Comment by AVTizzle | Hacker News Reader

Comment by AVTizzle | Hacker News Reader

Dropbox Inc. has closed on about $250 million in a funding round that values the online-storage provider at close to $10 billion, according to two people familiar with the deal.

A BlackRock Inc. BLK -0.33% investment fund is leading the deal, which also includes previous backers, said one of these people, who declined to provide more detail.

Dropbox wasn't immediately available to comment.

At $10 billion, Dropbox is one of the most highly valued companies backed by venture capitalists. The company's valuation has more than doubled since late 2011, when investors valued the San Francisco-based company at $4 billion. The company also got a higher price than expected when it approached investors as recently as November.

Dropbox raised $250 million in its 2011 financing from Goldman Sachs and venture-capital firms including Sequoia Capital, Index Ventures and Accel Partners.

The Wall Street Journal previously reported that Dropbox had expected sales of more than $200 million in 2013. The company made $116 million in sales in 2012, according to people familiar with the company's financials, more than doubling its $46 million in revenue in 2011. The year before, it nearly quadrupled sales from $12 million.

--David Benoit contributed to this article.

Dropbox really needs to accelerate its enterprise sales to justify this valuation long term. Given the tight integration that Box has with so many enterprise software solutions and Box's focus on enterprise, it'll be interesting to see how these two firms fair against each other on the public markets eventually (inevitable at this point given their valuations). Maybe just being a household name will do it for Dropbox even if Box can close more/better enterprise deals.

Maybe just being a household name will do it for Dropbox even if Box can close more/better enterprise deals.

Maybe, but "Box" evokes "Dropbox". I saw some ads for Free 50GB of storage on Box! and the very first thing I thought was, Is that slang for Dropbox?

So, with the way Box is immediately reminiscent of Dropbox, that may reduce Box's disadvantage in terms of being a household name. Even though it's a new company, it feels familiar.

You may be in for a surprise: Box was founded a few years before Dropbox (2005 I think) and is still bigger, at least in terms of number of employees. I actually had a Box account before Dropbox's. Box also seems to be more popular with enterprise.

Which makes me wonder why Box never sued to protect their trademark. It's probably too late for them now.

This appears to be their UK trademark record, http://www.ipo.gov.uk/tmcase/Results/4/EU005097555. [The USPTO trademark search is too blunt a tool for me to be bothered hunting that registration down at the moment.]

This http://www.ipo.gov.uk/tmcase/Results/1/UK00002215537 is a registration of the trademark "box" for the relevant computer and communication classes (inter alia 9, 38, 42) which was filed about 7 years before Box UK filed their application. TBH I can't see how the later one was granted RTM status except that this one appears to be an image mark.

"Box" is widely used as a trademark and other companies are using it in the same class. Box presumably can't make the case for infringement of their mark without also making the case that they're infringing someone else's - Boks™ belonging to a Norwegian company for example. It's pretty generic as a term for storage/term in computing.

That aside Dropbox would only be problematic if there was genuine confusion. For example Box UK had a series of offerings with trademarks using "box" as a suffix. If Dropbox were considered infringing, for example, Xbox would also be infringing as they operate within the same class - Box presumably haven't challenged the use of Xbox [which probably predates their use anyway].

I'm wondering if Dropbox could start using a slogan like "Add it to the box" or "Add it to your box"

Box is sufficiently generic that further commoditizing the word box as vernacular with respect to online storage would get people to use the word box (all lowercase) associated with Dropbox first.

_Drop_ it into the box?

Given the focus on enterprise the name differences are not that important. Sales are not done through clever advertising but via hardcore sales.

>> Dropbox really needs to accelerate its enterprise sales to justify this valuation long term.

My first reaction to this was "How can anything justify this valuation long-term ? It's just cloud storage FFS" Then I found they have revenue of 200m 2013 (through growth rate is slowing). Which actually surprised me - and then I realised that I am getting Dropbox links for people who would previously have mailed me a file.

It's slowly dawning on me that "cloud storage" is likely to be something as ubiquitous as smartphones - everyone will have a small slice. I still suspect 10bn is waaaay over the top, but they are the clear leader in what I revisionist style realise is going to be a big (if frustrating) industry.

Which is weird as I started at Demon Internet and we "gave away" 10MB of web space and stopped in the early naughties as no-one used it or cared :-)

> we "gave away" 10MB of web space and stopped in the early naughties as no-one used it or cared :-)

It's not about the storage, it's about the client (be it desktop or web).

