When Backblaze first filed to go public, TechCrunch found it a compelling company. With a central core of content to help power customer acquisition and a huge swath of customers, it was an interesting cloud storage play. But when it came to pricing, we had little idea of how to value the company.
Since it was smaller in revenue terms than most tech companies going public these days, we deferred on judging its worth until Backblaze itself provided some guidance. And it has, namely an S-1/A filing indicating that the company expects to price its IPO between $15 and $17 per share.
At its IPO price range and 28,545,893 shares expected to be outstanding after its IPO, Backblaze is worth $428.2 million to $485.3 million. Notably the company’s fully diluted valuation is quite a bit higher, with Renaissance Capital reporting that at $16 per share, Backblaze’s valuation inclusive of shares that have been earned, if not yet exercised via options or similar, to be $644 million.
Quick extrapolation indicates that at the top end of its price range, Backblaze’s IPO could value the storage firm at $684.3 million.
That means that Backblaze is going public as a non-unicorn. Which is notable given the sheer heft of many tech companies we’ve seen go public lately. Indeed, even some of the smaller or less traditional companies that we’ve seen debut in recent quarters have had valuations north of $1 billion.
The examples roll from memory: Robinhood was worth dozens of billions when it went public; Coinbase was as well when it direct listed; NerdWallet is going to be a public unicorn merely on the strength of the written word; and AllBirds? More like AllUnicorn. You get the idea.
Which makes Backblaze nearly unique from our perspective. Its IPO is a harkening back to the time when it was somewhat difficult to convince private-market investors to value your company in the nine-figures, let alone 10. And when double-digit multiples applied to profit and not revenue. So, color us more than curious.
But before we sign off, we have new numbers from Backblaze that give us a nibble at its Q3 results. Let’s take a look.
Q3, ARR and Backblaze’s new revenue multiple
Per the company, here’s how its Q3 2021 is shaping up:
The midpoint of $17.0 million to $17.3 million is $17.15 million, or just over 24% growth from the company’s year-ago revenue of $13.8 million.
The company’s Q3 profitability story is somewhat negative. The company’s GAAP losses swelled sharply compared to a year earlier, and adjusted profits were down as well. Rising interest costs, share-based compensation expenses and depreciation costs were to blame.
At its midpoint Q3 revenue expectation, Backblaze has an annualized run rate of $68.6 million. That puts its upper-end, simple IPO valuation at a multiple of just over 7x. And if we use its highest-calculated, fully diluted valuation for the same calculation, Backblaze could reach a run-rate multiple of a hair under 10x.
Looking around the public markets, companies with similar growth rates that play in the cloud or software space tend to sport higher multiples. But they also have better gross margins.
A company called Q2 might be the comp here, with 28% growth per Bessemer, 45% gross margins and a 9.4x run rate multiple. That’s just about where we find Backblaze.
Before we get to see Backblaze debut, we’ll see NerdWallet and AllBirds go public. But we’ll be right back to software.
More when we get a final price from Backblaze, can check our math and see whether smaller tech companies can debut at related multiples to larger firms with similar metrics.
If they can, one more startup excuse for avoiding IPOs goes poof.
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