May
22
2018
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Dropbox beefs up mobile collaboration in latest release

Dropbox announced several enhancements today designed to beef up its mobile offering and help employees on the go keep up with changes to files stored in Dropbox .

In a typical team scenario, a Dropbox user shared a file with a team member for review or approval. If they wanted to check the progress of this process, the only way to do it up until now was to send an email or text message explicitly asking if the person looked at it yet — not a terribly efficient workflow.

Dropbox recognized this and has built in a fix in the latest mobile release. Now users can can simply see who has looked at or taken action on a file directly from the mobile application without having to leave the application.

In addition, those being asked to review files can see those notifications right at the top of the Home screen in the mobile app, making the whole feedback cycle much more organized.

Photo: Dropbox

Joey Loi, product manager at Dropbox says this is a much more streamlined way to understand activity inside of Dropbox. “With this feature, we think about the closing loop on collaboration. At its heart, collaboration is feedback flows. When I change something on a file, there are a few steps before [my co-worker] knows I’ve changed it,” Loi explained. With this feature that feedback loop can close much faster.

The company also changed the way it organizes and displays files putting the files that you opened most recently at the top of the Home screen, which is somewhat like Recents in Google Drive. It also provides a way to favorite a file and puts those files that are most important at the top of the list, making it easier to find the files that are likely most important to you more quickly when you access the mobile app.

Finally you can now drag and drop a file from an email into a Dropbox folder in a mobile context.

While none of these individual updates are earth shattering changes by any means, they do make it easier for users to access, share and work with files in Dropbox on a mobile device. “All the features are to help teams collaborate and be efficient on mobile,” Loi said.

May
10
2018
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Dropbox beats expectations for its first quarterly check-in with Wall Street

Dropbox made its debut as a public company earlier this year and today passed through its first milestone of reporting its results to public investors, and it more or less beat expectations set for Wall Street on the top and bottom line.

The company reported more revenue and beat expectations for earnings that Wall Street set, bringing in $316.3 million in revenue and appearing to pick up momentum among its paying user base. It also said it had 11.5 million paying users, a jump from last year. However, the stock was largely flat in extended trading. One small negative signal — and it definitely appears to be a small one — was that its GAAP gross margin slipped slightly to 61.9% from 62.3% a year earlier. Dropbox is a software company that’s supposed to have great margins as it begins to ramp up its own hardware, but that slipping margin may end up being something that investors will zero in on going forward. Still, as the company continues to ramp up the enterprise component of its business, the calculus of its business may change over time.

This is a pretty important moment for the company, as it was a darling in Silicon Valley and rocketed to a $10 billion valuation in the early phases of the Web 2.0 era but began to face a ton of criticism as to whether it could be a robust business as larger companies started to offer cloud storage as a perk and not a business. Dropbox then found itself going up against companies like Box and Microsoft as it worked to create an enterprise business, but all this was behind closed doors — and it wasn’t clear if it was able to successfully maneuver its way into a second big business. Now the company is beholden to public shareholders and has to show all this in the open, and it serves as a good barometer of not just storage and collaboration businesses, but also some companies that are looking to drastically simplify workflow processes and convert that into a real business (like Slack, for example).

Here’s the final scorecard for the company:

  • Q1 revenue: $316.3 million, compared to Wall Street estimates of $308.7 million (up 28% year over year.)
  • Q1 earnings: 8 cents per share adjusted, compared to Wall Street estimates of 5 cents per share adjusted.
  • Paying users: 11.5 million, up from 9.3 million in the same period last year.
  • GAAP gross margin: 61.9%, down from 62.3% last year in the same period last year.
  • Non-GAAP gross margin: 74.2%, up from 63.5% in the same period last year.
  • Free cash flow: $51.9 million, down from $56.5 million in the same period last year.

(The GAAP and non-GAAP comparison is typically related to share-based compensation, which is a key component of employee compensation and retention.)

Dropbox was largely considered to be a successful IPO, rising more than 40% in its trading debut. That does mean that it may have left some money on the table, but its operating losses have been largely stable, even as it looks to woo larger enterprise customers as it — which is a bit of a taller order than its typical growth amid consumers that’s heavily driven by organic growth. Those larger enterprise customers offer more stable, and larger, revenue streams than a consumer base that faces a variety of options as many companies start to offer free storage. The company is now worth well over that original $10 billion valuation as a public company. Dropbox says it has more than 500 million users.

