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Box S-1 Filing

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207 pointsaustenallred97 comments

On the IPO:

Nice gross profit margin growth from 67% to 79%, but now we know where vc money went: sales & marketing.

Profitability seems very very very far away, and in my opinion Box is not a buy for the average Joe. It seems to me that revenues are extremely dependent on marketing, as per "50% of the net proceeds in sales and marketing activities". Now that we can hear cloud storage war drums from afar I don't see this expense item going down any time soon. This IPO isn't going to be cheap, at whatever valuation CS, MS and JP come up with.

On the VC/Tech industry's double standards:

Funny how an investors ask and drill down startups on their customer acquisition costs, customer lifetime value, user & customer numbers, etc. and none of that information is made available on the S-1, the document that should really be the "bible" for any investor. I guess the public market is going to get the short end of the stick again.

Sales & marketing for enterprise software is still the largest expense item for most enterprise software companies.

Even though more software is self-serve and provides zero-day value, the biggest enterprise customers still need the Sales & Marketing machine, from front-loading marketing which generate leads for sales people/sales engineers to customer success, etc.

For the longest time, the guys driving the best cars coming out of Oracle's parking lot were the sales people. That's changing, but not as quickly as we expect.

As a point of comparison:

Box R&D: 37% of revenue S&M: 138% of revenue

Salesforce (based on last SEC filing) R&D: 15% of revenue S&M: 53% of revenue

Oracle (based on last SEC filing) R&D: 14% of revenue S&M: 21% of revenue

Interesting exception is Workday (based on last SEC filing) R&D: 39% of revenue S&M: 42% of revenue

This is still a winner-take-all business because a typical enterprise customer is still 2-3 years at the minimum (depends on the product; ERP tends to be much stickier). Box is encouraged to spend expensive investor capital to focus on growth (and in the process, limit their tax exposure).

I think it'll be interesting as Dropbox moves more towards the enterprise how much of the typical "enterprise sales" playbook would they adopt?

Former enterprise guy here. You're 100% right.

Curious, why doesn't anyone here mention SAP when the topic of enterprise software comes up? SAP is the enterprise software company (bigger than Oracle in business software). That being said:[0]

- SAP has 15,000 s&m employees (second only to it's 17,000 R&D employees) - Of it's €11B in gross profit, it spends €4B on s&m, or 25% of it's revenue (€16B). It spends roughly the same €4b on software development (Cost of software + R&d)

Here's the funny thing. The argument for why cloud is taking over is that the Cost of Sales is supposed to go down. Ya...... (my thoughts on this: http://www.techdisruptive.com/2012/11/28/how-are-we-going-to...)

[0]http://global.sap.com/corporate-en/investors/pdf/sap-2013-an...

It's worth pointing out that they count the datacenter and support costs for their free accounts under Sales and Marketing.

I'd love to see the accounting on that (see it; not do it). It makes sense since they're not customers and free accounts are part of their lead-gen strategy. Good pick-up.

Yeah, the gross margins are telling just part of the story - the sales & marketing scaling with revenue looks scary. I don't think a company with a p&l looking like that would necessarily want to go public. I see it that they've either 1) exhausted venture money, aren't an acquisition target, and see the public offering as funding of last resort because they're nowhere close to being profitable or 2) they see this as very close to a market top and are rushing to take the company public before the music stops. I don't like either very much.

edit: I should make it clear, I'm just repeating your point for emphasis in my first sentence. I'm in agreement with your whole post.

"I see it that they've either 1) exhausted venture money, aren't an acquisition target, and see the public offering as funding of last resort because they're nowhere close to being profitable or 2) they see this as very close to a market top and are rushing to take the company public before the music stops. I don't like either very much."

They (Box) just raised ($100MM, Dec/13) a month or two before this was filed. The market, however, is very ripe[1] and the IPO marketers are likely advising them to take it public. The Last round is basically a mezz round ($2B valuation) and if they flip this thing for 1.5x to 2.0x in 6 months those guys are going to be happy. The cash burn on the P&L is $14/month and $350MM would last 24 months, enough to inflect if its a real biz. Closer to inflection, a Secondary raise will generate liquidity for the remaining insiders. Given the uncertainty with the FED's propping up of QE, its not a bad idea if you are the #N player to not wait (risk of backwash/turbulence if the others take all investor appetite), given that its a two-stage exit for most IPOs these days.

