David Friend is a serial entrepreneur. After a brief stint in corporate America following college, David realized that the traditional, prescripted path was not for him. He had the entrepreneurial spirit—wanting to strike out on his own, seeking the ups and downs that come with building something from scratch.
He’s now successfully built six companies and currently runs his most recent venture, Wasabi, as Co-Founder and CEO. Over the decades of starting and growing organizations, David has learned a lot about the process.
When asked about how to build a brand with your audience when your product is unknown, David responds with one word: “Marketing.”
A firm believer in the power of a compelling message, David says that marketing was his focus from the very beginning with Wasabi, starting with the name. The company does hot cloud storage, and David was willing to go the extra mile to get the punny name Wasabi branded.
Now that Wasabi is up and running, he and the team spend a great deal of time and effort on clever storytelling that positions Wasabi as the alternative to Amazon S3, the major player in the cloud storage market.
David’s team spends a lot of dollars on paid advertising. They’ve created a series of funny music videos featuring Nate, the IT guy, Wasabi’s unofficial mascot. This is all in the name of establishing themselves as the hip disruptor on the hot storage scene, and it’s worked.
Of course, when starting a new tech business, raising money is another major role for the founder and leader of the organization. David shares that his secret to attracting investors is also built around marketing and storytelling.
When young entrepreneurs ask him about putting together a pitch deck, David suggests you start instead with creating an ad. Challenging yourself to distill your business’s value proposition and mission down to a message that can fit on a billboard helps you get to the heart of what you do. Then, armed with that information, you can build out a pitch deck that’s far more compelling and targeted.
In both marketing and fundraising, David preaches patience and perseverance. Whether you’re trying to get the attention of potential customers or VC firms, getting your brand name out there and building trust will take time. But building a successful company is worth the effort. There’s great satisfaction in taking a kernel of an idea to a full-fledged public company, and that’s only possible with a lot of time, work, belief in oneself, and creative thinking.
Episode Transcript
Rob Ristagno: Today’s guest is no stranger to entrepreneurship. He’s founded six companies already. And now through his seventh, he’s out to disrupt the cloud storage industry. He shares the secrets to successfully building a brand and winning financial support in those early startup days.
Announcer: This is the CEO Campfire Chat with your host, Rob Ristagno. Taped in front of a live studio audience, join us to hear successful growth stories from middle market companies, just like yours. Sponsored by the Sterling Woods Group.
Rob Ristagno: Welcome to the CEO Campfire Chat. Recorded live in front of a studio audience of senior executives, I’m your host Rob Ristagno. And today I have the privilege of introducing you to David Friend, the CEO of Wasabi, which is a cloud storage company and their mission is to make storage a utility just like electricity. Now, David has a very long track record starting and scaling his businesses. This is actually the sixth one. Before Wasabi, David was the founder and CEO of the data backup service Carbonite, I think we all know that. He’s also a founder in Computer Pictures Corporation, Pilot Software, Faxnet, and Sonexis. Welcome, David.
David Friend: Hi. Nice to be here, Rob.
Rob Ristagno: I’m wowed by your track record. And I’m curious, have you always wanted to be an entrepreneur, or did something happen in your life that opened your eyes to this world?
David Friend: No, I spent about six months when I was in grad school working for RCA, which at that time was a big important company. And that was enough to convince me that I wasn’t suited for that kind of a life. The HR person called me into his office one day and showed me this chart that had sort of three curves on it, sort of asymptotic curves. And told me, “You’re on the A curve, and after 25 years you’re going to be making X, and congratulations.” And I was like, you got to be kidding me, if I had wanted my life to be that predictable, I could go to work for the post office, so the next day I quit.
Audience Member: RCA, you quit RCA?
David Friend: I was working at the RCA research labs in Princeton where I was going to grad school. And that little talk with the HR guy just, I’m sure that wasn’t the result that he was expecting, but it just made me stop and think, do I really want that much predictability in my life? And so off I went. The next day I packed my wife, my cat, my Christmas tree in the Corvair and headed to Boston.
Rob Ristagno: Excellent, I love it. That’s a great creation story there. Let’s see. I want to hear the whole story about what brought you here, but I like starting with the present and then we can go back to the past. So Wasabi, it’s a hot cloud storage company. I love the name, because it’s hot storage, but for those unfamiliar with the brand and what hot storage is exactly, tell us a little bit about what you do and what problems you solve, and what your business model is?