Since going public, the stock has had its ups and downs, but for the most part hasn’t dipped below that significant jump it saw from day one. Keeping that number propped up — and growing — is an important part of growing a business as a public company as it waves off more intense scrutiny and pressure for change from public shareholders, as well as offering competitive compensation packages for incoming employees in order to attract the best talent. It’s also good for morale as it offers a kind of grade for how the company is doing in the eyes of the public, though CEOs of companies often say they are committed toward long-term goals. The company’s shares are up around 11% since going public.

While there have been a wave of enterprise IPOs this year, including zScalar and Pluralsight’s upcoming IPO, Dropbox was largely considered to be a potential gauge of whether the IPO window was still open this year because of its hybrid nature. Dropbox started off as a consumer company based around a dead-simple approach of hosting and sharing files online, and used that to build a massive user base even as the cost of cloud storage was rapidly commoditized. But it also is building a robust enterprise-focus business, and continues to roll out a variety of tools to woo those businesses with consistent updates to products like its document tool Paper. Last month, the company started rolling out templates, as it looked to make traditional workflow processes easier and easier for companies in order to capture their interest much in the same way it captured the interest of consumers at large.

Apr
26
2018
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Dropbox rolls out a templates tool for its Paper online document service

As Dropbox looks to woo larger and larger businesses with its strategy of building simpler collaboration tools than what’s on the market, it’s making some moves in its online document tool Paper to further reduce that friction today.

Dropbox said it was rolling out a new tool for Dropbox Paper that allows users to get a paper document up and running through a set of templates. It may seem like something that would be table stakes for a company looking to create an online document tool like Google Docs, but figuring out what Paper’s core use cases look like can take a lot of thinking and user research before finally pulling the trigger. Dropbox at its heart hopes to have a consumer feel for its products, so preserving that as it looks to build more robust tools presents a bigger challenge for the freshly-public company.

The templates tool behaves pretty much like other tools out there: you open Dropbox Paper, and you’ll get the option to create a document from a number of templates. Some common use cases for Dropbox Paper include continuous product development timelines and design specs, but it seems the company hopes to broaden that by continuing to integrate new features like document previews. Dropbox Paper started off as a blank slate, but given the number of options out there, it has to figure out a way to differentiate itself eventually.

The company said it’s also rolling out a number of other small features. That includes a way to pin documents, launch presentations, format text and insert docs and stickers. There’s also a new meeting widget and increased formatting options in the comments section in Paper. Finally, it’s adding a number of small quality-of-life updates like viewing recent Paper docs by alphabetical order and the ability to unsubscribe to comment notifications and archive docs on iOS, as well as aggregating to-do lists across docs.

Dropbox went public earlier this year to dramatic success, immediately getting that desired “pop” and more or less holding it throughout the past month or so as one of the first blockbuster IPOs of 2018. There have been a wave that have followed since, including DocuSign, and it’s one of a batch of several enterprise companies looking to get out the door now that it appears the window is open for investor demand for fresh IPOs.

Paper, to that end, appears to be a key piece of the puzzle for Dropbox. The company has always sought to be a company centered around simple collaboration tools, coming from its roots as a consumer company to start. It’s an approach that has served it — and others, like Slack — well as the company looks to expand more and more into larger enterprises. While it’s been able to snap up users thanks to its simpler approach, those enterprise deals are always more lucrative and serve as a stronger business line for Dropbox.

Dropbox will have to continue to not only differentiate itself from Google Docs and other tools, but also an emerging class of startups that’s looking to figure out ways to snap up some of the core use cases of online document tools. Slite, for example, hopes to capture the internal wiki and note-taking portion of an online doc system like Google Docs. That startup raised $4.4 million earlier this month. There’s also Coda, a startup that’s looking to rethink what a document looks altogether, which raised $60 million. Templates are one way of reducing that friction and keeping it feeling like a simple document tool and hopefully getting larger businesses excited about its products.

Apr
25
2018
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Drew Houston to upload his thoughts at TC Disrupt SF in September

Dropbox is a critically important tool for more than 500 million people, which is why we’re so excited to have founder and CEO Drew Houston on the Disrupt stage in September.

