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.