Dropbox is an obvious PE Target? | Hacker News Reader

Dropbox is an obvious PE Target?

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66 pointsTaikhoom10108 comments

Not sure why this is on the front page but anyway...

> But a lesson from this story is twofold: when Steve Jobs tries to buy you, take it. Economically, the return from a capital efficiency standpoint would be much better. Second, public companies that are truly just a feature never give you great returns.

Dropbox was a private company when Jobs offered to buy it for $800 million in 2009. Drew Houston (the founder) has collected hundreds of millions of dollars in compensation since then and is today worth over $2 billion. He's also on the board of Meta.

So the point about investing in companies that are features might be a decent (if obvious) one for retail investors looking at public equities, but the lesson here isn't "when Steve Jobs tries to buy you, take it".

I was referring to multiples on invested capital. Plus, it's a bit hurtful when you IPO your company, the stock stays flat if not down, and you step down; I think an Apple acquisition like that is much more of a happy ending IMO.

You're thinking like an investor, not an entrepreneur/founder.

Yes, you're right

I would have taken the 800 million and retired. Would easily be worth 1.5 billion with simple investment. And you would not have needed to work those 17 years.

But you're not Drew Houston.

Correct. At the 26 years old that he was I would take the millions and just have a chill life. Maybe start collecting rare Lamborghinis.

And maybe that's why you didn't start Dropbox.

Still started and sold my own company. Quit working. But no, it wasn’t Dropbox.

which company?

OneDrive

It’s right there in his name. Retired Inc.

The advice isn't for Drew Houston, it's written as general advice for anyone.

The point is that different people have different priorities, and retiring in your mid-twenties to enjoy your many millions is a perfectly reasonable choice.

Until one does it and realizes that the concept of retirement is not the same as the reality of such, especially for people who like achieving things, which is going to essentially be 100% of people who end up making millions in their 20s. I think this is why so many billionaires choose to be workaholics even though they have the means to do literally almost anything.

In which case, fine, return to work, start a new company, start a foundation, whatever. Accepting the aforementioned big fat cheque from Steve Jobs affords you those options.

There's a very big difference between what you can achieve as an entrepreneur with low net worth and an entrepreneur with a war chest of hundreds of millions of dollars.

When you start out with effectively nothing, you are forced to take a day job while you build something out on nights and weekends. The pressure is high to take early investment - and essentially work for your early investors, instead of working for yourself, just so that you can work on your baby full-time.

When you have a war chest, then many more capital-intensive opportunities are available to you. Want to build hardware (i.e. without crowdsourcing)? Factories? Pharmaceutical R&D? Training open-weight LLMs? Hell, you want to start an airline? Take your pick, and I'm barely scratching the surface.

It's hilarious to think that an $800 million exit would force you to never work again. That's crazy. It only forces you not to work on that company you exited from. The exit enables you to work on almost anything else you can think of. You put $25 million away in close-to-zero-risk investments to let you live off quite an insane amount of interest (even if you only get 2% interest, that's $500k/year) and then have $775 million to work with.

Retirement generally implying “not working” is the disconnect here. For example, a person in poverty who quits their salaried job at 62 and has to go work at Walmart to keep up would be retired for some folks, not for others. Same difference for someone independently wealthy at 25 who pursues new businesses.

So exactly what was Drew Houston achieving at Dropbox? They stored your files in 2009. They store your files in 2026. Doesn’t seem like he achieved a lot. It’s not like Tim Cook who launched multiple succesful product lines during his tenure.

And you can still achieve things during retirement through adventurous travel or philanthropy.

So what exactly are you achieving by judging Drew, his life choices and how well you think he compares to the CEO of Apple?

You're "retired". Shouldn't you be trekking through Borneo or writing the follow-up to Plato's allegory of the cave while sipping a cocktail on the shores of Fiji?

I can shitpost on HN while walking the Camino de Santiago. There is 5G in Spain.

Well, I don't want to judge your retirement and what you're achieving by shitposting, but surely you're aware that the Camino de Santiago is a pilgrimage route that for over a millennia has been walked for spiritual growth.

I hope you can enjoy it.

If he wanted to “retire” he never had to wor in the first place, he could have hired someone to take his jobs while still keeping his equity.

