Dropbox Raising Massive Round at a $5B-Plus Valuation | Hacker News Reader

Dropbox Raising Massive Round at a $5B-Plus Valuation

techcrunch.com

161 pointsssclafani58 comments

Sounds like a round for the founders and employees to sell some shares (called a series f?), unless Dropbox has some major expansion planned to build its own CDN and data centres instead of using S3. The amount of savings at there scale (200 million new files / day [1]) would be huge as data via S3 is already more expensive then running your own bare metal boxes. I would imagine that Dropbox pays some sort of bulk price, but I can't find any information.

I don't think the 5 billion dollar valuation is out of the ball park considering that they solve a problem that a lot of people encounter including my mother. Their solution is simple and elegant and seems to work. Last statistics I heard they had 25 million users [1] and growing, while I dont know how many of those users are active subscribers I can imagine the conversion ratio is much higher then normal freemium products.

While there has been a lot of anti-Dropbox news in the tech press lately, we need to remember we live in an information bubble that doesn't reach the normal user.

[1] http://techcrunch.com/2011/06/17/billion-dollar-valuatio-clu...

There's a difference between 200 million new files and 200 million 'uploaded' files.

eg a song has a fingerprint. If 100 other users 'upload' the same song, it's counted towards their usage but no actual upload or storage is performed, saving costs.

Pretty clever on their part :)

Yes it is very clever, I had forgotten they ensure they only store unique files (I wonder what percentage of files "saved" are unique). I actually went and looked through the TechCrunch articles from April 17th that announced the Dropbox 25m user mark and 200 million file saves but it doesn't distinguish between unique and saved files. I imagine its the latter as it would be the more impressive number.

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

About the percentage of unique files: I guess if you go by volume, the percentage of unique files is small. And if you go by number, the percentage of unique files is big.

I.e. bigger files are more likely to be stuff that you didn't make yourself.

Until you get to home video. Which is growing very quickly.

Indeed. I wonder whether pre-fabricated files will grow in size, too, or whether the ratio will eventually shift.

Pretty clever on their part :)

It is actually pretty standard. Deduplication is a very common method for not duplicating the same content on shared storage.

OT: How do you add italics to text? I find it preferable than adding >s.

Put asterisks around the text: *your text (and another asterisk - can't put one or my text will be italicized!).

You may find these helpful, the formatting options for HN:

http://news.ycombinator.com/formatdoc

I also wonder if they are selling shares because Microsoft is nipping at their heels. Live Mesh is a serious contender and starts with 5G instead of 2G. I switched.

Hmm, interesting. I've never heard of it.

EDIT: Apparently it only works on Windows, so I'll be sticking with Dropbox.

EDIT: Thanks, I had missed the Mac option. But to me, they cheapen their Live Mesh brand by association with Windows Live ID and Hotmail.

Windows and OSX, but not iOS (yet) or Linux (probably never).

Windows Live is the online brand, all their free-download software/online services are "Windows Live X". I'm not sure how it cheapens it any more than if it was "Microsoft X" or "iProduct"...

Okay, I should rephrase: when I see Hotmail so prominently featured on the Windows Live ID page, I worry because of Hotmail's spammy past.

Also, the only times I've encountered Windows Live ID are times when it was being forced on me. E.g., when I got my broadband, I was forced to use a Windows-only CD to install a lot of (to me: irrelevant, useless, copycat) consumer software (photo sharing etc.), then get a Windows Live ID, and then finally activate the broadband.

So I pulled a Windows machine from a dumpster, did the install, got the Live ID, activated the broadband and then installed Linux. It felt dirty (and not from the dumpster).

After activation, the Live ID was not required, nor the software, nor Windows. So the whole experience was dictated and had no value for me, the customer.

> I would imagine that Dropbox pays some sort of bulk price, but I can't find any information.