Dropbox launched back in 2007 and Houston has spent the last decade growing Dropbox to the behemoth it is today.

During that time, Houston has made some tough decisions.

A few years ago, Houston decided to move the Dropbox infrastructure off of AWS. In 2014, Houston chose to raise $500 million in debt financing to keep up pace with Box, which was considering an IPO at the time. And in March 2017, Dropbox took another $600 million in debt financing from JP Morgan.

Houston also reportedly turned down a nine-figure acquisition offer from Apple.

All the while, Houston led Dropbox to be cash-flow positive and grew the company to see a $1 billion revenue run rate as of last year.

And, of course, we can’t forget the decision to go public earlier this year.

Interestingly, Houston first told his story to a TechCrunch audience at TC50 in 2008 as part of the Startup Battlefield. In fact, you can check out the original pitch from TC50 right here.

At Disrupt SF in September, we’re excited to sit down with Houston to discuss his journey thus far, the decision to go public and the future of Dropbox.

The show runs from September 5 to September 7, and for the next week, our super early-bird tickets are still available.

Mar
26
2018
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Dropbox up another 7% on day two

Dropbox’s surge on the stock market has continued, with the company going up another 7% on its second day on the stock market.

The company saw its shares close at $30.45, giving the company above a $13 billion market cap, fully diluted.

When it priced its IPO, there was a question as to whether Dropbox would surpass the $10 billion valuation it achieved in its last private round. It eliminated those concerns overnight.

The first few days have been a strong indicator of investor demand for the cloud storage company.

To recap, Dropbox initially hoped to price its IPO between $16 and $18, then raised it from $18 to $20. Then it ultimately priced its IPO at $21, closing the day above $28. And it still continues to go up.

Bankers price IPOs to “pop” or go up about 20% on the first day. The surge implies that Dropbox exceeded Wall Street’s expectations. It also means that Dropbox could have priced its shares higher and raised more money.

It priced shares at $21, raising $756 million. If Dropbox had priced shares at $24, it would have raised $864 million and new investors would have still seen big gains.

It was certainly a win for stock market investors, which like the company’s improving financials.

It brought in $1.1 billion in revenue in its most recent year. This is up from $845 million in revenue the year before and $604 million for 2015.

Yet while it’s been cash flow positive since 2016, it is not profitable. Dropbox lost nearly $112 million last year. But its margins are looking better when compared with losses of $210 million for 2016 and $326 million for 2015.

Monday was a good day on the stock market in general.  The Dow surged 600 points, partly due to gains from tech stocks like Microsoft and Apple.

Co-founder and CEO Drew Houston is the largest shareholder, owning 25.3% of the company ahead of its IPO. Sequoia Capital owned 23.2% of Dropbox.

Although Dropbox is very different than Spotify which intends to list next week, investors will view this favorable debut as a sign that the IPO window is “open,” meaning that there is strong demand for newly public tech companies.

Zuora, Pivotal and Smartsheet also unveiled IPO filings recently, suggesting that they will go public in April. And we broke the news that DocuSign’s IPO is coming up.

 

Mar
23
2018
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Drew Houston on wooing Dropbox’s IPO investors: ‘We don’t fit neatly into any one mold’

Dropbox went public this morning to great fanfare, with the stock shooting up more than 40% in the initial moments of trading as the enterprise-slash-consumer company looked to convince investors that it could be a viable publicly-traded company.

And for one that Steve Jobs famously called a feature, and not a company, it certainly was an uphill battle to convince the world that it was worth even the $10 billion its last private financing round set. It’s now worth more than that, but that follows a long series of events, including an increased focus on enterprise customers and finding ways to make its business more efficient — like installing their own infrastructure. Dropbox CEO Drew Houston acknowledged a lot of this, as well as the fact that it’s going to continue to face the challenge of ensuring that its users and enterprises will trust Dropbox with some of their most sensitive files.

We spoke with Houston on the day of the IPO to talk a little bit about what it took to get here during the road show and even prior. Here’s a lightly-edited transcript of the conversation:

TC: In light of the problems that Facebook has had surrounding user data and user trust, how has that changed how you think about security and privacy as a priority?