But being the CEO of a well-known startup has a lot of status benefits compared to just being rich. And that's all what matters at this level of wealth.

And it gives you a sense of purpose, which we all need.

$800M in 2009 Apple stock would be about $24B today!

But $800M in USD is worth only about $1.2B today. Keeping the money invested in Apple is convenient if you're already paid in stock, but beyond the lock-up period we have to keep in mind that it's just one of many things he could have done when accepting the money

Though I think it fair to speculate that if he had taken the deal he would likely have more money today, at the cost of less status

Yeah but who can say Steve Jobs bought their company so early on, the early Dropbox design was so Apple-esque.

Somewhat off-topic: When writing like this, explain your abbreviations and who the various people and companies are. PE Target? Price to Earnings Target, that makes no sense. Perhaps Physical Education, no, that's not right either. 10-K (might bold to assume that the reader knows what that is). Even smb (which should be SMB, even if it doesn't help) is probably not Small Message Block.

Think what you will of their writing and opinions, but one thing The Economist get right is that they don't assume you know what things are, it's spelled out at the first mention. So first mention of PE would be: private equity (PE).

> And Sequoia’s (a venture capital firm) investment in Dropbox was a great one, second to Airbnb in Fund 12 (another venture capital firm).

I think the people who need those abbreviations spelled out are not the target audience of the article. There is no possible way to think that PE == price to earnings/physical education here and if a reader thinks that they wont understand the article anyway. e.g. hamilton helmer, power, fund 12 being a sequoia fund not a different venture firm, etc.

Its OK for articles to be a short few paragraphs with a smaller audience rather than a few long pages and explain every single thing at a basic level to try reach everyone

> I think the people who need those abbreviations spelled out are not the target audience of the article.

Probably. But I like reading a lot of articles I'm not the target audience for, because I like learning things. Writing it like this excludes a ton of people who might not already be insiders to become insiders.

Maybe that's a choice, a way to keep knowledge away from outsiders, to feel better about knowing that people who read your article are cool like you, and that's fine. But if the goal is to educate and reach a broader audience, it isn't effective.

> Probably. But I like reading a lot of articles I'm not the target audience for, because I like learning things.

OK, but the definition of not being the target audience is you bear that burden, not the author. If the author bore that burden, you'd be the target audience!

private equity should also not be for audience here

the only PE relevant to hackers is PE32 file format for exe files

This is a site run by a venture capital firm, private equity is far closer to the target audience for HN than file formats.

And privilege escalation.

>I think the people who need those abbreviations spelled out are not the target audience of the article.

I agree this is true for the economist readers, but I clicked the link thinking this was about how Dropbox (in a company) is an obvious target for privilege escalation (for red teams and hackers), which also sounds plausible and interesting.

But I don't mind, after a few seconds of loading my mistake was obvious.

In the context of a economics blog, and its audience, sure!

But this is being shared outside that context. Deciphering acronyms for the HN titles would seem like an okay start. There are several common use alternatives. Wouldn't hurt to be explicit.

Mild disagreement. I find this annoying -- this is a community and it's absolutely POSSIBLE to structure this headline to provide the information.

HN is a community and an attitude of "if you don't get it, you're not in it" is unnecessarily toxic. Universally applying this sort of rule would apply to the queue getting cluttered up with insider jargon that pushes EVERYONE out.

Thanks, will do.

I have a few qualms with this PE Target:

1. For a Linux user, you can already build such a system yourself quite trivially by getting an FTP account, mounting it locally with curlftpfs, and then using SVN or CVS on the mounted filesystem. From Windows or Mac, this FTP account could be accessed through built-in software.

2. It doesn't actually replace a USB drive. Most people I know e-mail files to themselves or host them somewhere online to be able to perform presentations, but they still carry a USB drive in case there are connectivity problems. This does not solve the connectivity issue.

3. It does not seem very "viral" or income-generating. I know this is premature at this point, but without charging users for the service, is it reasonable to expect to make money off of this?

It is primarily a switching-cost-enabled cash cow.

Joe Public has no idea what an "FTP" is and just wants a program they can download that does it all for them

It's a reference to this infamous post: https://news.ycombinator.com/item?id=9224

Oh, I didn't know about that

> From Windows or Mac, this FTP account could be accessed through built-in software.