[1] http://www.cnbc.com/id/101425809

I agree on the S&M expenses. What's scarier is that this is a very competitive fairly undifferentiated market, which means you can't live without salespeople. Which means they're going to hit the wall at some point, because as it stands right now, they are spending about $1.40 in sales ALONE to bring in $1 of revenue. Now that's scary.

Yeah, that 1.40 to 1.00 ratio is eerily similar to the points dhh made on this interview about another infamous tech ipo :http://www.youtube.com/watch?v=jzERXJgi5vQ

#1 sounds like Ben Horowitz's last ditch IPO of Loudcloud (except market conditions today are much more favorable). The story goes that Loudcloud was unprofitable, headed towards bankruptcy, & couldn't raise VC capital, so they went public. http://www.businessweek.com/stories/2001-04-15/the-last-days...

"losing $107 million on only $6 million in revenues"

Is this what the 2000 bubble was?

"When Loudcloud first filed to go public 164 days earlier, it was valued at $1.15 billion, in spite of losing $107 million on only $6 million in revenues in the three quarters ended Oct. 31."

> Full context is useful.

== $1B+ val vs. $10MM LTM rev = 100x rev multiple.

I'd be much more scared if they were NOT ploughing money back into the business in order to grow. IPOs are fundraising events first and foremost. Virtually all companies that IPO are operating at a loss (ie, nearly synonymous with "growth company"). The sooner HNers recognize this, the sooner they will get involved with multi-billion companies.

Growth companies come at a discount (execution risk, growth is not given, growth industries = plenty of competitors), I doubt Box's valuation will support its financials and road ahead. One comment on "virtually all companies that IPO are operating at a loss", unfortunately this is the opposite case, companies that IPO tend to be profitable.

To be fair, most companies going public lately have been unprofitable. Yes, not true historically; but the desire for savings yield/strategy funds that will buy no matter what/success of flipping ipos has lowered the bar. And the P/S metrics .. well, Box would be stupid _not_ to ipo right now. I expect they'll play the same trick as others and sell a small percentage of the fully diluted share count to create a sellers market for the shares, and target a 50-100 multiple on revenue. When the market gets used to their price they can file a secondary.

edit: I should clarify again based on sibling/nephew comments... I think it's too far off topic to go into this in depth, but clearly running at a loss is expected and appropriate for companies at a certain stage of their growth profile. Even big companies (like Amazon, like someone noted) can do this if they prefer to invest in pursuing large enough growth opportunities out of cash flow vs selling debt or shares. Regardless, the revenue growth has to show up at some point, and spending in sales has to show ROI.

of course, i'm 100% with you. if i were box i'd be wanting to ipo on a hot market to avoid dilution/raise as much cash as possible. this is a good move for box. all i'm saying is that this isn't (imho) a good investment for ipo investors.

A company can be spending more than they make, and still be profitable (a la Amazon) - hence the "plowing money back into the business" comment above. A company in its growth stage believes there is significant profits to be made by spending on customer acquisition, and generally is making an informed decision not to pad the coffers and horde money (a la Apple).

>A company can be spending more than they make, and still be profitable

What?

Anyway, Amazon has razor-thin margins on some products but they're not loss making.

Discretionary spending is different than fixed costs and contractual liabilities. I am saying that you should think of costumer acquisition as an upfront expense that leads to future profits - if the business is growing, and has reasonable margins.

For example, Amazon has 'razor thin' margins and is operating at a slight loss. Does anyone really argue that they are not 'Profitable'?

this

Loss per share was $14.68 in 2013 and grew slightly to $14.89 in 2014. It's ok to lose money at IPO, but those losses need to be narrowing. Otherwise, you're plowing money back into a hole.

I see it that they've either 1) exhausted venture money, aren't an acquisition target, and see the public offering as funding of last resort because they're nowhere close to being profitable

That's what an IPO was originally supposed to be for, right? Raising capitol, rather than cashing out?

>That's what an IPO was originally supposed to be for, right? Raising capitol, rather than cashing out?

Perhaps, in a time prior to companies "routinely" raising massive sums (like $410MM) pre-IPO.