DH: Our business is built on our customers’ trust. Whether we’re private or public, that’s super important to us. I think, to our customers, whether we’re private or public doesn’t change their view. I wouldn’t say that our philosophy changes as we get to bigger and bigger scale. As you can imagine we make big investments here. We have an awesome security team, our first cultural principle is be worthy of trust. This is existential for us.

TC: How’s the vibe now that longtime employees are going to have an opportunity to get rewarded for their work now that you’re a public company?

DH: I think everyone’s just really excited. This is the culmination of a lot of hard work by a lot of people. We’re really proud of the business we’ve built. I mean, building a great company or doing anything important takes time.

TC: Was there something that changed that convinced you to go public after more than a decade of going private, and how do you feel about the pop?

DH: We felt that we were ready. Our business was in great shape. We had a good balance of scale and profitability and growth. As a private company, there are a lot of reasons why it’s been easier to stay private for longer. We’re all proud of the business we’ve built. We see the numbers. We think we’re on to not just a great business, but pioneering a whole new model. We’re taking the best of our consumer roots, combining them with the best parts of software as a service, and it was really gratifying to see investors be excited about it and for the rest of the world to catch on.

TC: As you were on your road show, what were some of the big questions investors were asking?

DH: We don’t fit neatly into any one mold. We’re not a consumer company, and we’re not a traditional enterprise company. We’re basically taking that consumer internet playbook and applying it to business software, combining the virality and scale. Over the last couple years, as we’ve been building that engine, investors are starting to understand that we don’t fit into a traditional mold. The numbers speak to themselves, they can appreciate the unusual combination.

TC: What did you tell them to convince them?

DH: We’re just able to get adoption. Just the fact that we have hundreds of millions of users and we’ve found Dropbox is adopted in millions of companies [was enough evidence]. More than 300,000 of those users are Dropbox Business companies. We spend about half on sales of marketing as a percentage of revenue of a typical software as a service company. Efficiency and scale are the distinctive elements, and investors zero in on that. To be able to acquire customers at that scale and also really efficiently, that’s what makes us stand out. They’ve seen Atlassian be successful with self-serve products, but you can layer on top of that leveraging our freemium and viral elements and our focus on design and building great products.

TC: How do you think about deploying the capital you’ve picked up from the IPO?

DH: So, we’re public because they wanted us to be a public company. But our approach is still the same. First, it’s about getting the best talent in the building and making sure we build the best products, and if you do those things, make sure customers are happy, that’s what works.

TC: What about recruiting?

DH: It’s a big day for dropbox. We’re all really excited about it and hopefully a lot of other people are too.

TC: When you look at your customer acquisition ramp, what does that look like?

DH: I mean, we’ve been making a lot of progress in the past couple of years if you look at growth in subscribers. That will continue. We look at numbers, we have 11 million subscribers, 80% use dropbox for work. But at the same time, we look at the world, there’s 1 billion knowledge workers and growing. We’re not gonna run out of people who need Dropbox.

TC: What about convincing investors about the consumer part of the business? How did you do that?

DH: I think, when you explain that our consumer and cloud storage roots have really become a way for us to efficiently acquire business customers at scale, that helps them understand. Second, it’s easy to focus on how in the consumer realm that the business has been commoditized. There’s all this free space and all this competition. On the other hand, we’ve never lowered prices, we’ve never even given more free space, we know that what our customers really value is the sharing and collaboration, not just the storage. It’s been good to move investors beyond the 2010 understanding of our business.

TC: How did creating your own infrastructure play into your readiness to go public?

DH: When I say that today is the culmination of a lot of events, that’s a great example. We made a many-year investment to migrate off the public cloud. Certainly that was one of the more eye-popping investors watching our gross margins literally double over the last couple of years from burning cash to being cash flow positive. We’ll continue reaching larger and larger scale, and those investments will.

TC: Getting a new guitar any time soon?

DH: I probably should.

Mar
23
2018
--

Dropbox finishes up 36% on first day of trading

Dropbox was off to the races on its first day as a public company.

After pricing above the range at $21 per share, raising $756 million, Dropbox kicked off its first day soaring to $31.60, and closing the day at $28.48. This is up almost 36%.

It’s surely a sign of public investor enthusiasm for the cloud storage business, which had initially hoped to price its IPO between $16 and $18 and then raised it from $18 to $20.

It also means that Dropbox closed well above the $10 billion it was valued at its last private round. Its market cap is now above $12 billion, fully diluted.