This is exactly what I've done: https://github.com/mickael-kerjean/fdrive https://github.com/mickael-kerjean/filestash

The same comment to bookend the era between "Dropbox is live!" and "Dropbox should be acquired".

We have come full circle.

sorry but this is just dumb. sure, there are a number of ways you can diy this. Congrats, you picked the most annoying and least secure one, that is not even remotely comparable.

> But a lesson from this story is twofold: when Steve Jobs tries to buy you, take it.

Not quite sure how the author reached that conclusion, considering – by their own calculations – Dropbox is profitable, rich on cash flow and worth at minimum 10x what Steve Jobs offered for it.

Right, but you have to consider how early on this was, with little venture raised; multiples are way better. My point was bundling wins in the long term.

Yeah, if he had sold and taken his money and invested it all in BTC or FB or Nvidia he would have been one of the richest people in the world.

What you're missing is that he was able to build his company, run it for years, get paid well and step down from the CEO position with a stake worth a couple of billion dollars.

You can't always reduce everything to money. Lots of entrepreneurs, perhaps the majority, would consider Drew's outcome to be the ideal one: you get to do what you love, raise your baby and earn a fortune.

Not everyone wants to sell out, start a family office and spend their days on a boat pondering what the purpose of life is and what they should do next.

Work at a soul sucking corporate for 17 years instead of enjoy life traveling around the world? In what way does that sound good?

Reaction to fragmede as I am rate limited:

You don’t have to travel full time.

And yes working at Dropbox is boring. Dropbox stores files. Things haven’t changed since 2009. There is not any product growth. They still store files. 95% of their daily operations is sales. That doesn’t sound enticing to me.

If you hate travelling, in what way does doing that for 17 years sound like fun? Some people just do not like traveling and living out of a suitcase or backpack. Others, do. If you see being at a corporation as soul sucking, then don't, but I imagine that if you're the CEO of the corporation, it's a different story than if you're a drone, and see yourself as one. Retirement is great, you get to choose what to do. Some people choose to fuck off to the beach. Others choose to keep writing code, like Larry Finger. No one's gonna shame you for not being Larry Finger in your retirement, but we should celebrate the people who chose to do good works.

For the system, there is not a lot of difference whether you are the slave or the slave driver. But oh boy would the system be in in trouble if it had more free people around...

Yes it would be very much in trouble. I wouldn’t want to be around to witness that, though.

Visit the Netherlands. People get paid to work less. That is going to do wonders in the future I guess. Healthcare system is already massively strained.

> Work at a soul sucking corporate for 17 years instead of enjoy life traveling around the world?

It might be difficult to believe, but some people enjoy running companies just as much as others enjoy traveling the world. Different people have different interests and goals in life. Neither is wrong.

Also, we can't just have people who retire as soon as they have enough money to travel around the world for the rest of their lives, we would only have inexperienced people in many important positions. 3 million is probably enough for that, if you don't demand too much luxury, and that's close to 1% of US families.

>> Work at a soul sucking corporate for 17 years

I'm pretty much sure it is not soul sucking if you are a CEO.

The CEO of a company that stores files. That is all they do and have been doing for 17 years.

Seems rather soul sucking to me.

Not spending time with 10/100/1000 millions people very much I appreciate there may be a boundary between 10 amd 100 but between 100 and 1000 I remain unsure there is a functionally useful distinction which would motivate me, per the money. Maybe it's about the zero as a rei-ified thing in itself but if somebody decides to stop at 100 and you argue they should have driven to 1000 what axiomatically makes you "right"?

This feels like a judgement purely in financial numerology. Is bigger of necessity "better" for every founder?

Bending Spoons must be watching Dropbox closely. Like the other companies that have been acquired by them, Dropbox has reached its final stage of stability.

They acquired already WeTransfer and Dropbox could be a natural fit with that.

Call me crazy, but I think we need more Dropboxes and fewer Metas or whatever.

Make a product that solves a sufficiently common problem, and make it extremely high quality. Want more growth? Find another problem to solve and launch a product in that space.