Profitability seems very very very far away

Just to add, right on their S1 risk factors:

  We have incurred significant losses in each period since our inception in 2005.
  We incurred net losses of $50.3 million in our fiscal year ended December 31, 2011,
  $112.6 million in our fiscal year ended January 31, 2013, and
  $168.6 million in our fiscal year ended January 31, 2014. 
  As of January 31, 2014, we had an accumulated deficit of $361.2 million

Granted the risk section is usually the absolutely worst case scenario, but it's interesting that they're losing more money at a faster pace each year.

At the same time, while they spent $1.7 of S&M expenses to generate $1 in revenue in 2012-13, they decreased this to just $1.37 in 2014, so that's an improvement given that S&M is 2/3rds of their operating expenses.

If you just multiply by -1 their earnings acceleration is fantastic!

Hmm... does anyone know how many employees they had in each year?

> we grew from 369 employees as of January 31, 2012 to 972 employees as of January 31, 2014

Enterprise salespeople are very expensive. Probably because for most of their existence they have been selling very expensive products. Not sure where this all shakes out. Does the enterprise salesperson of the future get paid less b/c he/she is selling cheaper products, or do we just employ less enterprise salespeople? i.e. only use them for the biggest contracts and have the rest of the leads handled by sales engineers/customer service types who work off of funnel scripts?

I don't disagree with "salespeople are very expensive", but they are clearly not bringing in enough revenues to make the business profitable. Is it the sales people fault for not bringing in enough revenues or the company's for spending too much on sales and marketing? Time will tell, but a $170m loss is no joke.

"they are clearly not bringing in enough revenues to make the business profitable"

I didn't read anything thoroughly, but there are times when more revenue does not take you closer to profitability. Wasn't that the big downfall of pets.com? The more they sold, the faster they lost money. Could be that Box has sacrificed revenue to conserve some cash (i.e. if their costs per customer were higher than they charge).

Enterprise salespeople may be expensive - but they are usually making a significant amount of their total compensation from commissions - which ideally means they are being paid some % of new $$$'s they are bringing in.

So, yes the pricing model/ value proposition of a company's products will effect how many & what type of salespeople they employ, but salespeople should never be a significant fixed cost without a corresponding revenue stream (greater than their costs).

The answer is inside sales. Sharefile, one of the leaders in this space for enterprise, has a well-oiled inside sales machine(50+ reps cold calling all day long). When Citrix failed to acquire Box, they acquired Sharefile.

For the past few years we've had it had beaten into us that a start-up is an organization searching for a scalable (and implicitly, profitable) business model.

Some businesses are always going to need a ton of capital up front: space travel, medical, semiconductors, etc. Also, social networks for obvious reasons, twitter doesn't counter this argument. There isn't a huge amount of utility gained by you when the company your friend works for is using Box.

I see Box need would need some capital, but I can't remotely put it in the capital intensive category.

Which leaves me thinking that Box simply hasn't yet found a scalable and profitable business model, it's a large company to still be in the search stage.

I get the argument that Enterprise sales is a long process and there's a race against the likes of Dropbox.

Let's say the sales cycle is 2 years. If I have 500 sales people in year 4 and 800 in year 6, I expect those original 500 to be earning twice their wages, at a minimum, at year 6. If they're not doing that after 2 years, why do I keep recruiting at such a rate? I also expect some proportional contribution from sales after 3-4 months, up to 2 years.

Let's call that roughly 600 people-worth of sales, that's a minimum of 1,200 salaries of income. Looking at their numbers they'd have to have gone from (normalise this to their actual numbers) 500 to 1,700 sales people in 2 years (or 250 to 850, etc). In that actually the case?

Note that sales and marketing accounts for 66.6% (yes really) of total operating expenses and "Sales and marketing expense [includes] datacenter and customer support costs related to providing our cloud-based services to our free users." (p55).

Their Net Loss, as a % of revenues, is decreasing year-on-year:

13 months to 31 January 2012: -227%

12 months to 31 January 2013: -191%

12 months to 31 January 2014: -135%

You can project that curve forward and predict that they'll be cash-flow positive by the end of 2015.

I think that, if you were to ask Levie off the record (i.e. with the restrictions imposed by the SEC), he'd say that they've found a repeatable and scalable business model and that the company could become profitable in the not-too-distant future.

