Index Ventures Leads $4 billion Valuation Round In Dropbox

http://techcrunch.com/2011/08/30/index-leads-4-billion-valuation-round-in-dropbox/

by amirmc • 15 years ago

74 49 15 years ago

mikeryan• 15 years ago

Perhaps "But the valuation ended up lower. Why?"

is answered by this: "Speculation was that they’d hit $100 million in revenue this year. Our best guess based on discussions with sources is that revenue will be more like $30 million in 2011. But this is still largely a guess."

A valuation at 133x revenues is, well wow.

I say this as big fan of dropbox as a service and a business but I'm not a fan of these monster valuations on the come.

Also should point out there's a lot of speculation in that article and those which preceded it.

revorad• 15 years ago

I think the key words there are "But this is still largely a guess.".

abbasmehdi• 15 years ago

You're looking at their revenue and valuation in absolute terms, as a snapshot. Look at it in relativity, like a movie not a photograph. They are on an upward trajectory, what was 13000% last year, is 1330% this year, and might be 800% next year.

yumraj• 15 years ago

One of the simplest ways to do valuation is to look at Free Cash Flow (FCF) or Discounted Cash Flow (DCF) and then divide it by (discount rate - growth rate). Now, if the growth rate is fairly large, the denominator becomes very small and can drive even a moderate FCF to cause a very high valuation, which is what seems to be happening here.

If interested search for FCF valuation, etc. there's a lot of info out there.

snewe• 15 years ago

You have to believe that the (huge) growth rate is perpetual. Most firms do not grow faster than US GDP growth in the long-run.

swombat2• 15 years ago

Holy fucking shit.

Back of the envelope maths:

6% investment, diluted three (two rounds after seed according to http://www.crunchbase.com/company/dropbox , plus the current one), that goes down to about 2% (diluted by 30% each time).

2% of $4b is $80m. That's a 4000x return over what, 4 years?

pchristensen• 15 years ago

pg has been on record saying that financially, YC does better if the YC companies go public, not if they sell out early for $XM or $X0M. But he supports those because it benefits the founders, and when founders win, YC wins.

webwright2• 15 years ago

IIRC, YC has pro rata rights... So it's not a foregone conclusion that they were diluted in both rounds. But yeah-- High five, YC!

jamesshamenski• 15 years ago

There is nothing being 'returned' to YC. The value of the investment has gone up but that has little to do with an exit.

javery• 15 years ago

You don't know that - they could very well have sold some of their shares in this round. (at this valuation why not take a point off the table)

kno• 15 years ago

Does this number tell us how much the bubble burst will hurt? A whole lot!!

webwright2• 15 years ago

Who, exactly, will it hurt?

aaronblohowiak2• 15 years ago

VC as an asset class, and programmers indirectly because of that.

Maakuth• 15 years ago

I wonder what are they going to do with the money. Build datacenters of their own? I hope they don't bloat their service with some expensively developed value-add stuff that nobody wants, but are force-fed nevertheless. One would think they're would be too smart for that kind of failure, but you can never know what big money does.

SwellJoe3• 15 years ago

Given the math of owning vs. renting, I strongly suspect they will want to begin building their own. If I were they, I'd be hiring ops developers from Google or Facebook or someone who has dealt with really big data centers and start dipping my toes into ownership immediately. They'll need to figure out how to cheaply and reliably manage petabytes of storage.

justincormack• 15 years ago

Not convinced. They are being valued at $4b not for some extra profitability by cutting costs, but because of a huge opportunity to grow. They need to do what they need for growth not hire expensive people to get into the server farm and storage business. Maybe later.

sskates• 15 years ago

Almost certainly going towards hiring more people to build out more stuff, people are by far the most expensive part of any software operation.

I agree with you that expensively developed "value-add" stuff that nobody wants would be a bad use of extra engineers. Hopefully they'll make stuff people want (as obvious as this sounds, this outcome is far from guaranteed).

dusklight2• 15 years ago

Can someone explain to me why dropbox has been so successful? I get that its a good idea but what makes it so valuable?

threepointone• 15 years ago

Taking a shot at this -

a good idea - 1 point. executed really, really well - 100 points.

aaronblohowiak2• 15 years ago

They are FolderShare for Macs, a little bit nicer and at a time where more people "get" the need.

Fun Historical note: FolderShare was founded 10 years before DropBox. MSFT paid to acquire FolderShare and then squashed all of the good things about it out of the project.

http://www.microsoft.com/presspass/press/2005/nov05/11-03Fol...

Second-mover (or N-mover) advantage and clean execution is undervalued, IMHO.

spulec• 15 years ago

One of my favorite quora answers:

http://www.quora.com/Dropbox/Why-is-Dropbox-more-popular-tha...

dusklight2• 15 years ago

Yeah I really don't get it? Google is valuable because (the theory is) you buy advertising and you get more business and you make more money. So the more money you spend on google the more money you make. Ok I get it.

Facebook is valuable because it increases the (perceived) size of your social circle, and maybe you make more friends, maybe you get laid more. Ok I get it.