David Friend: Yeah, we built Wasabi to be essentially plug compatible with Amazon S3, which is Amazon’s big cloud storage product, the difference is it’s one fifth the price and faster. And we saw a one-time opportunity as all the world’s data migrates from unprimed to the cloud. We saw an opportunity here with our 15 years of cloud storage experience at Carbonite to build a better cloud storage solution. Our vision is that cloud storage will be like electricity or bandwidth. It’s just, right now, we have 23,000 customers. We get everything from pictures of the night sky from telescopes in Chile, to my MRI at Mass General, to genomic data and video surveillance data, police body cams. I mean, you name it and we’re storing it. The appetite for storage is enormous. Typically, our customers are growing about 60% year over year.
Rob Ristagno: Oh, wow.
David Friend: So even if we never sold one additional customer, we’d still see our revenues grow 50% to 60% year over year, just because at that price, people just keep sending us more and more and more data, TV shows, feature length films. So it’s really a fantastic opportunity. And it takes a lot of money, but luckily we’ve made a lot of money for investors over the last 30 or 40 years. And so people were happy to open their wallets to us. And we’ve raised a couple hundred million dollars now and the next step for us probably is an IPO.
Rob Ristagno: Excellent, excellent. A lot to unpack there. So a fifth of the price and faster. So how often do you find a product that’s less expensive and performs better? It sounds almost too good to be true, kind of what’s what’s the secret here?
David Friend: Well, I don’t think we’re one fifth the cost of Amazon. I think Amazon’s making money hand over fist on their storage product, but last year they did 11-and-a-half billion dollars revenue on storage. So our bet is if they’re not going to come and drop their price by 80%, knock $8 billion off the top line because some little company in Boston is running annoying ads . This price-disruptive strategy against a large incumbent is a classic business school. EMC did it to IBM. You know when EMC came into the market 20 years or 25 years ago now, IBM owned most of the storage business.
David Friend: And EMC came in with these disk drives that were compatible with IBM. You could unplug the IBM then plugin the EMC one, and it was half the price. And you think, why wouldn’t IBM just put them out of business? So it was seven years before IBM decided to drop their price and compete with EMC. And meanwhile, EMC was almost two billion in revenue, so it’s tough. I mean these big companies are prisoners to their own business models and there’s not a whole lot they can do about it.
Rob Ristagno: Thus, the opportunity for a good entrepreneur. So you said you had 23,000 customers. One thing we like to talk about on the show is just how do you figure out who your ideal customer is? Do you have certain segments that you over-perform in, that are easier to acquire, that are a better match for your value proposition? Tell us a little bit about your ideal, give us an example of one or two ideal segments and how you figured that out?
David Friend: Well, given that our biggest selling proposition is price, the customers that are sort of the low-hanging fruit are those people for whom the cost of storage is a burden. And the things that would come to mind immediately would be surveillance, feature-length films, Hollywood studios, genomics, which creates an enormous amount of data. And then scientific research, things like particle colliders, telescopes, that sort of thing where you have something goes boom, and the next thing you know there’s a petabyte of storage that you’re going to have to keep for the next 20 years. For those kinds of things where storage is a big part, or consumer apps like Pinterest and things like that, where probably the biggest expense other than advertising, the biggest expense is storage. So those are the things where people are willing to say, “I never heard of these Wasabi guys, how do I know if they’re real? But storage is such a big deal for us that we really should check it out, because if these guys are for real, it’s a game changer for us.”
Rob Ristagno: And how did you go about building that trust? You’ve done it at Carbonite. I mean everyone knows Carbonite now. And that was when online backup was kind of a new concept, and can I really trust this? I like having something physical, but you figured it out at Carbonite–lessons there that you brought with you to Wasabi?
David Friend: Marketing. That’s why it was worth spending a lot of money for the Wasabi brand name. That’s why we do these crazy videos. If you look at, on YouTube, at some of the videos, the music videos that we produce. You look at the quality of the stuff on our website, just the production quality of the case studies and the technical documentation and everything like that, absolutely top quality. And that’s–even if you’re a small company, it gives you the impression of being a big company, and just a lot of presence. We spent a fortune on brand building the first couple of years at Wasabi, and I did the same thing at Carbonite. And most entrepreneurs in the tech world really don’t get the value of a brand. They don’t see an immediate return on it and it’s hard to measure, but eventually, everybody’s sort of heard of you.
