Dropbox Chooses Investor Group, Valuation Set at $5+ Billion

http://techcrunch.com/2011/08/13/dropbox-chooses-investor-group-valuation-set-at-5-billion/

by amirmc • 15 years ago

40 41 15 years ago

benologist• 15 years ago

tldr: they're rumored to have selected investor/s for a rumored amount at a rumored valuation.

fourspace3• 15 years ago

Sigh, another article that celebrates funding as some type of success. It isn't. What matters is what they do with that money.

pg• 15 years ago

What in the article celebrates funding as success?

fourspace3• 15 years ago

I admit, my post was an overreaction. My concern, and the reason I've stopped reading TC, was that we're in a culture that celebrates VC funding as some sort of business success. It's a milestone, but it's not success (in my eyes, anyway). Real success, which Dropbox certainly has reached, is when you build a sustainable company where your customers pay you for providing value, not investors. Investors eventually want their money back.

That said, my comments were definitely not targeted at Dropbox and I applaud that team for building a great product and providing great value.

davidu• 15 years ago

The article isn't celebrating success. But perhaps it should be.

Building a great company where the success you have achieved thus far is recognized in the form of a favorable valuation which increases shareholder value (which includes all the hardworking employees) and adds capital to the enterprise is certainly a positive milestone worth recognizing.

johnrob2• 15 years ago

I'm somewhat surprised that a file sharing company can get a valuation this large. Don't get me wrong, the product is great, but I'm skeptical that the "file sharing industry" is big enough for valuations like this. Some quick math:

A 5 billion valuation implies earnings of at least 250 million/year. Assuming paying customers are worth 240/year and represent 5% of the user base, dropbox would need roughly 21 million users. Maybe 5% is high; if 4% is better then the number jumps to 26 million, etc...

There may be billions of people on earth, but how many are sophisticated enough to really need file sharing? Also, there are other players such as box that will claim some of those users.

Dropbox is awesome, but I can't understand the numbers on this one.

rubyrescue• 15 years ago

21 million seems pretty easy to achieve to me worldwide; every one of my social circles and peer groups, both technical and non-technical, in the US and South America, seem to use dropbox. my parents love it. my wife is non-technical to a fault and can't live without it; she just paid for the upgrade to 100gb because it represents safetey to her of her photos. even my under 10 year old son knows that saving in dropbox means he won't lose his homework assignment.

i think they have a huge, huge opportunity.

ThomPete2• 15 years ago

Just until windows and apple both offer the service. Apple is already on the way with iCloud.

frossie• 15 years ago

Well, they don't just have the $240/yr plan. And file sharing isn't quite as sophisticated as you might think - it passes the grandparents test.

I wish Dropbox would have a smaller priced tier (like $5/mo). The free plan is more than ample for my needs, but I like to pay for premium service from companies I use to support them. But $10/mo is a bit steep in comparison to, say, the value I get out of Netflix streaming for $10/mo.

ericd• 15 years ago

I think Netflix isn't the best thing to compare things to. It's absurdly cheap for what it is, and they might not even be able keep it at that price point (undervalued, and the content companies know it).

Havoc• 15 years ago

Agreed. My first reaction was "way too high". The problem imo is that they don't have a huge edge over the competition. Hell even Ubuntu has a semi comparable product. Not quite as user-friendly, but do a few easily duplicated UI difference really justify billions?

heynk• 15 years ago

Justifying billions is of course a stretch, but having a really, really smooth UI definitely does make a difference. Its easy to underestimate these things in favor of technological advantages, which dropbox doesn't really have compared to every other personal file hosting site. But normal people really don't know/care about that, for them all that matters is an easy UI that just works. And dropbox does just that, IMO better than any others

phaker• 15 years ago

> do a few easily duplicated UI difference really justify billions?

A large (paying) customer base would. But, just like johnrob, I'm not sure dropbox has that many users.

sfoguy• 15 years ago

I really, really don't understand this valuation.

But I also don't understand why MS and Apple are not pushing their own services more aggressively. And Google could add that in a month (I guess they still have the GDrive code somewhere)... good for dropbox ;)

sdizdar2• 15 years ago

I believe that everybody will have a least one "cloud storage" account. Actually probably multiple "cloud storage" accounts since cloud storage providers will try to specialize and differentiate (i.e., you will have Google Docs account, Dropbox account, iCloud account, etc.). So 21M is a conservative number.