Dropbox brought in $1.1 billion in revenue for the last year. This compares to $845 million in revenue the year before and $604 million for 2015.

While it’s been cash flow positive since 2016, it is not yet profitable, having lost nearly $112 million last year. But it is significantly improved margins when compared to losses of $210 million for 2016 and $326 million for 2015.

Its average revenue per paying user is $111.91.

There has been a debate about whether to value Dropbox, which has a freemium model, as a consumer company or an enterprise business. It has convinced just 11 million of its 500 million registered customers to pay for its services.

Dropbox “combines the scale and virality of a consumer company with the recurring revenue of a software company,” said Bryan Schreier, a general partner at Sequoia Capital and board member at the company. He said that now was the time for Dropbox to list because “the business had reached a level of scale and also cash flow that warranted a public debut.”

He also talked about the early days of Dropbox pitching at a TechCrunch event in 2008 and how disappointed they were that the slides stopped working during the presentation. We have footage of that here.

Sequoia Capital owned 23.2% of the overall shares outstanding at the time of the IPO. They shared Dropbox’s original seed pitch from 2007. 

Accel was the next largest shareholder, owning 5% overall. Sameer Gandhi made the investment at Sequoia and then invested in Dropbox again when he went over to Accel.

Founder and CEO Drew Houston owned 25.3% of the company.

Greylock Partners also had a small stake. John Lilly, a general partner there, said he “invested in Dropbox because Drew and the team had an exceptionally clear vision of what the future of work would look like and built a product that would that meet the demands of the modern workforce.”

But there are quite a few other businesses with similar products to Dropbox. The prospectus warned of the competitive landscape.

“The market for content collaboration platforms is competitive and rapidly changing. Certain features of our platform compete in the cloud storage market with products offered by Amazon, Apple, Google, and Microsoft, and in the content collaboration market with products offered by Atlassian, Google, and Microsoft. We compete with Box on a more limited basis in the cloud storage market for deployments by large enterprises.”

Note that it downplayed its competition with Box, a company that’s often mentioned in the same sentence as Dropbox. While the products are similar, the two have different business models and Dropbox was hoping that this would be respected with a better revenue multiple. If the first day is any indication, it looks like that strategy worked.

The company listed on the Nasdaq, under the ticker “DBX.”

We talked about Dropbox’s first day and the outlook for upcoming public debuts like Spotify on our “Equity” podcast episode below. We were joined by Eric Kim, managing partner at Goodwater Capital.  He authored a research report here. 

Mar
23
2018
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Y Combinator’s Jessica Livingston on Dropbox IPO: “It was just a dream of ours”

Dropbox, after more than a decade, finally went public this morning — and the stock soared more than 40% in its initial trading, making it a marquee success for one of the original Web 2.0 companies (at least for now).

While we still have to wait for the dust to settle, it’s been a very long road for Dropbox. From starting off as a file-sharing service, to hitting a $10 billion valuation in the middle of a massive hype cycle, to expectations dropping and then the announcement of a $1 billion revenue run rate. Dropbox has been a rollercoaster, but it’s another big moment this afternoon: it’s Y Combinator’s first big IPO. And Y Combinator still has a very deep bench of startups that are, thus far, obvious IPO candidates down the line like Airbnb and Stripe.

That isn’t to take away anything from the work of CEO Drew Houston and the rest of Dropbox’s team, but Y Combinator’s job is to basically take a bunch of shots in the dark based on good ideas and potentially savvy founders. Houston was one of the first of a firm that now takes in a hundred-odd founders per class. Y Combinator Founder and partner Jessica Livingston was there for the start of it, recalling back to the day that Houston rushed to her and Paul Graham to show him his little side project.

We caught up with Livingston this morning ahead of the IPO for a short interview. Here’s the conversation, which was lightly edited for clarity:

TC: Can you tell us a little bit about what it’s like to finally see the first Y Combinator company to go public?

JL: I feel like 13 years ago, it was just this dream of ours. It was this seemingly unattainable dream that goes, ‘maybe one of the startups we fund could go public someday.’ That was the holy grail. It’s an exciting day for Y Combinator. It shows what a long game investing is in early-stage startups. I do feel kind of validated.

TC: How did Y Combinator first end up in touch with Houston?

