What is this new idea?
Founded in 2017 by David Friend and Jeff Flowers, Wasabi is a cloud storage company that provides durable, fast, and inexpensive storage for companies. Although Wasabi doesn’t target small companies, anyone can head to their website, put in their credit card, and use their service.
Wasabi’s viewpoint is that cloud storage is a commodity, like electricity or bandwidth, and it should be available to everyone without an individual having to go out and buy their own storage. In my interview with David Friend, he likens buying your own data storage facility to building your own electric generating facility. While people did this more than a century ago, it’s just not the way things work in today’s technology-driven world.
As the cloud storage market grows, those who enter will realize there are places they can go to store their data quickly and inexpensively. Wasabi’s average 2018 customer grew its storage 70 percent year-over-year, which translates to 170 percent net revenue retention, so the company is on its way to great things.
Here are the quick facts
- Wasabi has raised $80m and is taking in $1.5 million in monthly revenue.
- Wasabi’s growth rate is 5x year-over-year.
- The cloud storage solution is the same as Amazon S3, but one-fifth of the price.
- Wasabi has 15,000 customers buying between 50 and 100 TB of Data for $6 per TB per month.
Keep reading to learn more information about Wasabi, David Friend, and how the company has reached new heights.
How Wasabi Got its First 100 Customers
Wasabi invested a great deal of money in advertising to get their initial customers. They primarily focused on Google Ads and focused on customers who searched for Amazon S3 and Object Storage. Wasabi also spent a large portion of their marketing budget on radio ads that were featured on NPR. Online and print computer publications also featured Wasabi ads.
In total, the company spent a couple of million dollars to blast their name everywhere that made sense. Now that Wasabi has established itself as a player in the cloud storage market, they spend less on advertising and focus more of their marketing with their channel and technology partners.
Why Did Wasabi Spend $20 million Building Version 1?
It takes a lot of money to build a product of Wasabi’s scale and ensure it’s stability, as well as market the product. David Friend likens Wasabi’s business model to building apartment buildings.
You build the building. You fill it up with tenants. When the building is 70 percent occupied, it starts making money, and then you build another building.David Friend
Wasabi builds a data center, fills it up with customers, and when it hits a certain level, they build another data center. Getting it right is worth the money, so scaling becomes easier.
Friend shared that Wasabi has prospective customers whose business would be larger than the entire company. If Wasabi seals the deal on one or more of these companies, they will have to quickly scale and build more data centers. Each storage facility takes about 90 days to build.
Why Did Wasabi Raise $80 million?
Many investors have done business with David Friend and his co-founder, Jeff Flowers, and made plenty of money on previous projects with them. With success in five companies prior to Wasabi, including Carbonite, investors were excited to hand over funding for this new venture. These good relationships provided the capital the company needed for startup and gave investors the opportunity to once again make money with Friend and Flowers.
Additionally, the founders chose not to finance their venture with debt and fund some of the earliest stages with the money they made from Carbonite. Although building version one of Wasabi came with a hefty $20 million price tag, the founders also knew they needed to spend money to advertise and have enough capital for operating costs. Currently, Wasabi has 100 employees, 40 or 50 of which are engineers, who keep the systems running smoothly for customers.
How Did Hosting Company Wasabi Hit 15,000 Customers?
Once Wasabi secured some business, they created a program for channel partners and technology partners. These partnerships give partners the authority to sell Wasabi cloud storage bundled with other products.
Currently, Wasabi has more than 1,700 channel and technology partners. Most of these partners are resellers and their bundles often include backup products and video surveillance products. The resellers get a discount or margin on the products they sell, so they see a profit when they provide their customers with Wasabi service. Depending on the size of the reseller, they get a discount between 15 and 50 percent.
Currently, Wasabi’s European market is 100% channel partners, but the U.S. market does have a modest in-house sales team that sells direct to customers. This is in part because Europe had the demand for the cloud storage product in place when Wasabi launched three years ago, while U.S. customers have taken a little longer to jump on the cloud storage bandwagon.
Noteworthy Data Points
- May 2016: Venture Round — $1.9 million
- May 2017: Series A — $8.9 million
- August 2017: Series B — $10.8 million
- September 2018: Series B — $68 million
- 2017: Launch of Wasabi
- 2018: 3,000 customers
- 2019: 15,000 customers
- 2019: $18 million (estimated) and $1.5m MRR
- 2020: $45 million
Will Wasabi Beat Amazon AWS?
Amazon’s subsidiary, Amazon Web Services (AWS), provides a cloud storage option called Amazon S3. Like S3, Wasabi’s storage is fast and durable.
From a statistical standpoint, this means if you were to give Wasabi a million files to store, there is a chance they will lose one file every 659,000 years. All things being equal, Wasabi offers the same service as S3, but instead of charging customers $23 per terabyte, they only charge $6 per terabyte.
David Friend argues that it’s highly unlikely Amazon would drop their price to undercut Wasabi and put them out of business because they would simply lose too much money.
With increasing cloud storage use, the market is surely big enough for Amazon and other small companies like Wasabi. Plus Wasabi gives customers a technological advantage with their proprietary file system that takes advantage of new storage technology.
As for Wasabi beating Amazon, you decide!