And don't forget companies of all sizes are going into cloud: so replace 21 million users with 21 millin users via their employeer. (Ever tried sharing documents using MS SharePoint?)

georgemcbay2• 15 years ago

I believe that cloud storage accounts will find widespread usage, I just don't think it is a $5 billion industry. I think it is more something that will exist as a free bonus within some other business model (eg. buy one Amazon album, get many gigs for free, or use Google Docs storage so google can have even more info on you for ad targeting).

In short, I think Dropbox got on to something big early on, but they will eventually be like the early Netscape of this area.... Other competitors are pretty much guaranteed to come in and erode their value with "free" (enough) alternatives that exist to prop up other business models.

olivercameron• 15 years ago

Dropbox already has 25 million[1] users.

1. http://techcrunch.com/2011/04/17/dropbox-hits-25-millions-us...

mkl• 15 years ago

But how many are paying users?

gduffy• 15 years ago

1. Why is a 20x P/E ratio appropriate for a high-growth tech startup?

2. http://tech.fortune.cnn.com/2011/04/18/reviewing-dropboxs-vi...

3. File sharing is, like, what the Internet was originally invented for. Quite a few people use the Internet (>1billion), and it's still hard to share a photo album with your family.

johnrob2• 15 years ago

People have always wanted to do certain things online: search (google et all), shopping (amazon, ebay, et all), communication (email, aol, facebook, et all) are good examples. I've never really sensed a similar demand for syncing and backing up files. The idea that a single player has a 5 billion valuation implies the industry is significantly larger than that. That's what caught me by surprise.

The numbers I threw out there were just guesses (including the 20x P/E ratio); I was trying to understand the basis of such a valuation. There are some good explanations in this mini thread, yours included, but I still struggle to imagine there will be this much money in a such a service. It seems like competition would drive the free offerings to the point where the paid usage gets pretty low.

I guess what I'm really saying is that file sync/backup as a service doesn't feel like a 10s of billions industry. I don't have much real data to back that claim though ;)

far33d• 15 years ago

I'm sure hundreds of second and third tier VCs piled on with ridiculous valuations in the hopes that they could add a "hot" company to their website. If this article is correct, Dropbox did the right thing and decided to go with smarter money.

alFoX• 15 years ago

Have I chance to have open source client? I don't trust blobs on my computer.

mtogo• 15 years ago

https://www.dropbox.com/downloading

Maxious• 15 years ago

The source on that page is for the Nautilus (GNOME File Browser) extension that adds right click menus and special icons to the file browser and "dropbox" a command line client for talking to the dropbox daemon in the same way as the Nautilus extension.

The secret sauce is dropboxd which is not open source.

rokhayakebe• 15 years ago

Sometimes I feel like there is a little jealousy among the startup community which translates into I like this, but the valuation is absurd.

Dropbox could be worth that much, I believe. Some say their business is not defensible because anyone else can build a similar product for free. Well until someone has, nobody has.

sprovoost5• 15 years ago

The problem with owning shares is that it takes a decade or longer to earn back your investment just through dividends. I'd say it's almost certain lots of competitors will be crowding the space with that time span.

plusbryan• 15 years ago

Congrats Drew and the rest of the team. Quite an accomplishment!

dont• 15 years ago

I tend to see the software world as divided between "Tools" and "Platforms"

Platforms are systems that enable a large number o similar behaviors -- Google is the search platform, Amazon the shopping platform, Windows is a platform as is MS Office. Platforms tend to be a winner take all business, as there are significant advantages to scale as well as strong network effects.

Tools on the other hand do one thing and one thing well. Most products start off as tools - then there are 2 ways to go, either become a platform (eg: facebook) or get bought by a platform (eg: flickr).

I don't see how dropbox is going to be worth $5B as a file sharing tool, nor do I see any platform buying them at that price.

So my question really is -- what is the dropbox platform gonna look like? What do the investors know that we don't?

sprovoost5• 15 years ago

Just one more problem: as more and more great platforms become available, there seems to be a trend of users storing different kinds of data in their own specialist platforms. Photos on FlickR, music on Spotify, movies on Netflix, simple documents in Google Docs, code on Github, books on Amazon, mail in Gmail, etc. That leaves less and less stuff for Dropbox.

In particular, it leaves less gigabytes for Dropbox, because the big stuff is taken care of. So with the price of storage and bandwidth dropping exponentially and the amount of "other" data dropping, it's going to be hard to sustain a freemium model just based on a storage cap.

Dropbox Chooses Investor Group, Valuation Set at $5+ Billion

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