Backblaze takes opposite IPO route to Rivian, going public on small valuation and minimal funding

Electric-vehicle maker Rivian Automotive, which has almost no revenue, dominated the headlines this week after raising close to $12 billion in its IPO and then watching its market cap swell past $105 billion, leapfrogging Ford and General Motors along the way.

On the far other end of the IPO market, there was Backblaze, a cloud service for backing up data.

In an era of blockbuster market debuts preceded by astronomical private financing rounds, Backblaze is a throwback to a time when sub-billion-dollar companies routinely went public to raise capital and build their profile in an effort to win the trust of customers.

In the year that ended June 30, Backblaze’s revenue totaled $59.9 million, with second quarter sales up about 17% to $16.2 million, according to the company’s prospectus.

Backblaze raised just $100 million in its offering, less than one-twentieth the amount raised this year by companies including GlobalFoundries, Robinhood and Bumble. Backblaze shares climbed 24% in their debut on Thursday and another 12% on Friday, lifting the price to $22.31 and giving the company a market cap of around $650 million.

Over 100 technology companies have listed on U.S. exchanges this year and, by the standards of its peers, Backblaze is a micro-cap. At least 21 tech companies to debut in 2021 are worth over $10 billion. Coinbase is valued above $70 billion, Roblox is over $50 billion and Affirm topped $40 billion.

Those companies all routinely tapped venture investors for hefty amounts of capital on their way to the public exchanges. Rivian raised $2.5 billion in a pre-IPO round in July. Backblaze, by contrast, had raised less than $3 million from outside investors between its formation in 2007 and earlier this year, when it issued $10 million in convertible notes.

“Over and over again investors saw that and said, ‘Wow, I can’t remember the last time I’ve seen a company looking to approach the public markets having only raised that little,’” said Backblaze co-founder and CEO Gleb Budman in an interview on Thursday after the company’s market debut. “The fact that we’ve been able to be so capital-efficient in building the company to scale is something they were very surprised by.”

One of Backblaze’s competitors is Amazon, the world’s fourth most valuable U.S. company. Amazon has been one of the great growth stories over the 25 years, expanding from online bookseller to giant e-commerce site to full-stack technology platform.

But when Amazon went public in 1997, the company was generating $16 million in quarterly revenue. Until about a decade ago, when the private markets started to balloon with new entrants, it was still common for tech companies to go public with valuations below $1 billion.

Backblaze executives had other reasons to go public in a highly-competitive market that features the biggest cloud services in the world from Amazon, Microsoft and Google. Backblaze currently stores two exabytes of data — that’s 2 million terabytes — and has a half-million paying customers.

Budman said the IPO presented a clear opportunity to open Backblaze’s books to customers and prove that it’s mature enough to be a long-term technology provider.

He said the fresh capital will help the company expand its sales team as it faces off against industry heavyweights. Its B2 business, which competes with Amazon’s S3 cloud storage offering, grew 61% in the second quarter.

“I actually hope us showing this is possible for a mid-market company opens the path for more companies to do this,” Budman said. “It used to be that other companies went public at other sized scales. I think people have been scared of it and so waited longer and longer.”