David Friend: And the whole issue of, “Who the heck is Wasabi, and why should I trust you with my data?” starts to go away. You get one big brand name customer, you flaunt the heck out of it. You get a second one, you flaunt the heck out of that. And pretty soon people say, “Oh, well, CBS is using it, Sony Pictures is using it, Legendary Pictures is using it, all but one of the Ivy League schools are storing their data with Wasabi. It must be good.” And sooner or later, the problem just dissipates. And also you have to work the consultants, like IDC produced a chart that showed their view of the major players in the cloud storage industry. And it was Amazon, Google, Microsoft, IBM, Oracle, and Wasabi, six companies. And we’re like probably 2% of the size of any of those guys.
Rob Ristagno: Yeah. No, the power of the brand, social proof. And you’re right, it is tougher to measure and it doesn’t give you instant gratification, but it is a competitive advantage for sure.
David Friend: If we do it right, it’s money in the bank.
Rob Ristagno: Now, how do you deal with this tension? And what’s coming to mind is on one hand, we’re saying that we want to become a commodity like electricity. On the other hand, we’re building this big brand. Help me sort of these two seemingly paradoxical statements?
David Friend: I’ll give you an example. So I mean when I say a utility, I don’t mean a commodity. There’s still utilities like Comcast, Verizon, AT&T. I mean, I view those as utility companies, but they definitely have their own brands. And they’re definitely out there competing with other brands. A brand that I think has been very successful is Iron Mountain. If you’ve got a cardboard box full of papers and you need to store them somewhere, probably the only brand you can think of is Iron Mountain. And they got the trucks running around all over the place and everything else. So if we can get to digital data, what Iron Mountain is to a cardboard box full of papers, that’s kind of my holy grail. Your brand has to stand for something. And our brand stands for always the lowest cost, high performance cloud storage. Nobody will undersell us. And there’s no point in shopping around because you’re always going to end up at Wasabi. And that’s the way I think about the brand and the image that we want to create in the marketplace.
Rob Ristagno: I want to shift gears and talk a little bit, you mentioned, you’ve raised hundreds of millions of dollars. So let’s come back to that in a second, but I want to open it up to the audience: Questions about the Wasabi strategy, business model, customer segmentation?
Audience Member: I’m curious around the business, David, is it completely vertically integrated? You talked about raising all that money. I know you didn’t spend all of that on the name Wasabi and the brand. So you own all of your own physical data centers?
David Friend: We aren’t building our own buildings, but we are renting space in other people’s data centers like Equinix and Digital Realty and that sort of thing. Someday, if our footprint is big enough, we probably could save some money by building our own buildings. But I think that’s pretty far off in the future.
Audience Member: And the economics of the business is such that, when you talk about charging 20% of what Amazon does, I’m assuming that you are profitable, or at least marginally profitable on the next dollar of storage that you sell. So that means, am I to understand, then, that Amazon, whose cost per unit should be lower than yours, is making at least 90 cents on every dollar of storage they sell?
David Friend: Well, we’re making about 70 cents on every dollar of storage that we sell. I don’t know what Amazon’s making, to be honest with you. Their costs are actually higher than ours. I mean we know a considerable amount about Amazon’s architecture. And their storage product was designed 15 years ago now and it hasn’t fundamentally changed since then. I mean, they’ve had their plate full of literally 275 other cloud products other than storage. And they haven’t seen fit to really go back and rearchitect it with some of the things that you would do differently if you were starting from scratch today. But our goal is to have a business model that’s a lot like real estate.
David Friend: You put up an apartment building, you borrow money from a bank to put up an apartment building, you hire some sales and marketing people. You put the for rent sign out. Tenants, move in, and when the building gets to 60 or 70% occupancy, it starts making money and you build another one. And we’re pretty much the same thing. We spend a couple million bucks building a data center somewhere, and we put the for rent sign out. People send us their bits, and when our data center gets, 60%, 70% full, it starts making money and we build more. So we want to use debt to buy CapEx. We don’t want to be using expensive equity to buy sheet steel and disk drives, so we borrow money.
