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Backblaze filed its IPO Tuesday, debuting the cloud storage and backup vendor to the market after 14 years in operation.
The company is selling 6,250,000 shares of Class A common stock to the public with an initial price between $15 to $17 per share, according to a blog post from Backblaze. The company's stock will be listed with the ticker "BLZE" on the Nasdaq Global Market.
Backblaze has 484,630 customers in 175 countries, five data centers and 288 employees as of June 2021, according its filing with the Securities and Exchange Commission (SEC).
"We do not plan to change our customer focus, nor our dedication to staying efficient," the company wrote in its SEC filing. "As Backblaze becomes a public company, we plan to maintain our core values, our focus on sustainable growth and our commitment to our customers."
Dave RaffoSenior Analyst; Evaluator Group
The company said money raised from the IPO will be invested into sales and marketing to expand its visibility, increase its total number of data centers and establish new vendor partnerships.
"Backblaze will probably have to grow faster to keep shareholders happy, but they're not far off where they need to be," said Dave Raffo, a senior analyst at Evaluator Group.
He noted the company's prospectus indicates an expectation to raise between $89.5 million to $103.4 million.
A crowded market
Backblaze business cloud storage and services compete directly with hyperscalers such as AWS, Azure and Google Cloud Platform, along with smaller cloud storage vendors such as Wasabi. Its backup offerings compete most directly with other cloud-based backup products such as Druva, Clumio, Datto and Commvault's Metallic backup-as-a-service suite.
"They're in a rapidly growing market and have a chance to greatly expand their revenues and income," Raffo said. "The downside is, it's also a highly competitive market, and they face some of the largest IT companies."
Raffo noted that Backblaze generated $54 million in revenue last fiscal year and $31 million in revenue until June of this year, according to the filing.
"Backblaze has been more of a bootstrap company that relies on a little bit of funding and tries to keep losses down instead of taking hundreds of millions of dollars from VCs and spending lavishly to grow," Raffo said.
Still, the company has carved out a niche in the cloud storage market thanks to its early presence and growth over the past decade, said Steve McDowell, a principal analyst at Moor Insights & Strategy. Backblaze's success, however, will depend on its ability to continue to differentiate itself and compete with bigger vendors.
"The danger that Backblaze faces is in maintaining relevance in what's become a cloud-first world," McDowell said. "It has no shortage of competitors, and the public cloud guys have no problem undercutting industry pricing to gain business."
Backblaze declined to be interviewed for this story before press time.
Cloud storage backup since 2007
Backblaze launched in 2007 with consumer-grade cloud backups and expanded into business uses with its B2 Cloud Storage product in 2015, providing businesses with features that compete with hyperscalers at competitive prices.
"We have maintained our per-gigabyte B2 Cloud Storage pricing for five years, and we announced price increases to our unlimited subscription Computer Backup pricing in February 2019 and July 2021 with no material impact on customer retention," the company wrote in its IPO filing.
The filing indicates average revenue from B2 Cloud Storage per user is $326 annually, while the Computer Backup service generates $99 per user. That consistent subscription revenue means Backblaze can likely maintain its price promise, according to Raffo, especially as existing customers become more comfortable backing up to the cloud.
"By increasing revenue from existing customers, they're talking about a 'land and expand' strategy where their current customers keep putting more data into their cloud," Raffo said. "Not only does that increase revenue, it also lowers cost of sales."
McDowell said continued growth might come from markets outside of the U.S., where 28% of its customers are based, according to the IPO filing, and from new markets Backblaze has yet to tap such as the enterprise.
"It could develop new offerings to better serve that market," he said. "A lot can be done that doesn't require breaking commitments that it's made to existing customers."
Raffo added that the success or failure of Backblaze's IPO could potentially dictate the pace of other, similar storage vendors filing IPOs, including Cohesity, Rubrik, Infinidat and Wasabi.
"I would say all of those companies are candidates for IPOs," he said.
Tim McCarthy is a journalist living in the North Shore of Massachusetts. He covers cloud and data storage news.