Prospectus Summary
PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus and is qualified in its entirety by the more detailed information and financial statements included elsewhere in this prospectus. It does not contain all of the information that may be important to you and your investment decision. You should carefully read this entire prospectus, including the sections titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our financial statements and the related notes included elsewhere in this prospectus before making an investment decision. In this prospectus, unless context requires otherwise, references to “we,” “us,” “our,” “Backblaze,” or the “Company” refer to Backblaze, Inc.Our Mission
Data is the digital world’s most precious resource.
Our mission is to make storing, using, and protecting that data astonishingly easy.
Company Overview
We are a leading storage cloud platform, providing businesses and consumers cloud services to store, use, and protect their data in an easy and affordable manner. We provide these cloud services through a purpose-built, web-scale software infrastructure built on commodity hardware. From genome sequencing to mapping the world, from saving lives to playing online games, from interacting with a business to running one, data is central to modern existence. By substantially reducing the complexity and frustration of storing, using, and protecting data, we empower customers to focus on their core business operations. Through our blog and culture of transparency, we have built a devoted community of millions of readers and brand advocates. Referrals from our community of brand advocates, combined with our highly efficient and primarily self-serve customer acquisition model and an ecosystem of thousands of partners, have allowed us to attract over 480,000 customers. These customers use the Backblaze Storage Cloud platform across more than 175 countries to grow and protect their business data on our approximately 2 exabytes, or 2 trillion megabytes, of data storage under management. As businesses and consumers shift to the cloud, we believe our cloud services will increasingly become a foundational element of their overall technology stack.
At its founding, Backblaze set out to simplify the process of storing, using, and protecting data. Over the following years we focused relentlessly on cutting away the complexity common among diversified cloud vendors’ services and legacy on-premises system vendors. Today, our solutions are differentiated by their ease of use and affordability. Focusing on storage use cases and promoting an open ecosystem allows us to integrate well with a broad range of partners. From our straightforward pricing model, to our transparent communication with customers, to the popular and insightful content on our blog—we have established ourselves as an open and trusted provider and partner.
The Backblaze Storage Cloud provides the core platform for our cloud services. This storage cloud organizes, safeguards, and keeps over 500 billion files available on demand and is designed to store trillions more in the future. Through our purpose-built software, we provide a platform that is durable, scalable, performant, and secure. This software manages our global physical infrastructure of nearly 200,000 hard drives and one terabit per second (one million megabits) of network capacity across 5 data centers that are interconnected by private network infrastructure. Our scale, along with our efficiency and expertise developed over years of growing the Backblaze Storage Cloud, provide a robust platform and significant barriers to entry. Our two cloud services that we offer on our Storage Cloud are:
down as needed on a pay-as-you-go basis. This service is offered as a consumption-based Infrastructure-as-a-Service (IaaS) and serves use cases including backups, multi-cloud, application development, and ransomware protection.
Public cloud adoption has been rapid and transformational for a wide range of companies. However, the market is demanding alternatives to the traditional, diversified public cloud vendors for multiple reasons. 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. Due to their walled-garden approach, these public cloud vendors have made it expensive for customers to use their data in multi-cloud and hybrid cloud deployments and with other independent cloud platforms. Additionally, these diversified public cloud vendors increasingly compete with their customers and partners in an ever-widening range of industries.
Backblaze, on the other hand, is designed to fulfill major unmet market needs, particularly among mid-market businesses, by providing straightforward cloud storage offerings with easy-to-understand and affordable pricing from a trusted and independent provider.
Our solutions are designed for individuals and businesses of all sizes and across all industries but have a particularly strong appeal to mid-market organizations (which we define as organizations with 10 to 999 employees) due to their desire for easy-to-use and cost-effective solutions. We serve both the Public Cloud IaaS Storage market and Data-Protection-as-a-Service (DPaaS) market. According to forecasts from International Data Corporation (IDC), the worldwide market for Public Cloud IaaS Storage is $27.6 billion in 2020 and is expected to grow to $91.0 billion by 2025. Additionally, according to IDC, the worldwide market for DPaaS is $7.7 billion in 2020 and expected to grow to $18.4 billion by 2025. Based on our analysis of IDC data, we believe the Backblaze opportunity in the mid-market alone for Public Cloud IaaS is expected to grow to $54.6 billion by 2025, representing a CAGR of 27%, and for DPaaS to $11.0 billion by 2025, representing a CAGR of 19%.