Dropbox you get synced files? Ok that's useful obviously but so what? It seems like at best a 100m business to me, not a 4b one, what's the angle here?

cHalgan• 15 years ago

I have some storage experience and I can tell you that Dropbox is not a new idea at all. Even AOL had something like this. I'm also convinced that they didn't win because of simplicity. However, Dropbox just delivered what they promised.

It was amazing for me to watch companies in "cloud storage" space just not delivering. Their servers were down, clients were using 99% of CPU, etc. Yes it is ok that service has some bugs but these companies were adding features (mobile app, integration who knows what) before even making basic stuff working.

Just look Google Docs. Why they cannot just make that "documents" don't intermittently disappear (you get 404 but after retry they are back) before they change interface. Why? I really don't know.

jseliger• 15 years ago

Because it's insanely simple—which is, basically, what all the other answers boil down to. When I tried Dropbox, I was skeptical: you mean it actually transparently syncs folders from my desktop to a server, and lets me download easily from the server? Yeah, right. There's some catch.

It turns out there isn't. That's simplicity. That's why they "won."

jdp23• 15 years ago

Congrats to Dropbox. I have to admit that I still don't see their sustainable advantage but the folks with the money clearly do!

api• 15 years ago

It's similar to Facebook: name recognition, everyone's on it so everyone's on it, etc.

And their stuff just works really well. They're also slowly cultivating a third party integrated apps ecosystem.

wanorris• 15 years ago

> They're also slowly cultivating a third party integrated apps ecosystem.

I think this is a big part of why Dropbox could warrant a high valuation. If Dropbox is simply "the platform" for file sync, then more integrated apps will come along with Dropbox support.

For example, the notes application I use on my Android phone (Epistle) uses Dropbox for sync. This is great because I always have those notes on my computer too. I think we'll see lots more of this in the mobile space.

swombat2• 15 years ago

Their defensible advantage is two-fold:

1) they developed a technology that in theory should be easy to duplicate, but in practice is extremely hard. Large teams always mess this up (even world-class teams, e.g. at Microsoft, which has had several stabs at this), and small teams often don't have the skills to work with so many orthogonal elements at the high competence level required.

2) They have supportive users signed up on yearly contracts. That makes them very resistant to competition.

A Dropbox competitor would ahve to be 10x better for people to switch. That's hard to achieve.

benologist• 15 years ago

I've been thinking about this lately as I use Dropbox more and transition from working at home to an office and find myself using 2 computers more.

A Dropbox competitor just needs to sync my app settings and stuff on top of what Dropbox does. I am gone the instant someone offers me a way to turn on my laptop and have an almost-replica of my workstation. Or upgrade phones, tablets or anything else.

Sync my <breed of device> is a lot better than just syncing some files across them.

arethuza• 15 years ago

I would hope rather than a single competitor there would be an open standard for this kind of file replication and then multiple implementations and service providers.

0x12• 15 years ago

Cue another 10,000 or so dropbox imitations.

erikstarck• 15 years ago

Darn it. I was just writing an article saying that the combined value of YC-funded startups is $4.7 billion (the number @pg gave a few weeks back). Guess I have to update the text. I wonder what it will be next week.

taylorbuley• 15 years ago

Since Dropbox was valued at $4b, I'd love to see what Amazon Web Services is valued at

SwellJoe3• 15 years ago

Amazon is a public company. You can figure out what AWS is valued at by the market, by doing some math, and reading some annual reports. Admittedly, the web store portion of Amazon clouds that value, no pun intended...but you could probably take a look at Amazon a few years ago, before AWS became a major contributor to their bottom line, to make sense of the numbers.

AMZN currently has a market cap of $95 billion. It's safe to say AWS is worth significantly more to the market than Dropbox; as it should be.

AlexMuir• 15 years ago

Actually I'd be surprised if Aws makes up more than $10bn of AMZN Market cap. Which might mean Dropbox valuation is absurd. Or it might mean Dropbox is making fat margins in a consumer market, while AWS is making slim margins in b2b.

kd1220• 15 years ago

Is Dropbox using S3 as their storage platform?

fletchowns• 15 years ago

Yes: http://en.wikipedia.org/wiki/Dropbox_%28service%29#Technolog...

"Dropbox uses Amazon's S3 storage system to store the files"

yalogin• 15 years ago

How come we do not hear much about Box.net?

jccodez• 15 years ago

Procter and Gamble was a HUGE DEAL for box.net. Did box go through yc?

TedBlosser• 15 years ago

nope, they didn't go through YC - http://www.quora.com/Box-net/Whats-the-story-behind-Box-nets...

orijing• 15 years ago

I don't think it's YC funded

6ren• 15 years ago

I don't think this can be based on their current business, but they must have a related idea (something cloud) with greater market potential + their proven ability to execute in the space.

There's been allusions to developments at dropbox that are not yet public.

BTW: dropbox's initial application was single founder.

Index Ventures Leads $4 billion Valuation Round In Dropbox

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