Storage pricing is right there on the S3 pricing page: http://aws.amazon.com/s3/#pricing

Assuming they're at the highest tiers, we're looking at about $0.055/gb storage, $0.050/gb transfer out, $0 transfer in. Transfer out could certainly be less, though, if they're in the >524TB/mo range.

I'd bet that Dropbox is that largest S3 user in existence. Custom rates are very likely.

Netflix also uses Amazon S3 and is probably an even larger customer, but I agree with your assessment that custom rates are very likely (for both of them).

Netflix uses EC2 for computing power. It uses CDNs (Level 3 and Akamai mostly) to deliver streams so most of the bandwidth would not be from Amazon.

41 days ago, PG's estimation for the sum of the value of all YC companies was 4.7 billion. http://ycombinator.com/nums.html

Congrats to Drew, Arash, and the whole Dropbox team.

(Ordinarily I would say that giving congratulations before a deal is confirmed as closed is a jinx, but at this point there is no such thing as jinxing Dropbox. Their ultimate success, whether this report is true or not, is inevitable.)

Just for clarification, it looks like he stated "the combined value of the top 21 companies is $4.7 billion."

Yes, but as explained in the post, that's a decent estimation for the value of the whole portfolio (of the 210 companies through S10).

This is because startup valuations follow a power law, which among other things means that almost all of the value in a portfolio will be in the top 10%. This round of funding is a good example of that principle - if TC is correct, then even among the top 21 companies, a majority of the value will be in the top single company.

How does PG value YC companies? Is this process public knowledge or something internal to PG?

From the link: "For 18 of the top 21 I used the postmoney valuation of the most recent funding round. The other 3 had grown significantly since their last round, and to estimate the values of those I used the opinions of independent experts and the valuations of the funding offers they are currently receiving."

Dropbox has traction and paying users. Why do they need $200 million? Of course it's not just a two-man gig anymore, but... what is it for?

If their business model isn't supporting the growth they want and they're not going to change it, is throwing money around going to be all that helpful?

Maybe I'm doubting that they'll be able to bring in that many new users because I can't imagine how anyone hasn't heard of dropbox by now -- which is pretty silly. I've just known about it for a long time because of HN.

Or maybe there are economies of scale that I don't know about, and by spending $x they'll be able to save/make $y>>$x?

(...Are they going to get off of s3, set up their own datacenters?)

Current traction and paying customers may not be enough to satisfy their growth/evolution goals. The cash could be used for a lot of thing. One guess is that they may be trying to ramp up the attack the enterprise storage/backup market and need a war chest to have any major impact.

Also, plenty of people who could really use a service like Dropbox have not heard of it. Even with their current product offerings, there is an ocean of customers who haven't been reached yet.

Exactly. Given that Dropbox is still on a growth curve and it's time to raise more money, you can bet that Drew is being very shrewd in maximizing his valuation and keeping from needing to raise another round any time soon.

They still need to work on their pricing. They have an opportunity to convert quite a few of their non-paying customers if they'd simply offer a plan between 2GB and 50GB.

https://www.dropbox.com/votebox/90/better-more-affordable-st...

Don't forget, they also have an opportunity to downgrade quite a few of their paying customers from 50GB to e.g. 20GB.

I imagine they could spend a little more on marketing.

1) Founders may want to take some money off the table.

2) I do not see why DB couldn't end up being a 100B company. They built a huge business with one fucking product. One. I do not even remember the last time I noticed new features. I want to see them starting to move more into backing up/syncing social data as well. There could be a day when all your social data will be simply poured into your DB, and they will do the job at syncing it via all your devices, and social networks.

Go DB.

Edit: Imagine. I take pictures. Put them on my DB. Set privacies (social, private, family, work, etc...). Then Facebook can now directly grab from my DB, Google, Twitter and new startups as well depending on my settings.

Everything is possible. There might for example be a bout of hyper-inflation in the US, making any business more serious than a lemonade stand worth >$100 billion. And that's about it for plausible scenarios. Becoming that valuable in real dollar terms would probably mean being one of the top 25 largest companies in the US.

true, I think facebook just got a 100B valuation...

damn, that's genius. it would take a lot of cooperation from huge entities though.