They could slow their expenses' growth rate further by ceasing to offer free storage to new users. If they really started running out of money, they could cut expenses significantly (and increase revenue a bit) by saying to existing users "No more free storage! Pay us $x/GB from next month or you'd better download your files because we'll delete 'em!"

I doubt they'll do that, though. I expect they'll simply keep selling and marketing and growing bigger and bigger, in the same way that Amazon studiously avoid profitability in order to keep growing and expanding.

Interesting, by the way, that Andreessen Horowitz don't show up in the list of >5% shareholders.

This might be dense, but why would you measure net loss as a % of revenues? That calculation uses revenues twice, each $ of revenue reduces loss by a $. Surely, it should be expenses as a % of revenue?

Edit : Sorry, I'm not asking what it is, I'm wondering why a trend in that particular metric points towards profitability, one day.

It was easier. The end result (in terms of projecting forward) is the same however you do it.

PS: It's not dense, by the way - fair question.

> Edit : Sorry, I'm not asking what it is, I'm wondering why a trend in that particular metric points towards profitability, one day.

For the purposes of a "finger in the air" projection of when they'll hit profitability, it doesn't matter whether you use "Net Loss as a % of Revenues" or "Expenses as a % of Revenues" because, as you pointed out, Net Loss = [Expenses - Revenues]. The numbers are different (by 100 percentage points) but the general shape of the curve is the same. If you extrapolate the curve out, you get to break-even in 2015. It's completely unscientific. I'm basically pulling numbers out of my ass. I have an MBA, you see. ;-)

> Which leaves me thinking that Box simply hasn't yet found a scalable and profitable business model, it's a large company to still be in the search stage.

Quite the opposite. They do have a scalable and profitable business today.

The biggest component of their operating cost is Sales & Marketing. The Sales organization was the main cause for the costs increase in 2014, but it won't continue to grow linearly with revenue for much longer. Maybe a couple of years more, as they ramp up sales teams outside the US, and then it'll flatten out.

On the other hand, the cost of Marketing is not really marketing. It's infrastructure + customer support for the free users. For now it's an investment, and they are hoping to monetize by converting into paying customers, or some indirect way in the future (e.g., advertising).

Let's do a quick thought experiment. Turn it off its free users, and focus only on the 34K paying companies. Plus, to keep existing paying customers you don't need an army of 600+ salesmen, so you could get rid of them too. What is left is a company that is extremely profitable and cashflow positive, with a nice and sustainable business.

Naturally pre-IPO companies are better-off by focusing on exponential growth, instead of profitability. The enterprise cloud storage market is a gold rush. Dropbox, Box, Amazon, Google, Microsoft and EMC all fighting for the same corporate dollars, so there's no time to waste.

The next couple of years are pretty clear for Box and Dropbox. I think the interesting challenge will be in 2-3 years, with the upcoming commoditization of this market. When everyone has a Storage-as-a-Service product, and their apps and web interfaces became good enough, how to you convince IT folks to justify tens of thousands of dollars per year?

Okay, let's do that thought experiment. Set Sales and marketing expense (Currently $171 million) to zero. So, they would be making $2.3 million a year in profit.

But you can't have your cake and eat it too. Without sales/marketing, you can't expect any growth. And expectation of future exponential growth is the trigger for these very high tech company valuations. Without that growth, I would value it like a blue chip company.

The average P/E ratio of the S&P 500 is about 20 times earnings. That would put the valuation of the company at about $50 million - a far cry from what they want to value it at.

Or, if you do it by sales, the average P/S ratio of the S&P 500 is about 1.7 times sales. Which puts their valuation at about $210 million - still a far cry from what they want to value it at.

So, while they have a scalable and profitable business today, they don't have one which comes anywhere close to justifying their valuation outside the silicon valley bubble. Ergo, they better still be in the search stage.

Average S&P 500 P/E is hardly a good proxy to evaluate a nascent, fast-growing, enterprise technology company. The "E" part of the ratio is still too small to matter.

Salesforce.com hit 6100x P/E in 2011. Facebook had 3500x P/E in 2013 (now at 100+). LinkedIn was over 950x until recently (now 770).