As for Steve Jobs and selling out, Apple bought FingerWorks. That's how they ended up with excellent, multi-touch touchpads while the rest of the computing world suffered. Make great products (or "features") and never sell out to soulless megacorps.

I personally agree, but clearly the market doesn’t. You will find here people saying they have moved to GDrive, OneDrive or iCloud. They are supplementary services to existing large platforms/ecosystems. If the problem is small and well defined, most people would look at Windows, Mac/iOS, or Android and angrily complain it’s not part of these platforms. Long gone are the days of people getting mad at Microsoft for using their dominance of an OS to push another platform. People demand that now.

As a result, the problem you solve have to be sufficiently complex with a huge surface to guarantee platform operators don’t cannibalize you. If LLMs weren’t an active area of expensive research and advancement, for example if it was just a couple of models with a simple defined interface, majority of people would use whatever one came on their device or OS. Dropbox had a novelty for its file syncing simplicity and it took few years for platforms to catch up. it was able to establish a market share, but the scale of the others dwarfs it. If LLM advancement hits a wall an all models converge, we might find Apple, Microsoft and Google becoming the most dominant consumer AI providers with other experiences building on top of them, like how apps do today with these storage services.

Large behemoths struggle in innovating new and novel ideas, but they can execute on well defined ones. For example, imagine if something like Tailscale’s use case becomes very common place. You would have “Apple Network”, “Google Chrome Connect” and “Windows Copilot Device Active Link”

I used to use Dropbox at work and also personally.

Work didn’t like it as Dropbox was new/unknown and eventually banned us from using it. This was about 15 years ago and the only way to share files between colleagues was to manually upload a file to their shared drive (through a browser) and then ask your colleague to go download it.

Works Dropbox was replaced by Microsoft. My personal Dropbox was replaced by Google Drive, and then by iCloud.

Nice to know Dropbox is still make lots of cash really. They started it all.

>They started it all.

Actually box.com was first (launched as box.net in 2005), and Dropbox was founded in 2007.

Yes and quite frankly dropbox should have leverage their consumer brand to move into enterprise.

I mean if we're going to get pedantic like that, then here is the classic Dropbox evaluation:

BrandonM on April 5, 2007 | parent | context | favorite | on: My YC app: Dropbox - Throw away your USB drive

I have a few qualms with this app:

3. It does not seem very "viral" or income-generating. I know this is premature at this point, but without charging users for the service, is it reasonable to expect to make money off of this?

Everyone makes fun of #1 for good reason, but #2 and #3 were actually reasonable objections at the time.

https://zedshaw.com/blog/2018-03-25-the-billionaires-vs-bran...

Box.net launched first, but they didn't introduce file synchronization, the core value proposition of Dropbox, until mid 2010.

Dropbox pulled the plug on so many good apps. They should have built the full office suite in the browser and eventually slapped an email service on it. As a competitor to Google Workspace, they would have a real chance. Storage as a Service is too little of a moat in the cloud age.

Out of curiosity which apps do you miss the most?

Mailbox, Paper and whatever the photos one was called (Carousel?). I agree. I was hyping them up as the next gsuite and they just dismantled all those apps and the momentum they built along with them.

I’m guessing their “momentum” wasn’t on the path of building a sustainable business, particularly given the existence of Microsoft. From a market position standpoint, Paper could have become what Notion is now. Notion even released at around the same time as Paper.

Was it that Notion from early on supported Markdown compatibility, which is a distinguishing feature when selling to software startups? Was Paper too aggressively coupled to Dropbox storage, when Google, Microsoft, and Box already had a large share of that market?

Paper still exists - Drew refused to kill it. Been heavily underfunded for years and saddled with a codebase that assumed it would be >50 people forever, so still digging out of that hole - hence the apparent freeze on feature development for multiple years and separate mobile/desktop apps disappearing.

Yes, the photos one was Carousel. I'm still sad about that, in some ways it was better than even what Google Photos offers now. The big problem there was Dropbox chicken'ed out about picking a fight with Google Photos - since Google were giving away for free(ish) a comparable product to the whole Android install base, doing the same freemium model as always would've been a challenge with heavy competition for the free users.