JL: He applied as a solo founder. We had met Drew the summer before. Back then, we were so small that we always encouraged people to bring friends to a Y Combinator dinner. [Xobni founder Adam Smith] brought [Houston], and we met him then and talked it through. When he applied, we invited him to come to an interview, and Paul [Graham] before the interview reached out to [Houston]. He said, “I see you’re a solo founder, and you should find a cofounder.” Three weeks later Drew showed up with [co-founder Arash Ferdowsi]. It was a great match that worked well.

TC: As Dropbox has grown, what’s stood out to you the most during changes in the market?

JL: They’re a classic example of founders who are programmers who built something to solve their own problem. Clearly, this is a perfect example of that. Drew gets on the bus, he forgets his files, and he can’t work on the whole trip down. He then creates something that will allow him to access files from everywhere. At the time, when he came on the scene with that, there were a lot of companies doing it but none were very good. I feel like Dropbox, regardless of market dynamics, from the very beginning was always dedicated to wanting to do well by building a better solution. They wanted to build one that actually works. I feel like they’ve stuck to that and that’s been driving them since. That’s been their guidepost.

TC: What was your first meeting with Houston like, and do you think he has changed in the past 10 years?

JL: When I first met him, he was young — he was very young — and he was always a good hacker, and very earnest. During Y Combinator he was very focused on building this product and was not distracted by other things. That’s when there were just two people. He’s really evolved over the years as an incredible leader. He’s grown this company and he’s navigated through all different parts of his life cycle. I’ve witnessed his growth as a leader and as a human being. He’s always been a great person. It’s sort of exciting to see where he is now that he’s come a long way, it’s really cool.

TC: Houston and Ferdowsi still own significant portions of the company even after raising a lot of venture capital. Do you think Y Combinator had any effect on companies looking for more founder friendly deals?

JL: I think when Y Combinator started, our goal in many ways was to empower founders. It was to level the playing field. You don’t have to have a connection in Silicon Valley to get funding. You just have to apply on our website. You don’t have to have gone to an Ivy League school. We [try to tell them], don’t let investors take advantage of you because you’re young and have never done this before. In general, times have changed over the past 15 years. Hopefully Y Combinator played a small role in some of those changes in making things a little more found friendly.

TC: What’s one of your favorite stories about Houston?

JL: He was always very calm, cool, and collected under pressure. I remember that was definitely a quality about him. His feathers didn’t get ruffled easily. One of the things I remember most clearly is from that summer when we had demo day. Back then it was, like, 40 people tops. Still, there was a lot of pressure. I remember Paul [Graham] came up with this idea that, ‘hey, Drew, during your demo day you should show people how well Dropbox actually works by deleting your presentation live and restoring it through Dropbox.’ That’s kind of risky, right? To delete your presentation. You’re just standing up there without anything. And he did it and he nailed the presentation. It sounds a little gimmicky, but it really worked and showed his product worked. I remember thinking, like, wow, he’s pretty calm. If it were me I don’t think I could hit the delete button in front of these people. That’s an important quality in someone, not to get flustered.

By the way, we funded them in 2007. If you asked me in 2008 how were they doing, I would say, well, they’re making progress. But it wasn’t like we funded them and we could say, ‘this is gonna be a great one.’ We just knew, yeah they’re making progress, but it’s always hard to know there.

TC: Back then, what were you just expecting? M&A? Did you even anticipate an IPO?

JL:  As we were formulating the idea, the hope was rather than going to work at Microsoft — I use them as an example because that was the company back then — and rather than going to get a job out of college, why not build a company and make Microsoft acquire you to get you to work for them? We had low expectations back then. We were hoping there’d be some small acquisitions. But yes, the hope was always acquisitions, but maybe someday in our wildest dreams there’d be an IPO. We didn’t even think YC would work when we started, people didn’t believe in YC’s models for many years.

TC: Looking back, what would you say is one of the biggest things you’ve learned throughout this experience?

JL: What a long road it is for startups. When we started YC back then, it wasn’t a popular thing to do a startup. Now, thank goodness, more people are starting them, and more types of people are starting them. It’s not just super high-tech companies. That’s exciting, but what I think a lot of people don’t realize is how hard startups are. You say, yeah, I know how hard, but people don’t realize how difficult they are and how long the commitment is. If you’re successful, it takes such a long time. For [someone like Houston] to make it to that point, they’ve committed a lot of their life and energy and all their intellectual capacity to making this work. To me, that’s so exciting, but I think it would surprise people to know realistically how long that could take.