Bottom line: as any other IPO, the valuation is not a reflection of how much the company is worth today, but what the company will be worth in the future. That's why growth is so important for them, and building a successful sales team is the single most important thing for Box now.

They have the model, and it's proven scalable. Now they have to just execute it. Before everyone else.

They don't have a scalable business model when measured annually, that is clear. But enterprise customer LTV accrues over years, not months. It might take $5 to generate $1 of income this year, but then only take $0.25 to maintain that $1 of income for the next 10 years.

I don't know for sure, but I'd say there are probably enough smart people who understand the dynamics of enterprise software involved with Box for this to make sense.

Not having a 'scalable' business model (or having to prove that the model is indeed scalable) hasn't deterred other companies from going public and having an awesome final exist (from Investors' perspective). Example: Successfactors.

Here is the excerpt of their S-1 from IPO and their last 10-K as an independent company: http://mark.ly/KgA6PO/

The point being that as long as Box's bankers can convince the investment managers that there is an eventual buyer, box will have a decently oversubscribed order book at IPO. Of-course roadshow can't and won't mention this.

Interesting to note that Aaron Levie owns just 4.1% of the company at this point: http://www.sec.gov/Archives/edgar/data/1372612/0001193125141...

That's actually a very interesting point. I know Mark Zuckerberg owned a really big chunk (~30%) of FB when they IPO'd. Anyone with insight know if the norm is closer to Zuckerberg or Levie?

Box comes from a very different situation from the astronomic growth and beast that was pre-IPO FB.

Realize they've raised at least $414M that has been reported.

At many of those rounds it was likely possible for founders/ early employees to cash out options. FB/ Mark had enormous leverage because it was an unstoppable growth machine. Box is a great company, but still has to battle to grow sales into revenue/ profits, as is evidenced by the S-1.

(http://www.crunchbase.com/company/box)

It's closer to Levie. It's very rare for founders to be able to maintain strong control of their company through multiple funding rounds.

It's not too common, but larger amounts aren't unprecedented: two big ones that had even larger ownership were Microsoft (Gates still held 49% of Microsoft at the time of IPO) and Amazon (Bezos & family held 52%, with Bezos himself holding 42%). The Google founders also owned a combined 32% (16% each). Those companies were rather more successful than Box, though.

I think that's generally the rule. The more successful the startup, the larger the stake the founder maintains due to being in a better position in regards to VC rounds.

Had Microsoft raised much funding before the IPO?

The only VC with an investment in Microsoft was David Marquardt's Technology Venture Investors. At the IPO, TVI owned 6.1% of Microsoft.

The remaining 93.9% belonged to the founders, the Board, the employees, and friends and family. Everyone listed on the S-1, with one exception, took a bit off the top but held on to most of their shares.

The one exception was Bill Gates's sister's trust fund, which owned 20,000 shares -- 0.1% of the company. She could've been a hundred-millionaire if she'd held on to it, but her trustee sold it for $400,000 and moved on.

Microsoft had so much cash lying around they were using t-bills (or some other kind of bond) as bookmarks (don't remember which Gates bio I read that in -- Hard Drive maybe). When Microsoft IPOed it was basically owned by its founders. It never wanted for cash.

Zuck is a huge outlier. FB had a $15b valuation by 2009. People were throwing money at him, so he took very little dilution. Also, his control provisions are way more favorable.

Yes, I remember that though his ownership might be ~30%, his voting counts for >50%.

How much does that leave for the avg. employee, many who probably took pay cuts for the promise that their equity would be worth millions?

One of the reasons Levie has so little equity is because of the equity that was allocated to the employees' options pool. I expect the average employee will be quite happy.

What would be a normal percentage for a founder to keep in their company?

It varies pretty widely, but Levie's number is on the low side historically for tech companies, particularly for such a relatively young company.

Gates had 45% of Microsoft the day after their IPO. Larry Ellison still owns ~20% of Oracle. Google's founders still have ~10%. David Filo even still has around 9% of Yahoo (Yang & Filo had closer to 20% at the time of the IPO if I recall). Bezos still has around 18% of Amazon. When Dell IPO'd, Michael Dell still owned a huge percentage of the company at IPO, over 40% if I recall (he sold most of it high, which is why before they took Dell private, he was nearly worth more than the company).

