Update: Deleting C:\Programdata\Backblaze\bzdata\bzexcluderules_mandatory.xml resolved the problem for me. Seems like at one point[1] they started excluding .git directories by default, got a bunch of backlash, reverted that change, but never changed the setting back for some users (like me).

[1]: https://www.reddit.com/r/backblaze/comments/1cgy93n/i_did_a_...