December 8, 2021

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Cloud object storage company Backblaze files to go public

3 min read

DeMarcus Cousins #15 of the LA Clippers talks to Assistant Coach, Roy Rogers of the LA Clippers before the game during Game 6 of the Western Conference Finals of the 2021 NBA Playoffs on June 30, 2021, at STAPLES Center in Los Angeles.

Adam Pantozzi | National Basketball Association | Getty Images

Backblaze, a company that backs up data on people’s computers and provides cloud-based storage space that companies use to store and retrieve files, filed to go public on the Nasdaq on Monday. The company intends to have its shares trade under the symbol “BLZE.”

It’s not a major cloud company, but Backblaze has managed to expand in the shadow of much larger entities, as more organizations become willing to count on data center equipment they don’t own, in part because they can pay based on how much they use. If Backblaze completes its initial public offering, it would join DigitalOcean in providing cloud capabilities to smaller businesses.

“The market is demanding alternatives to the traditional, diversified public cloud vendors for multiple reasons,” Backblaze said in its IPO prospectus. “These public cloud vendors have increasingly focused on the largest enterprises, resulting in significant complexity in their products and pricing that leaves behind mid-market businesses”

Following its establishment in 2007, Backblaze in 2008 released online backup services for PCs running Apple’s MacOS and Microsoft Windows, and the company grew by focusing on that one product. In 2016 the company entered the market of object storage, going up against some of the world’s largest companies, including Amazon, Google and Microsoft, which offer cloud computing services to companies, schools and governments.

Backblaze, based in San Mateo, Calif., hasn’t exactly won over the biggest cloud storage customers of Amazon Web Services. However, Backblaze’s B2 cloud storage service has won adoption from some small organizations, such as American Public Television, the nonprofit Gladstone Institutes and California’s Kings County.

The Backblaze website says data storage from the B2 service costs 76% less than AWS’ S3 storage service, with 80% less expensive data download fees. Amazon S3 enjoys a gross margin percentage in the low 50s, according to one analyst’s estimate, while Backblaze, with its lower object-storage pricing, has an overall gross margin of 50%.

Less than one-third of Backblaze’s revenue comes from B2. But B2 revenue grew 60% year over year in the first half of 2021, while the online backup business grew 12% during the same period. Plus, existing customers more consistently stick with B2 than with backup, and B2 has higher annual average revenue per user.

In September Cloudflare, which offers a content-distribution network companies use to quickly serve up content from data centers around the world, said it would release its own object-storage service called R2.

Backblaze reported a $2.4 million loss on $16.2 million in revenue in the second quarter. While revenue grew 24% from the year-ago quarter, the loss widened from $1.9 million. Before issuing $10 million in convertible notes in a private funding round in August, Backblaze had raised under $3 million in backing from outside investors. The company employed just 228 people at the end of the second quarter.

Oppenheimer and Co., William Blair and Raymond James are the lead underwriters of the initial public offering.

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2021-10-18 18:37:00

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