Dropbox (YC S07) Raises $7.25M, Crosses 3M Users

http://gigaom.com/2009/11/24/dropbox-raises-7-25m-crosses-3m-users/

by hshah • 17 years ago

106 35 17 years ago

netcan7• 17 years ago

- Over the summer Dropbox raised a $7.25 million Series A round from Accel, adding to $1.5 million in seed money it brought in from Sequoia Capital and Y Combinator in 2007

- San Francisco-based Dropbox has just 20 employees.

I wonder why they need so much money. If the Freemium model is working, shouldn't they at least be breaking even?

antidaily• 17 years ago

Marketing? They could be huge if more people knew about 'em.

teej• 17 years ago

Raising money isn't always a reaction to bleeding money. Maybe they've nailed down their customer LTV and customer acquisition costs. In that case, they'll want a big stack of cash to start buying up customers whereever cost < LTV.

netcan7• 17 years ago

Maybe they did nail down the lifetime value of a customer. But I doubt they nailed down the acquisition cost.

It's not like you can pay to have your customers refer more friends.

patio114• 17 years ago

I wonder why they need so much money.

Pretend I have a machine where you insert a quarter and, a year later, a dollar pops out. Do you a) insert the quarter you have in your pocket, wait a year, and then put all four quarters back in or b) go to the bank, borrow as much money as they'll give you, get it changed into quarters, and start stuffing the machine?

A freemium startup which has a good idea of what customer lifetime value is and what customer acquisition costs are is, essentially, a quarter-into-dollar machine.

This factor becomes particularly acute when the ultimate goal of the startup is to sell their quarter-into-dollar machine for some multiple of the number of dollars it has produced in the most recent year.

[Edited in response to the above post going grey: Please do not downvote the post above me. He isn't being malicious. The big picture strategic view is non-obvious and many smart people need to have it explained a few times for it to sink in. If you wish to correct the misconception, either explain it or upvote an explanation.]

[Edited to add: P.S. The expert on "(LTV > COCA) + source of capital => blow the doors off" is Dharmesh Shah. He has been banging the drum for a few years now. Example: http://tinyurl.com/doors-blown-clean-off ]

netcan7• 17 years ago

I appreciate the tone.

That aside, you are assuming growth is constrained in some way that money relieves. IE they need money to promote or they need money to support their free users until they mature into premium users. Either one of those is a sufficient answer.

netcan7• 17 years ago

I understand the principle of taking investment to enable growth. It is not just a principle. It has mechanics to it.

one option A common way this works is putting that money to work acquiring more customers. This can mean sales staff. It might mean advertising. It might mean outlets. etc. It works if you have some way of converting money in to customers in a reliable way. Since dropbox appears to be growing virally through referrals, I don't see how this can be the case here. You cannot easily turn cash in to referrals. If it is a case of putting money to work acquiring customers, there is something I don't understand going one.

The other option I can see is funding the free accounts while you wait for premium accounts to open. If you are in a fast growth period, you might have a higher ratio of free/paid customers then what you expect the long term average to be. If you are growing very fast or your profit margins are relatively narrow, you might need some funding. IE, you might dip under profitable temporarily while you wait for the many new customers to convert. This kind of a need is short term & marginal. $7.25m is not marginal.

doug_m• 17 years ago

I think Dropbox is valuable enough to become ubiquitous but one imagines they need to grow to a certain size before such a feature exactly is rolled into a version of one of the big operating systems. Not that what they've done isn't technically difficult of course, but it just seems like something so valuable it might be on a Chrome wishlist.

Cool thing if the guys who make the software are reading this - started a new job earlier this year at a mostly non-software company managing a few development projects. I doubt most of my colleagues are aware of this startup culture or have heard of .NET much less Y Combinator.

First week "You've got to see this program we have the sales team using, called Dropbox... its tremendous there's about a thousand things we can use it for". Not only are they using it its their "we're showing this off to the new guy" thing.

hyperbovine• 17 years ago

It's unlikely that one of the big operating systems would come forth with a feature that worked with all of the other big operating systems as well.

icey• 17 years ago

Dropbox is hands down the best piece of software I've installed in the past few years. It's the first product I've ever been able to recommend to both friends (geeks) and family (categorically not geeks whatsoever) without having to change my explanation of why it's so awesome.

Congrats guys!

ujjwalg• 17 years ago

I agree and congratulations to the whole team. I have been a huge fan and loved their free service. However, as soon as I moved to the paid service and increased my backed up data to 10GB my computer became extremely slow. Dropbox is using 98% of CPU both on windows XP and Mac. It has been a week and not everything is backed up yet. Moreover, if I move a directory within my dropbox folder, it takes it as a new folder completely and tries to delete and back it up again which is completely opposite to their philosophy. Also, if you want to back up 2-3 computers at the same time everything screws up. So, a word of advice while using dropbox, be patient, dont get too excited after using their free service and jump the gun from 2GB to 20GB, do it slowly and carefully and hopefully things will work out great.

steveitis• 17 years ago

Me too, and I was only on the free version. After trying to copy a couple of thousand tiny text files, I had to force kill explorer repeatedly until I gave up and uninstalled Dropbox.

In the end I just signed up for a $9.99 a year hosting plan with 20 gig of storage and WebDAV. Cheaper, faster, and no funky software to crash my boxen.

Honestly I'm not even really sure how Dropbox ever became so popular.

st3fan• 17 years ago

"1.3 million gigabytes" - is that correct? If it is .. wow!

staunch• 17 years ago

I'm betting Dropbox will be the biggest YC exit for quite some time.

mattmaroon2• 17 years ago

Grats guys! Just out of curiosity, how did you come up with $7,252,763? Everyone knows its good luck to end with a 4. You could be $1 away from an IPO there.

mikebo• 17 years ago

Dropbox is really awesome. I'm very impressed with how well they execute. Lots of companies big and small have offered the same basic service, but nobody has built a product nearly as good.

greyman• 17 years ago

What about Live Mesh? (When assumed that all your computers run windows). As I see it, there is basically all the functionality of Dropbox, plus 5GB free space, ability to sync several folders, and remote desktop functionality.

gboyer• 17 years ago

I believe Live Mesh has an OS X client now. I tried it (on both OS X and Windows), and while it has most of same basic functionality as Dropbox, I found the interface off-putting.

mikek• 17 years ago

It seems that this article is inaccurate:

http://www.techcrunch.com/2009/11/24/dropbox-sequoia-funding...

"Dropbox did close a Series A funding round, but it was for $6 million, and it was back in October 2008. And it was led by Sequoia, not Accel (though Accel did participate in the round)."

jlk• 17 years ago

Agree, Dropbox is amazing. Cheap version control for the rest of us. Made my USB drives useless.

nixme• 17 years ago

"And Dropbox ... says it will offer tools for corporate collaboration in a more formal fashion early next year."

Any Dropbox folks here who could comment on what those tools might be?

Dropbox (YC S07) Raises $7.25M, Crosses 3M Users

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