Mailbox... was a botched acquisition. Ideologically they aligned, but no real plan for how to keep momentum and turn it into making money, and no real story about how Mailbox was better as part of Dropbox than separate. Even under the hood the infrastructure was all separate (except eventually for login).

A big missing piece of the story: Dropbox tried to be a multi-product company long before building the infrastructure for that. Which I think self-sabotaged many of these new products.

Mailbox and Paper. With just those and a Google Sheets alternative they would have had all the tools ready for the pandemic boom.

Paper still exists, though has definitely spent quite a while stagnant due to underinvestment.

It would've helped to clarify that "PE" stands for "private equity".

Sad. I still use Dropbox personally and really like their use experience, but I just don't find enough use for it to pay for a service like that. The technology proved to be far too easy to replicate and they failed to build anything that would make users stick around, I guess. Maybe moving to workspace collaboration solution like Google docs was the play?

As much as I hate it, capturing users and building a walled garden seems to be the only way to make it really big.

I recently migrated to a new phone and one of the apps I had to re-login was Dropbox. A feeling of nostalgia washed over me. It was absolutely essential many years ago but now the competition is huge. I'm not a fan of Private Equity but if it can keep the business alive, then it's worth exploring by the leadership.

No, definitely agree. One of the great SaaS companies, strategy matters, though, and the early success distracted them from building a defensible business.

I was at Dropbox from 2016-2020. We were certainly trying to build a sustainable business, but there was a major identity crisis. Were we consumer web? Buy Mailbox and build Carousel, then shut them both down.

Maybe we’re Notion/Evernote? Buy Hackpad, plow a ton of money into Paper (which was legitimately good), then quietly deprioritize it.

Maybe we’re actually some kind of enterprise document productivity suite? Buy HelloSign. Plow a bunch of money into a desktop app. Pull more plugs.

A lot of smart people were trying. We made a lot of bets (too many?). None of them proved to be a second act, and the competitors eventually caught up.

I intend to write a piece going deeper into the failures; I would love to chat if you're open to it. Also, not to say Dropbox sucked or anything, it is just that the broader strategy and industry structure make it hard; if anything, the success of the first product made it difficult to evolve the business.

PE's end goal is never the health of the business.

Being bought by PE is a death sentence. Maybe drawn out by years, but a death sentence none the less.

It depends on the acquirer; Silver Lake could be a good partner.

And despite their patterns giving not that great returns they keep doing it. Mostly it's an income play vs capital appreciation anyway. If you wanted the capital gains pre-seed and seed are doing well. ACA had a report which I think also got mentioned in Bloomberg.

That's an oversimplification. Private Equity's goal is to take control of the business and change it so that it has higher resell value.

Often they do sell it for parts, or they enshitify the hell out of it to squeeze revenue from loyal customers. Not necessarily because it's the optimal strategy, but because truly fixing a business is hard and these are decent shortcuts from their perspective.

But that's not a given, sometimes they do truly turn it around for the better.

Exactly ... PE's wants shorterm return, just numbers in a sheetbook, and they special execs for such jobs. Their only "strategy" (my dog can figure out better) is aggresive monetization, layoffs pushing remaining employees to limits. Profits goes up ... so the strategy must work, lets increase monetization more and do more layoffs.

Prices goes up, quality of service goes down. After few years, everything goes down the drain, PE and their execs can't figure out what went wrong.

In most cases you have the causal effect of PE incorrect. By the time PE comes in, the company has already peaked and is on a downslope. The original owners know this, want to get out and sell. Blaming PE is like blaming vultures for the roadkill they are picking over.

Dropbox was huge before everything built in sync as SaaS. I still fondly recall the Dropbox backend to 1Password.

I understand why it is a reasonable acquisition target for PE and worthy of exploration, but I’m not sure I understand how being acquired by PE would keep Dropbox alive longer other than shaking up the leadership and shifting priorities. Perhaps aggressively targeting enterprise customers currently using Box after rolling out the necessary features?