10mB of space? Wow, that's insane for the time. I remember when my Yahoo mail inbox was 4mB.

yeah, I think that was why it was a big surprise to the organisation to learn most people did not care (it was obvious from usage rates but organisations don't learn what they don't measure-promote)

As a customer of Dropbox for Business, I can confidently say they have a long, difficult road ahead of them here. The way they've defined their concepts seems hostile to the very things businesses need in a product.

Even being a company that spends 50k a year gets you next to nothing wrt feature requests or support outside of what would be given to a free user, aside from speed of reply. If you want any level of control over data and sharing, you're sent over to "sookasa", a shambles of a business, or you can look at non-recommended solutions like boxcryptor (an incredible product that unfortunately carries it's own administrative overhead).

If anyone from Dropbox is reading this, the things that make my life the hardest are:

1) removing shared folders from a user's account. (Impossible unless your IT department controls every shared folder in your organization. Difficult & time consuming if they do)

2) Deleting a corporate account from all devices, removing folders. (Impossible)

3) Offering any sort of encryption (need to use 3rd party, unreliable)

4) Managing/reverting changes. Terribly ugly, difficult, and time consuming process. It's bafflingly inefficient, and in an organization of any size clueless or new hires are going to create these problems on a weekly basis.

5) Management and reporting APIs don't exist.

I work on a product that solves most of these issues you mentioned. Shoot me an email at marknutter at gmail dot com if you are interested in hearing more.

box.com?

Keep your eye out for upcoming updates to Dropbox for Business. Looks like upcoming features will cover most of your points: https://www.dropbox.com/business/two-dropboxes

We'll see. The only thing that actually looks new is "sharing audit log" and an audit log is a long way off from being able to effectively control sharing. Changing someone's password to log into their dropbox, delegate ownership of the folder to a shared account helpdesk controls, and then have helpdesk go through every shared folder to remove a terminated employee, then sending the original user a password reset, then requiring a helpdesk touch for every sharing change in the future isn't a valid business workflow. Furthermore, in the past Dropbox's audit logs have been paginated lists you click through online. Not the sort of thing you can automate. Here's hoping for a change.

Also, notice the phrasing: "With separate Dropboxes for personal and work, administrators can have the control necessary to secure company data, and you can still have your most important stuff at your fingertips." That sounds suspiciously like a sentence that says nothing at all, considering it's already easy to run two dropboxes, and all the problems I listed concern fully administered business accounts.

Remote wipe will be nice though.

I'm the desktop client lead for Syncplicity. We are an enterprise file synchronization solution. EMC bought us in 2012.

1) Not only do we let you remove shared folders from a user's account, I designed our remote wipe feature that can go and delete those files from users computers. (It's a best-effort approach.)

2) We also support remote wipe from devices as well.

3) I'm not sure what kind of encryption you're looking for. In general, encryption with cloud storage introduces support difficulties, and makes it hard to do web-based access. We allow you to host your files on your own servers, so that might provide enough security to address your concerns.

4) We do allow reverting a folder to a known date, but you need to contact support.

5) Unfortunately, our APIs aren't public. Our management tools are in use at many large organizations, though.

I won't be the first to ask but: Linux client, please.

Seconded.

Dropbox will keep me as a customer purely because my entire business is run on Linux (except for the Mac my business partner uses).

John here, from rsync.net.

We don't do any of the things you list - not even close - and we don't ever plan to.

We can, however, do this:

  pg_dump -U postgres db | ssh user@rsync.net "dd of=db_dump"

and this:

  ssh user@rsync.net s3cmd get s3://rsynctest/mscdex.exe

... it's probably not for you. Cheers!

Hi there, awakeasleep.

I think all your points are very solid. I would, however, disagree with you about Dropbox or any other cloud provider implementing their own, in-house, encryption.

They're the one with the data and having the key to open your data as well is, to me, a conflict of interest. I've share my thoughts on this a while back (http://vuongnguyen.com/personal-business-cloud-security.html).

Now, if you haven't had a chance to use nCrypted Cloud, give us a try: http://ncryptedcloud.com. We do client-side encryption and work on top of Dropbox and shortly other cloud providers. We're free for regular consumer. The enterprise clients we have a usually more interested in the integration, management and control mechanisms we have in place.

Thanks,

-V.

PS: Please feel free to contact me if I could be of any help. My email is in profile.

I'm pretty amused that most of the responses to this comment is "I built a service competing with dropbox that does what you want!".

It's interesting to see the changes in the market since when Dropbox pioneered it around 2007 or so.