TC: What would you tell startups with the hindsight of what happened with Dropbox’s valuation hype cycle?

JL: I will say, with startups, sometimes you just have to stick to what you’re doing. There’s a lot of stuff going on around you, especially now with social media and things like that. With a startup, you just have to keep moving forward with building a company and building a great product.

Mar
22
2018
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Dropbox prices above its original range at $21 as it heads toward an IPO

Dropbox today said it is pricing above the range it originally set ahead of its public listing tomorrow, handing the company a valuation inching ever-closer to its original $10 billion valuation.

Dropbox earlier this week said it would price its initial public offering in a range between $18 and $20 per share, settling on a valuation near $8 billion at the high end of the range (or closer to $8.75 billion, based on its fully-diluted share count). With the new pricing, Dropbox will be valuing itself at around $8.4 billion — or a hair above $9 billion based on its fully-diluted share count. That $18 to $20 range, too, was a step up from its original proposed range, which fell between $16 and $18. Dropbox will be raising more than $700 million in the IPO, in addition to existing shareholders selling more than 9 million shares as part of the process.

What all this means is that Dropbox initially tested the waters to gauge interest, and clearly there was a lot. Companies sometimes set conservative price ranges (though this isn’t always the case) and then revise upwards as they see how much interest there is in potential investors buying shares at that price. Dropbox will make its public debut tomorrow, and the usual process here aims to get as much value for the company as possible while still ensuring the so-called IPO “pop” — usually a jump of around 20%. We’ll probably get the formal price in the form of an SEC filing this evening as it gets ready to list tomorrow.

Should that be successful, Dropbox would fall above the valuation of its last financing round, which gave the company a $10 billion valuation amid a hype wave of consumer startups. Dropbox, one of the original pioneers of online storage, in recent years has found itself looking to slowly scoop up more and more enterprise customers as it tries to create a second lucrative line of business. The company deploys a classic playbook of attracting initial customers within teams and then growing up to the point it reaches the C-Suite of companies, though the reverse is certainly possible as Dropbox matures over time.

CNBC first reported the news.

Mar
21
2018
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Dropbox boosts its price range for its IPO as it nears an $8B valuation

Dropbox said it would be increasing its IPO price range – the range for which it will sell its shares for its initial public offering — from $16-$18 per share to $18-$20 per share, giving the company a valuation that could reach close to $8 billion, according to an updated filing with the Securities and Exchange Commission.

Including all shares offered from stockholders selling in this offering, the “greenshoe” and the actual IPO, Dropbox will have a valuation between $7.2 billion and $7.96 billion. Based on a fully-diluted share count, Dropbox’s valuation should land between $7.8 billion to $8.75 billion. It’s below Dropbox’s previous $10 billion valuation, but it’s still a signal that investors are interested in buying up Dropbox’s IPO, which will be the most well-known enterprise name to go public this year. Cloud security company Zscaler went public earlier this month and immediately saw a massive pop, but Dropbox will probably be lumped into a similar boat as Snap as a signal to whether investors are going to be interested in hyped startups.

There will indeed be some shareholders selling stock in this offering, though it looks like for the most part the ownership is going to stay the same. There are a lot of reasons to sell a stock beyond just getting liquidation, such as paying taxes for other share options and exercises, so it’s not clear exactly what the motivations are for some employees for now.

Dropbox has more than 500 million users, 11 million of which are paying users. While originally born as a consumer service, the company has sought to crack into the enterprise in order to help build a robust second line of business to tack alongside its typical consumer operations. Dropbox at the start had the benefit of spreading via word of mouth thanks to its dead-simple interface, but since then has started building out new tools geared toward larger businesses, such as Dropbox Paper.

It’s also what’s made this IPO a somewhat tricky one. The process for this is normally the same, with the company setting a price range and then throwing it out there to see who bites. If things go well, the range goes up. If things go poorly, like the case of Blue Apron, the range is going to drop. This could always change at the last minute, but you can take this as another step toward its eventual listing, which is expected to happen later this week.

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