David Friend: And that actually was one of the big challenges with getting the company going which is, venture capitalists are taking risks, lenders don’t like to take risks. They just want to know how are they going to get paid back. They’re not interested in getting three X on their money or something like that, but we’re big enough now that we can get that kind of debt. And so that’s pretty much the model, which is that there’s almost an infinite demand for storage. And we need to be where the customers are, so the plan is to continue geographic expansion. We’re in the US, obviously, Europe and Japan now. But this year, we’re going to probably open three or four more data centers in other geographies.
Audience Member: David, are there other positions out there that you would think about or look at to accelerate growth, or do you believe it’s all pretty much organic?
David Friend: I mean that’s actually a really good question, John, because we’re just sort of wrapping up our C Round. And the C Round was pretty ambitious, and I wasn’t100% sure we were going to be able to get it done, but we did. And now, we’re sort of in the mode of, how can we deploy that money to actually accelerate growth even further? And we have a laundry list of ideas and we’re trying to figure out how to put some numbers around those right now to say, okay, we’ve got some long bets, we’ve got some short bets and where do we put that money? That’s a really difficult exercise. And we’re really just starting those discussions right now.
Audience Member: I mean, if you can compete with Amazon on a hosting standpoint or a data warehouse, et cetera, storage, you could compete with them across the e-commerce landscape, could you not? And is that an opportunity?
David Friend: No, I mean the problem is Amazon’s business model is, they want your entire IT infrastructure in their cloud. If you go to Amazon’s website, you don’t see anything about storage. If you did, you’ll find the app storage, but they’re not selling storage per se when you go to their website. So they have a very different proposition. They want you to move into their walled garden and do everything there. Our view is that the only way we can compete is by spending a 100% of our time just on storage, and put blinders on and not do anything else. And it turns out that there is an ecosystem of other companies like Wasabi springing up that do other parts. For example, we have partnerships with a company called Limelight that only does content distribution. We have a partner, StackPath that only does content distribution.
David Friend: We have partnerships with people that do video. We have partnerships with people that do surveillance and that sort of thing. And Amazon has all that stuff, but pretty much all of their products are mediocre. They’re not great at any of them. They’re just good at all of them and that’s their real strength. But I think, as there is in the hardware world, there will be companies like Wasabi that’s specialized to do certain jobs better than anybody else. And that the channel partners, the MSPs and the VARs will put all of this together for the customer. I think it’s a repeat of what happened in the hardware world. When I was in college, if you walked into the data center, every piece of gear had an IBM logo on it. Today, when you walk into a data center, you see 20 or 30 different manufacturers gears all working together. That’s not the way the cloud business is today, but I think that’s the way it’s headed.
Rob Ristagno: When your organization is facing revenue shortfalls, you feel lost in the wilderness. Data science provides the breadcrumbs you need to find your way out of the thicket, and you also need a guide to lead you down the right trail. Scout X, a proprietary approach by Sterling Woods, empowers you to quickly unearth winning sales and marketing strategies. It’s founded in our fundamental belief that the answer always lies with your best customers. Are you ready to find your way back onto a winning path? Head to sterlingwoods.com to begin your journey.
Rob Ristagno: So David, you said you raised hundreds of millions of dollars, and I want to brag on your behalf. You have quite a track record. You sold Pilot for 80 million, Faxnet for 250 million, Carbonite for 1.5 billion. Wasabi has a much bigger potential than even Carbonite. So you have a track record, so this time raising money must have been easier than your very first time. Thinking back to your original raise there, what advice would you have for entrepreneurs who are thinking about raising money for the first time and don’t quite have the track record that you have right now?
David Friend: Well, I’ll tell you, for me, it’s never been like really easy. I mean it always takes a gazillion meetings. And I just wind myself up. I get a really good presentation put together. I rehearse it. I work on it. And then I’m just prepared to take a month and give that presentation a hundred times if I have to because it only takes one. I mean, for Carbonite, I remember I went out there with one of my lieutenants. We stayed in a grimy Best Western Hotel on El Camino Real. And we spent a whole week marching up and down Sandhill Road, pitching, and pitching, and pitching and pitching. And if somebody said, oh, I’m not interested. We’d say, well, who around here do you think would be interested? Would you mind making an introduction?
