10 ms·

The Bootstrapper's Bargain

51 points by nikunjk 14y ago

codegeek 14y ago
"We started drive farming--buying external drives from retail stores, cracking open the cases, and placing the drives in our servers." As a bootstrap lover, this is awesome even though critics can question this especially since they are a backup company.
- bluedino 14y ago
  They mention in a blog post that they don't buy enough drives to order directly from the manufacturers, much less at a discount. They had to do some pretty interesting things during the Thailand floods.
  - RyanZAG 14y ago
    You missed the point of the OP's post - the company sells a backup service, which means losing a customer's data is a very bad thing. Breaking open retail external drives and moving those hard-drives into a server is not something that inspires confidence in their ability to actually keep the data safe. The OP's point was a confidence issue, and not necessarily that there was a better option that could have been taken.
    - bluedino 14y ago
      The pods have internal redundancy, and your data is stored on more than one pod, so I'm okay with them using consumer hardware to back my data up. They also wouldn't be doing it if they weren't sure that the drives were reliable enough for that use.
      - rubinelli 14y ago
        That's one of my favorite uses of probability: if you know what you are doing, you can build extremely reliable systems out of unreliable components.
    - klipt 14y ago
      Even the best hard drives will fail eventually, so you need a redundant failure-recovery system anyway. And once you have that, using commodity hard drives shouldn't be a problem.
up_and_up 14y ago
> We committed to working a year without salary. Sounds interesting. Not many of us could do that w/o previous success(s). > We started in one person's apartment with the understanding we'd get an office in six months. Six months became a year, a year became 18 months, five people became six people...and the guy living there finally said, "Obviously, you guys are not leaving my apartment, so I am." That let us turn the bedroom into our conference room. Haha, thats hilarious. I wonder how much more productive it would have been to have a more comfortable situation? EDIT: Care to share why the downvote?
- dllthomas 14y ago
  > Not many of us could that w/o previous success(s). Or other outside support (parents, spouse).
- dspillett 14y ago
  You need to be careful with using residential property for commercial purposes in most places. Repurposing a property, even though it would require no external changes and no structural internal changes, often requires planning permission and/or a correct license to operate a business. There are exceptions for sole traders, but they'd not count in this case. Caveat: I'm in the UK. Things may be different the other side of the pond (and may vary by state).
  - ssharp 14y ago
    I'm sure things vary by state, but I think if you're careful, it's something you can easily get away with. As long as you don't need to have frequent visitors, aren't making tons of noise, and generally make it look like your apartment isn't a makeshift office, I'd probably be more worried about my landlord finding out than the zoning commission. Is commercial office space substantially more expensive than residential? I could see using a space you're living in as an office, but if the original tenant moved out because the office was infringing on his space/life, is it cheaper to maintain the residential apartment as an office or find proper office space?
  - bluedino 14y ago
noelherrick 14y ago
I think this is a key takeaway: "Most entrepreneurs think of the VC as their customer, but when your survival is based on the VC, you build a company on what the VC will like and not what your real customers like." A VC-backed business often has the wrong priorities from the get go, which is why bootstrapping is really attractive because you live and die by building a product people want to use.
deleted 14y ago
[deleted]
sreitshamer 14y ago
$10 million/year in revenue in the 6th year doesn't sound like a VC-compatible growth rate.
- n00b101 14y ago
  > $10 million/year in revenue in the 6th year doesn't sound like a VC-compatible growth rate. Interesting point. Come to think of it, online backup services have existed for a long time, I remember using a similar service at a previous job 6+ years ago. I recall that it was quite expensive and certainly not unlimited. I seems clear that Backblaze was able to get to $10 million revenue by competing on price - dirt cheap pricing. And the dirt cheap pricing was made possible by not paying salaries, running a "data center" in an employee's apartment, building servers from ultra low cost hardware components, violating residential zoning laws, oversubscribing storage capacity, etc. One can only wonder what kind of sacrifices were made in terms of physical and network security. I wonder how many of their first customers realized that their backups were sitting in someone's apartment ... somehow I doubt it was disclosed at the time? The problem with this kind of business model is that it is effectively a small business owner mindset. $10 million revenue after 6 years of toiling away ... at $5 per month, this means that they have something like 2 million users ... considering all the other backup solutions available (including far more secure solutions), it seems quite possible that their growth will stall or slow down as their target market is going to be relatively small and already saturated and you can't go much lower than $5 a month to continue competing on price alone. Incidentally, I noticed that their website actually says "as low as $3.96 per month" ... so they are continuing to push the limit on price. I'm not sure that a price war / race to zero is the optimal strategy for this business ... this is like trying market the world's cheapest helmet or life vest - how many people would seriously want that?
  - davmre 14y ago
    FWIW, the $10 million number is annual revenue. So they'd only need about 170k users at $5/mo ($60/year) to be making that much.
    - 14y ago