"They built a huge business with one fucking product. One."

That's not a good sign, that's a bad one. That means if anyone attacks that one product credibly, the whole company is rocked hard. Better to be diversified, broadly speaking. (Details matter, of course.)

What are the odds Google, Amazon, and a not insignificant number of the other backup vendors in the world are planning some form of direct competition?

... actually, this speaks to what sort of concerns me about a bubble right now. Excessive valuations aren't themselves a cause, they have to be a symptom of something else. ISTM there is an excessive optimism over any one company's ability to completely lock up the market forever and ever, amen. To be honest I don't expect one masterstroke that comes in and just destroys Dropbox in three days, but valuating them as if it's just an assured thing that they're going to completely own the home backup market over the next ten years is absurdly optimistic. It's one possible outcome, but not anywhere near the most likely. Valuating Facebook as if it's going to own social networking forever and ever is absurd; look at the very rapid inroads G+ is making, my point being that even if G+ crashes and burns it has clearly demonstrated that it has a chance, and that means other competition has a chance, too. Valuating X as if it's going to own the market is stupid, and a lot of the valuations seem to be based on that; not a reasonable, rational assessment of the possibility that they may own the market or at least do well, but valuations based on the solid, near-100% of that outcome. Seems unwise to me.

When there's a massive bubble frothing money all over the place, it probably pays to take advantage of it.

More than 4 years ago, a post on HN by Houston asking for a review of DropBox:

http://news.ycombinator.com/item?id=8863

[Edit: Corrected link. Thank you.]

That's a link to this post.

And if I remember correctly that linked to just a video of how dropbox works, without Drew actually having a working product (but you couldn't see that on the video).

Kudos to them on a fine product and excellent execution but, wow, this seems pretty frothy. And I don't have a huge problem with some of the other big valuations (Square, AirBnB, etc). But DropBox is going to have to find some other interesting business for investors to see any of that money. Just storing files doesn't seem like it would fit that bill.

and to think i balked at investing in dropbox at 20m pre!

Can you tell us why you balked? Market size?

20 seemed too high, is all. lesson learned: if the price is shooting up, there might be a reason.

No, no, it is not a bubble and 5 billion dollars is just a several hours of printing.. ^_^

Very rough mental math: At a $5B valuation, PG's share of Dropbox should pay for ~10,000 YC investments

Did you factor in for dilution, they previously raised a 7.2m round.

We also don't know what percentage YC took. They might have taken a bit more or less than 6%. Regardless, this valuation puts their equity in the $100 million - $350 million range.

Almost the same price as United States Steel (6.2B).

Congrats Drew and Arash, awesome stuff!

All this talk/speculation about how the valuations are done and Amazon S3 costs etc.. Just log in to Dropbox with email ceo@dropbox.com or partner@yc.com on dropbox.com with ANY password and look in their docs folder, S3costs2011.xls and valuation.xls. duh.....

Let's hope they will invest at least some of their newly-gotten money into improving their security.

Awesome! I use their service all the time, I'm glad to see them doing well!

In the past year, Dropbox has lied to it's customers about encryption and how much power Dropbox has over the data (!!!), shown that they deduplicate before encrypting (and that they can view files in your Dropbox and make them unsharable), and finally allowed all Dropbox accounts to be logged into without a password, for four hours.

And yet they are at a $5B+ valuation?

I'm amazed at how dropbox seems to be able to make any mistake and keep going. Very few other companies are capable of this. I'm not sure whether i should congradulate them or be disappointed.

Wow. Good for them! Go Dropbox.

What's worth more YCombinator or Dropbox

Congrats to Dropbox and YC. Awesome!!

Congrats also to Trevor, Jessica, PG.

With the revenue of 100M, that valuation is insane.

S3 costs must be eating most of the revenues.

http://www.businessinsider.com/dropbox-revenue-2011-3

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