David Friend: And you get rejected and you get rejected, it’s sort of like, one of my college roommates who was a poet had his dorm room lined with rejection slips from the New Yorker, sooner or later he got published. It only takes one. And so you just have to be prepared to keep going, but you have to listen to what’s worrying people about your presentation. And when somebody does say no, you have to absorb what it is that they are telling you that’s bothering them about it. And either have to say, they’re right or they’re wrong. And if they’re right, you try to modify your pitch in some way. And if they’re wrong, you just say, look, these guys don’t know what they’re talking about, too bad on them. We’ll go to the next guy.
Rob Ristagno: What other war stories can you share with us about raising money over the years?
David Friend: Well, I’ll tell you, I’ve always had a mix of individual investors and VCs, and the individual investors were mostly kind of wealthy individuals. You might call them angels or something like that. But I found that these angels, if you’re successful, the angels make enough money that the next time you want to raise money, they don’t even want to look at the business plan. They’re just like how much do you need? I can give you a million or I can give you a half a million. And by the way, I know 18 other wealthy people who might like to get in on your next venture. And so with Wasabi, we went our A round and our B round. We raised $107 million without talking to any institutional investors.
Rob Ristagno: Excellent.
David Friend: And it started out with things like the Boston Harbor Angels, which is one of these investor clubs that passes the hat. And my college, Blue Ivy Ventures, which is an alumni thing that the Ivy League schools have. And if you work those, you find that the network of family offices and private and wealthy individuals is very tight. Everybody knows each other. If you’re willing to spend the time pitching and pitching for one, two, three $5 million checks, it’s unlimited.
Rob Ristagno: So the mindset there to be had, you have to pound the payment and just ask for it.
David Friend: Yeah. And I don’t think I could have done that earlier on in my career, because the individual investors don’t like to do a lot of due diligence. They invest sort of more on a handshake and a recommendation from somebody else. They’re very lightweight in terms of due diligence, but you have to have a track record to get to that point. So certainly, my first and second companies, there’s no way I could have done that. I had to go to VCs and institutional investors.
Rob Ristagno: And you mentioned the importance of having a great presentation and practicing and rehearsing it, any pro tips there for someone working on their pitch deck?
David Friend: When I was teaching at the business school in MIT, people used to talk about the elevator pitch. I actually used to do one better, which was instead of giving me your business plan, write an ad or make a billboard that would go on the Mass Pike. And if you can explain your product on a billboard, you better at least be able to explain it in an ad, because otherwise, you’re never going to be able to sell this thing. Even to this day, when somebody comes to me with an idea for a new product proposal for either my own company or a company that I’m working with, I say write the ad. Don’t write me a business plan, just write the ad and that’s where I start when I’m preparing a presentation for an investor. And it’s very hard to do, it’s really tough. And what the exercise makes you realize how complicated your business idea really is, and it forces you to figure out how to simplify it. Because when you’re out raising money, these guys get hundreds of business plans coming over the transom every day.
David Friend: And most of them go straight into the circular file, or they’ve got a bullpen full of kids two years out of business school, would-be VCs or something like that, and they’re in charge of sifting through all of these business plans that come in over the transom. And you’ve got to be able to find a way to stand out. So I actually write an ad and I put the ad on the front of my business plan, my pitch deck. It’s generally the first slide. I try to fill my decks with pictures and illustrations as opposed to words. I have word slides, but I would try to minimize it. I try to have pictures and illustrations and then talk to them because reading word slides is boring. And so I try to stick with things where the images are either emotional or evocative of something.
David Friend: And then I talk to those things and fill in around it, so that’s kind of my technique. And I’ve made so many freaking pitches in my lifetime that I’m very comfortable in front of a group of investors pitching. And you get comfortable because an entrepreneur already sees how things should be turning out. When I started Wasabi, I had a very clear picture in my mind of how things are going to be five or 10 years from now. And it may not happen, but to me, it’s already happened. It’s kind of like a temporal thing, right. So I can already see it. I can see sort of how I’m going to get there. And so it’s easy to convey that to an investor with confidence, because to you, it’s manifest destiny. It’s obviously going to happen.
Rob Ristagno: Absolute clarity, absolute certainty, absolute confidence, it sounds like.
David Friend: Yeah, but it’s not fake confidence. If you believe it, you don’t have to force it.