Keep the business alive? Article says it’s making good money so no risk of it dying

I recall I was using Dropbox on Windows 2003 and Mac OS X 10.4. I was student and actively writing Office documents, AutoCAD, NanoCAD, LabVIEW, plenty of cryptic formats. Eventually Dropbox stopped working on Mac OS X 10.4. And I was not student anymore, I was not dealing with folders. As developer I worked with TortoiseHg and BitBucket, Mercurial repositories and reStructured Text wikis. And returned to neither Dropbox nor similar alternatives. By inertia I synchronized with Dropbox, but when Dropbox stopped working on Mac OS X 10.4, it stopped at all. Eventually I've got OS upgrade, but Dropbox already gone and never returned.

syncthing replaced dropbox for me. and for cloud the existing solutions are better google drive,icloud, onedrive but actually I use restic and a s3 compatible bucket.

I'm surprised Dropbox is still around, was it 15 years ago when I used? It was something new, but after they started pushing limitations I stopped using it.

I know, right! Switching costs are powerful.

I'm still a paying customer from somewhere before 2010, don't use it consistently but I've got a ton of things in there. Every time the anniversary rolls around in November I ponder how much effort to move off it for the not insignificant cost, but then the desire fades until about the next November :)

I remember gaining a bunch of storage from dropbox because they used to have this program where you gained storage by doing referrals. but then they removed it after I had invited so many people and I didn't want to keep using the service at all. Now I use syncthing (no cloud needed)

From the service provider perspective storage is a feature not a service.

From the customer perspective it is a pretty important product.

The customer may not be aware of this until it is too late. It becomes tempting to store your data with application providers because it seems more "cost effective".

I try to avoid storing a lot of data with services that offer online storage as part of a product. For instance image storage coupled with image processing applications. Because I really care about my pictures, so I don't want to have my choice of image processing software dictate where I store them. There's also the fact that I do not trust the company that makes the software I use for image processing. I use their software because in the pre-enshittification era of their business, I got used to using it. Switching has a cost.

Now the image processing software I use is a bit of a liability. They haven't done anything that is so bad that I'm motivated to ditch them, but it feels like they are one bad product decision away from me jumping ship.

I haven't looked at Dropbox from an investment point of view, so I can't say if their business is growing, declining, still sound, or just unsexy because it is undramatic. Perhaps there has been drama and I didn't notice. But from a user point of view it is really attractive to have storage services that are JUST storage.

I find real value in not having storage tied to Google, Microsoft, Adobe and whatnot. And if that makes Dropbox boring: good. They should be utterly dull.

The selection of fonts on this webpage makes it barely readable for many.

True title: Why Dropbox is a obvious PE Target

There are not many companies around with so much of voluntary important/intimate personal data as Dropbox has. PEs have gone for smaller note taking apps.

> ICloud went on to become a bigger business than Dropbox

And a worse app/service and that's saying something because Dropbox isn't even a shell of what it used to be. I'd agree with Jobs' observation of original Dropbox being a feature. But not any more.

As for "take it".. really?

> The product has largely remained the same

It seems to be coming from someone who hasn't been using Dropbox, at least not of late.

Also, I think their paying users used to be 2-3%. So yes PEs like this kind of chance of quick squeeze and squeeze and dry it and then leave it to die. I would reckon PEs would see a lot of one-time juice making opportunity here.

The premise of the article that "Dropbox was .. a feature, not a Product" is complete nonsense. Remember the infamous FTP guy's top comment during their launch? I have spent almost 10 years working on making that vision a reality [1], and there are entire industries built around some variation of it: digital asset management, managed file transfer, digital preservation software, electronic document management systems, ...

[1] https://github.com/mickael-kerjean/fdrive | https://github.com/mickael-kerjean/filestash

Well look at the broader industry, Icloud itself is probably throwing off more cash.

You should send these out in a newsletter

Maybe Bending Spoons could buy it?

They would need to borrow a lot of money to buy it, as article suggests $8bn valuation.

Bending raised $1bn in IPO and spent all of it on Airtable recently

Yeah they could use debt to finance it, a combintaion of 20% equity, 40% senior debt, and then the rest could be stock.

Dropbox is a name everyone knows, just like OneDrive and Google Drive. But fact is that Mega, an end-to-end encrypted file storage service just like Dropbox but where only you can see your files, is a MUCH better product.

I've always wondered why not everyone's using it. People are largely ignorant about their privacy and security it seems.

What the heck is a PE Target? Please, please, PLEASE define obscure terms.

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