We have a highly efficient go-to-market model that is built on a self-serve selling motion. Prospective customers find us through a variety of channels including our website, partners, and brand advocates. We have fostered deep community engagement with valuable content we share on our blog—in 2020 alone, more than 3 million readers consumed content that we shared there. Our content encourages organic, inbound traffic that we believe serves as our greatest source of advocates and referrals. Our frictionless free trial and self-serve sign-up processes help convert our blog readers and referrals from our brand advocates into customers, with over 80% of our revenue in 2020 coming from self-serve customers. In addition to generating customers, a community of thousands of partners has arisen as a result of our efforts. Our developer, alliance, and managed service provider (MSP) partners expand use cases and attract customers, thereby increasing usage of our Storage Cloud and helping to drive revenue growth. New customers and partners ultimately lead to more insight, content, and community engagement, which creates a positive feedback loop that drives additional customers and partners. In addition to our self-serve selling motion, in recent years we have begun to invest in a sales-assisted selling motion to identify opportunities to increase business with existing customers and to assist larger customers in adopting our services. Our sales-assisted selling motion has experienced substantial growth and helps customers that, in 2020, were approximately 20 times larger in terms of average revenue per customer than our self-serve customers. These efficient and effective go-to-market motions have helped us grow rapidly.
Substantially all of our revenue is recurring in nature. We employ a land-and-expand model that drives additional revenue from existing customers. As customers generate, store, and back up more data, their use of our platform increases, creating natural opportunities for revenue expansion. We are able to further expand our relationships with our customers when they adopt new features and use cases that lead to increased usage of our platform. Our land-and-expand strategy is evidenced by our overall net revenue retention rate of 113% and 114% as of December 31, 2019 and 2020, respectively.
Our B2 Cloud Storage revenue grew by 66% during the year ended December 31, 2020 and our Computer Backup revenue grew by 23% during the year ended December 31, 2020. We also have recently launched offerings such as Extended Version History, multi-region selection and our new ransomware protection functionality, Object Lock. By expanding our offerings, we are able to further expand our revenue and market opportunity.
Our operations have historically been efficient with limited outside investment. Prior to issuing $10.0 million of convertible notes (which we also refer to as a Simple Agreement for Future Equity agreement (SAFE)) in a private financing round in August 2021, we had raised less than $3.0 million in outside equity since our founding in 2007. This has helped create a culture based on operational efficiency, creativity, and collaborative problem solving. This culture, combined with the software and infrastructure we have scaled, refined, and enhanced over a decade, our innovation roadmap, our efficient go-to-market, large community of brand advocates, and position as an independent cloud platform, is what enables us—now and in the future—to succeed. This is evident in the significant growth we have achieved in recent periods. 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. As of June 30, 2021, our annual recurring revenue was $64.8 million and we incurred net losses of $6.1 million for the six months ended June 30, 2021. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics—Annual Recurring Revenue” for more information on annual recurring revenue.
Industry Background
We believe data is an increasingly critical part of the global economy. The fundamental shift in how data is created and consumed is fueling the growth and evolution of storage:
According to Frost & Sullivan’s 2020 Global Cloud User Survey, 43% of respondents indicated current adoption of multi-cloud in 2020 and 84% of respondents indicated planned adoption of multi-cloud in 2022.
Our Platform and Cloud Services
Our Platform: Backblaze Storage Cloud
The Backblaze Storage Cloud provides the core platform for our cloud services. This storage cloud organizes, safeguards, and keeps over 500 billion files available on demand and is designed to store trillions more in the future. By architecting our platform to administer this complexity, we free customers from having to worry about their data. Through our interfaces, customers can upload, manage, safeguard, build upon, and utilize their data while remaining free of the financial and logistical hurdles of maintaining on-premises technology or the complexity of administering diversified cloud solutions. The Backblaze Storage Cloud acts as the foundation for our two primary services, Backblaze B2 Cloud Storage and Backblaze Computer Backup. Each of these cloud services unlocks a multitude of use cases and additional services for our partners and customers.