Exactly. I hope people recognize our response to the "my flybynightcloudstoragefirmbuiltonaws does just what you want" lineup was meant to be funny...

The problem is when it gets upvoted above the other responses it just becomes confusing.

What you are asking for is the "management" of distributed unencrypted data - it's probably impossible, but likely a major rethink in how we distribute data.

I think bittorent sync might be a serious threat in this space.

BitTorrent Sync on mobile seems pretty amazing actually, even just for point-to-pointing data between devices.

I wouldn't want to use it for all my files, but I'm setting it up for syncing photos and content to my PCs (i.e. things which are simple and don't get multiple offline edits and the like).

Unless they (knowingly or unknowingly) are going to follow Apple's iPhone path where "private", home users started pushing their employers IT departments to switch to iPhone from BB. At the beginning, iPhone was not considered "secure" for financial and medical applications, but as iPhone market share grew, Apple started investing in "enterprise" features (Outlook integration, etc) that it became feasible to do the swtich. Every few months we get an email from our employers telling us that we cannot install Dropbox on our office computers. Eventually, some higher-up who's using Dropbox at home will make enough noise that s/he cannot sync his work docs from home that it will become "ok" to do it (and the org will switch to it)

I'm not convinced they are strictly going to keep the file syncing business any more than Amazon has kept to only selling books. Drew has bigger things in mind besides just making the existing product more enterprise-friendly. He used to write poker bots during college after all, and wasn't Dropbox business number 2?

Here's a link to story without paywall: http://online.wsj.com/news/article_email/SB10001424052702303...

50X sales. That makes HP's purchase of Autonomy look cheap.

Maybe not the best comparison, since HP later accused Autonomy of accounting fraud related to that acquisition.

Doesn't that imply revenue growth is slowing?

$46m -> $116m (+152%) -> $200m (+72%)

Then again "more than $200m" is probably conservative.

"Doesn't that imply revenue growth is slowing" do you really expect a constant growth of 152%? of course the percentual growth will slow down, that by itself says nothing.

Or speeding up, depending on how you look at it

$46m -> $116m (+$70m) -> $200m (+$84m)

I don't really know how these numbers are generated, so I really have no idea what I'm talking about - but just back-of-the-napkin:

100*($200 million / $10 Billion) = 2%

So assuming no growth, the investors are back getting 2% a year? So basically matching inflation...

So does this indicate that the market is split on whether they'll continue to grow or not?

No, the investors are buying 2% of the equity, and by paying $200 million they indicate that they estimate that all of the equity together (the whole company) is worth $10 Billion.

Return on investment would mean that the investors expect the valuation to rise, or that they derive some other kind of profit from owning the shares (sometimes patents, knowledge, influence etc).

I think the commenter was referring to the $200 million revenue (not even profit) over the $10B price.

EDIT: "benmanns" pointed out the point of confusion. thanks!

I don't think we're disagreeing.

Sure they bought 2% not 100% of the company, but that's not really relevant. The $200M/yr they currently make is I assume profit - which is either payed out as dividends or invested back into the company. It's not really important which ones b/c the two are in the grand scheme of things equivalent. An investment increasing the worth of the company and therefore the worth of their share of it.

I feel like in the end it still represents an expectation of 2% growth...

No. The expectation of growth should be roughly similar to growth of similar tech companies. Typical return on equity of an S&P 500 company is about 15-16% per year, so investors should expect probably at least that much and more like twice that

Well why doesn't that square up with the valuation then? Did Dropbox lowball themselves?

No. You don't pay 50x revenue for 2% growth. That is a huge valuation and it means they are expecting more like 50-100% growth for a few more years.

So assuming no growth, the investors are back getting 2% a year? So basically matching inflation...

No, because the $200M is revenue. In the long term scenario it's profits which get paid out to shareholders.

On a long-term broad (across industries) basis, stock market investors tend to expect a 10% annual ROI. This is different for VC investors, but only slightly by the time they get to a $10B valuation.

The fact that the $10B valuation is 50x revenue implies an extremely high expectation of future growth. They'll look at future earnings potential (profit, not revenue) and try to figure out the probability for Dropbox eventually earning 500m/year, 1b/year, 5b/year etc and discount it according to how long they think it will take them to get there.

Another way to look at it, which is one step removed from valuing on future earnings, is to guess what other people will value it for at IPO. If they think Dropbox has a 50% chance of IPOing at $50B in 2 years, they've made a pretty good bet at the current $10B valuation.

Assuming no growth for an investment in Dropbox is like assuming no air resistance when designing a jumbo jet.

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