51 points by nikunjk 14y ago

"We started drive farming--buying external drives from retail stores, cracking open the cases, and placing the drives in our servers." As a bootstrap lover, this is awesome even though critics can question this especially since they are a backup company.

bluedino 14y ago
They mention in a blog post that they don't buy enough drives to order directly from the manufacturers, much less at a discount. They had to do some pretty interesting things during the Thailand floods.
- RyanZAG 14y ago
  You missed the point of the OP's post - the company sells a backup service, which means losing a customer's data is a very bad thing. Breaking open retail external drives and moving those hard-drives into a server is not something that inspires confidence in their ability to actually keep the data safe. The OP's point was a confidence issue, and not necessarily that there was a better option that could have been taken.
  - bluedino 14y ago
    The pods have internal redundancy, and your data is stored on more than one pod, so I'm okay with them using consumer hardware to back my data up. They also wouldn't be doing it if they weren't sure that the drives were reliable enough for that use.
    - rubinelli 14y ago
      That's one of my favorite uses of probability: if you know what you are doing, you can build extremely reliable systems out of unreliable components.
  - klipt 14y ago
    Even the best hard drives will fail eventually, so you need a redundant failure-recovery system anyway. And once you have that, using commodity hard drives shouldn't be a problem.

up_and_up 14y ago

> We committed to working a year without salary. Sounds interesting. Not many of us could do that w/o previous success(s). > We started in one person's apartment with the understanding we'd get an office in six months. Six months became a year, a year became 18 months, five people became six people...and the guy living there finally said, "Obviously, you guys are not leaving my apartment, so I am." That let us turn the bedroom into our conference room. Haha, thats hilarious. I wonder how much more productive it would have been to have a more comfortable situation? EDIT: Care to share why the downvote?

dllthomas 14y ago
> Not many of us could that w/o previous success(s). Or other outside support (parents, spouse).
dspillett 14y ago
You need to be careful with using residential property for commercial purposes in most places. Repurposing a property, even though it would require no external changes and no structural internal changes, often requires planning permission and/or a correct license to operate a business. There are exceptions for sole traders, but they'd not count in this case. Caveat: I'm in the UK. Things may be different the other side of the pond (and may vary by state).
- ssharp 14y ago
  I'm sure things vary by state, but I think if you're careful, it's something you can easily get away with. As long as you don't need to have frequent visitors, aren't making tons of noise, and generally make it look like your apartment isn't a makeshift office, I'd probably be more worried about my landlord finding out than the zoning commission. Is commercial office space substantially more expensive than residential? I could see using a space you're living in as an office, but if the original tenant moved out because the office was infringing on his space/life, is it cheaper to maintain the residential apartment as an office or find proper office space?
- bluedino 14y ago

noelherrick 14y ago

I think this is a key takeaway: "Most entrepreneurs think of the VC as their customer, but when your survival is based on the VC, you build a company on what the VC will like and not what your real customers like." A VC-backed business often has the wrong priorities from the get go, which is why bootstrapping is really attractive because you live and die by building a product people want to use.

deleted 14y ago

[deleted]

sreitshamer 14y ago

$10 million/year in revenue in the 6th year doesn't sound like a VC-compatible growth rate.

n00b101 14y ago
> $10 million/year in revenue in the 6th year doesn't sound like a VC-compatible growth rate. Interesting point. Come to think of it, online backup services have existed for a long time, I remember using a similar service at a previous job 6+ years ago. I recall that it was quite expensive and certainly not unlimited. I seems clear that Backblaze was able to get to $10 million revenue by competing on price - dirt cheap pricing. And the dirt cheap pricing was made possible by not paying salaries, running a "data center" in an employee's apartment, building servers from ultra low cost hardware components, violating residential zoning laws, oversubscribing storage capacity, etc. One can only wonder what kind of sacrifices were made in terms of physical and network security. I wonder how many of their first customers realized that their backups were sitting in someone's apartment ... somehow I doubt it was disclosed at the time? The problem with this kind of business model is that it is effectively a small business owner mindset. $10 million revenue after 6 years of toiling away ... at $5 per month, this means that they have something like 2 million users ... considering all the other backup solutions available (including far more secure solutions), it seems quite possible that their growth will stall or slow down as their target market is going to be relatively small and already saturated and you can't go much lower than $5 a month to continue competing on price alone. Incidentally, I noticed that their website actually says "as low as $3.96 per month" ... so they are continuing to push the limit on price. I'm not sure that a price war / race to zero is the optimal strategy for this business ... this is like trying market the world's cheapest helmet or life vest - how many people would seriously want that?
- davmre 14y ago
  FWIW, the $10 million number is annual revenue. So they'd only need about 170k users at $5/mo ($60/year) to be making that much.
  - 14y ago