Our Cloud Service Offerings
Backblaze B2 Cloud Storage. Backblaze B2 provides customers direct access to our Storage Cloud to store, use, and protect data. Users can access the platform through industry standard and native application programming interfaces (APIs) software development kits (SDKs), our web interface, or hundreds of third-party integrations. The wide range of options for accessing B2 Cloud Storage allows anyone to easily use it, including developers and partners who seamlessly integrate storage capabilities into their technology stack or build their own solutions on top of our platform. Customers also strategically tier backups of their core data systems to Backblaze B2, including on-premises and virtual machine servers and other high-capacity storage devices.
Backblaze B2 Use Cases
As companies adopt cloud infrastructure and undergo digital transformation, we believe Backblaze B2 will increasingly become a foundational element of our customers’ overall technology stack. Customers leverage Backblaze B2 for a wide range of use cases, including:
Backblaze Computer Backup. Our Computer Backup cloud service backs up laptops, desktops, and external hard drives in a continuous and automated fashion. Whether for home computers or a business’ full fleet of machines, customers can back up a virtually unlimited number of files without size or speed constraints. This cloud service includes a lightweight agent that runs locally on each end user’s computer, continuously searching for new and changed files in a manner unobtrusive to the user. When a new or changed file is detected, the altered data is backed up and sent to the Backblaze Storage Cloud. Once there, it is accessible to the end user or business administrator responsible for managing the account. In the event of data loss, customers can restore all or portions of their backed-up data.
Computer Backup
Use Cases
Competitive Strengths
Our competitive strengths include:
interests of our customers and partners. We do not aim to compete with our customers and we do not sell their data. Our long track record and independence, combined with our desire to do business and communicate in an open, transparent manner helps us succeed with our customers and partners.
Our Growth Strategy
Key elements of our growth strategy include:
Risk Factors Summary
An investment in our Class A common stock involves a high degree of risk. Below is a summary of the principal factors that make an investment in our Class A common stock speculative or risky. Importantly, this summary does not address all of the risks that we face. Our ability to execute our business strategy is subject to numerous risks, as more fully described in the section titled “Risk Factors” immediately following this summary. These risks include, among others:
Corporate Information
We were incorporated in Delaware in April 2007. Our principal executive offices are located at 500 Ben Franklin Ct, San Mateo, CA 94401. Our telephone number is (650) 352-3738. Our website address is https://www.backblaze.com. We have included our website address in this prospectus solely as an inactive textual reference. The inclusion of our website address in this prospectus does not include or incorporate by reference the information on, or accessible through, our website into this prospectus.
Trademarks
Backblaze, the Backblaze logo, and our other registered or common law trademarks appearing in this prospectus are the property of Backblaze, Inc. This prospectus contains references to our trademarks and service marks as well as to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus, including logos, artwork, and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other entities’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other entity.
Implications of Being an Emerging Growth Company
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act. We will remain an emerging growth company until the earliest to occur of: (i) the last day of the fiscal year in which we have more than $1.07 billion in annual gross revenue; (ii) the date we qualify as a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, with at least $700 million of equity securities held by non-affiliates; (iii) the issuance, in any three-year period, by us of more than $1.0 billion in non-convertible debt securities; or (iv) the last day of the fiscal year ending after the fifth anniversary of our initial public offering. As a result of this status, we have taken advantage of certain exemptions from various reporting requirements in this prospectus that are applicable to other publicly-traded entities that are not emerging growth companies and may elect to take advantage of other exemptions from reporting requirements in our future filings with the Securities Exchange Commission (SEC). In particular, in this prospectus, these exemptions include:
As a result, some investors may find our Class A common stock less attractive. The result may be a less active trading market for our common stock, and the price of our Class A common stock may become more volatile.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. We have elected to use this extended transition period until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period. Even after we no longer qualify as an emerging growth company, we may qualify as a “smaller reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements including reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements, if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million.