Region. And they are doing exactly what you described as Multi Cloud. Even their CDN are split between Akamai, ( used to be Limestone and they switch to something else I cant remember ) and their own.
I would not be surprised if their next move is to fund Cloudflare R2 Storage services. ( Once it becomes mature enough )
Plus, to make their hardware more attractive by having that service available.
Storing backups is probably also quite cheap to do since the data would be infrequently accessed. You don’t need fancy ssds. Cheapo hard drives will be fine.
Smart move IMO.
This is really all there is to it. You don't actually have to build a business anymore to get rich. You just put together something that looks like one, pay yourself a handsome salary for 10 years, then cash out and retire to New Zealand.
Sweet gig if you can get it.
Did you also start a business from the ground up and run it to the size that generates $50M in revenue? What exactly about Backblaze is a "sweet gig if you can get it"...achieving this is not trivial...
Of course it's not. You need to have gone to the right school, made the right friends, be the right ethnicity/gender (white or asian male), and have access to the right VC. But given all that, it's a cakewalk.
What's even revenue to say in the face of growth.
>” In the years ended December 31, 2019 and 2020, our revenue was $40.7 million and $53.8 million, respectively, representing growth of 32%. We incurred net losses of $1.0 million and $6.6 million for the years ended December 31, 2019 and 2020, respectively”