Rob Ristagno: What about one other thing that’s important when we’re talking about raising money is who you raise money from? And there’ll be a temptation, especially if you’re earlier stage and one of your first times raising money, it’d be great just to get money from anywhere, but that can bite you over the long run. Thoughts on how you think about who to approach and how to screen them, and how to make sure you avoid this temptation about taking money, even if you have a bad feeling about the source of it?
David Friend: Well, not too many people have a huge amount of choice, right. I mean, if you’re marching up and down Sandhill Road with your business plan, if you get one term sheet, that’s success. If you get two or three term sheets, that’s fantastic. And then you can be a little picky, but that doesn’t happen all that often. I mean you hear about those things all the time–VCs jumping on deals and so forth–but that’s not as common as you would think. I mean most of the time, it’s rejection, rejection, rejection. And maybe you find somebody who believes in, and once you’ve got one investor that says, okay, I’m going to give you a term sheet. Let’s say you’re trying to raise 20 million bucks. Somebody gives you a term sheet for $7 or $8 million. Filling in the rest is relatively easy because you’ve already got a lead. Somebody else has already said, it’s good enough for me. And there are a lot more followers out there than there are leaders. So I’ve always found that once you got the lead, the rest of the thing comes together.
Rob Ristagno: And you mentioned an IPO maybe on the horizon at some point for Wasabi. Just curious, SPACs are kind of the hot thing right now. Any thoughts on, you haven’t really thought about it or …?
David Friend: Well, I think we’re still a little small for a SPAC, but I’m sort of interested in it. I just went to a seminar on SPACs run by our law firm. And it’s money, it’s green and there’s so many of them out there right now that the usurous terms that they started out with five years ago or seven years ago have kind of like mellowed. So it’s actually, for a lot of companies, it’s a pretty good deal because the process of going public is very time-consuming, and it’s a huge burden and risky. I mean can you spend a year doing it and millions of dollars in legal fees and everything else, and the thing could fall apart at the last moment. The SPACs are a lot simpler.
David Friend: So, I mean, if you just want to focus on running your business and you don’t want to spend most of the year huddled with bankers, it looks like a pretty interesting way to finance an IPO. And if your goal is to get liquidity for certain investors and also just gain access to the public markets, not bad. But you better be sure your company’s still going to be on a growth path, because if you go public and then all of a sudden your growth rate slows down, or you have some adverse turn in the business, you can end up in purgatory. And Carbonite was in purgatory for four years after we went public because we missed our numbers on a couple of quarters. And people just ignore you, and it doesn’t matter. You can get back on your growth path and everything else, but it takes years to climb out of that hole.
Rob Ristagno: Yeah, too bad. Yeah. It’s a lot easier to, unfortunately, lose the momentum than to gain it back. Thank you, David. We’ve learned so much and congratulations on your continued success and Wasabi. When people want to learn more about Wasabi, what should they do? Where should they go?
David Friend: Wasabi.com. There’s all kinds of stuff on there. Or if you want to see something entertaining, go on YouTube and just search on Wasabi. Wasabi Nate, Nate is our kind of musical spokesperson. And there’s some funny videos that we’ve done that are going viral. And the first one that came out about three or four months ago has gotten over two million views. Worth watching, it’s fun. They’re entertaining. You can poke the bear, which is what we do to Amazon all the time. One of our ads, one of my favorite ads was Amazon is great for tube socks, but not for storage. That kind of thing. I mean you can just have fun with it, and we have fun with Amazon. Welcome to the jungle.
Rob Ristagno: Love it, love it. Well, thank you very much. This has been David Friend, CEO of Wasabi, and this has been the CEO Campfire Chat. I’m your host, Rob Ristagno. To listen to more episodes, sign up for bonus content, or to take a two-minute business growth assessment, visit ceocampfirechat.com. See you next time around the fire.
Rob Ristagno: Like trees in a forest, your organization’s revenue problems can keep you from seeing a way out, even when the way out is right in front of you. Our data-driven solutions deliver the shortest, fastest route to increase sales and lower marketing costs. The trick is in knowing how to find and use the data you already have to reveal, test, and implement remedies in a matter of months, not years. When you can see the forest and the trees, everything improves. To learn more about our approach, head to sterlingwoods.com.