If you keep bleeding money and needing more cash influx to extend the runway - then the achieved (and appropriate) percentage rapidly goes to zero.

I've used Box extensively in the Enterprise and never really "got" it - it was cumbersome and often confusing. It just seems like another layer on top of what could be used as a first-party integration in something like Onedrive or Google Drive.

Perhaps where some of the "big" wins are its integration with other enterprise products like Salesforce, but we just didn't understand it because it felt like another layer on top of our office suite that wasn't necessary.

If only there was a storage platform / offsite backup platform that just gave you a plain old unix filesystem to do whatever you wanted with.

If only...

I spent 6 yrs bootstrapping a sales & services startup to $12M rev / 7-fig net. I watched every $ and plowed My Own Profit back into growth. How easy it must be to get huge VC checks & spend more on sales than company top-line! And all we've heard in the ecosystem is how brilliant Levie is.....

Aaron is the CEO and his Salary is only about $155K, seems too less as compared to other executives. I know that their majority of the compensation comes in the form of Stock but can anyone explain why and how it works for executives?

It's typically discouraged for startup founders to pay themselves very high salaries. Box isn't a startup any more, but compensation of $189k (not $155k, notice the cash bonus) doesn't seem bad for a young company losing over $100M per year. As others have said, he may have cashed out options along the way as well.

Keep in mind, he was paid ~$2M in stock options in 2013, and owns 4% of shares overall. The IPO will make the other executives/shareholders very wealthy. Box likely had this IPO in its sights for a while, so that probably made it easier to take home "just" $189k.

As a startup CEO your salary is there to provide for your "essentials," such as housing, food, etc. It is not designed as an income that you can get rich off of. That ways your personal success is tied to the success of the company, which incentivizes you to have the investors best interests in mind.

Either that's some damn good food and shelter, or there's a heck of a lot of "etc.".

The CFO is only 28 years old. As a twenty-something finance guy I'm very jealous of the experience he's getting.

To his credit, it looks like he was there from the beginning as a co-founder. Being a sub 30 CFO seems to be the exception rather than the norm. I, too, am jealous though.

You're jealous of just his experience, I'm more jealous of his compensation :P

This is all coming from a salesman at a different SaaS company. Answering some questions about how companies may use Box and the key 2 differences (in my mind) between Box and a competitor like Dropbox:

Someone below said that their company of 50 doesn't see the value add that Box would bring over Google Drive. In response, Box definitely isn't for all businesses. They try to tap into companies that use other cloud softwares like Salesforce, Workday and NetSuite. Box offers these integrations that make it simpler for businesses running these tools to access data. The goal here is increasing efficiency and decreasing time spent transferring content from one place to the next. They also try to tap into industries with complex and stringent security needs like healthcare. Point here being that Box has certification and is compliant to securely store certain types of private information.

Finally 2 key differences: 1. The rich integrations I mentioned above. Dropbox really doesn't have that and by many industry reports is not considered a real competitor of Box (yet) due to improper infrastructure to support common needs of a business looking to go cloud. 2. http://www.citeworld.com/cloud/23090/box-aaron-levie-sxsw It seems Box's goal isn't just to go cloud; it's turning into a platform for developers to build off of. This seems like a highly profitable pivot to me.

I thought it was really interesting that only ~15% of businesses are paying them money.

  "34k+ paying institutions"/"225k+ great organisations"

My company is up to about 50 people now with a good amount of people in each department (sales, marketing, hr, engineering, etc) and we've never come across a dire need to spend money on something like box nor has anyone internally expressed the desire for us to look into it. Google drive has fit our needs for sharing documents, powerpoints, excel, etc.

Can someone explain the actual value proposition for box? Just google drive with better features?

Well maybe your company is lean and smartly frugal.

Many Enterprisey customers aren't, many are as un-lean and un-frugal as they can "get away with".

So if there's one tiny little thing a user thinks they need they'll proclaim to their team "Google doesn't provide this little trinket and for us it's really mission-critical or it's all for naught" -- with no one budget-owner challenging that with a good ol' lean&frugal "do we really need it, as in need or perish?". Instead it'll be "OK look for alternatives and put it on expenses".

The bigger they are compared to your 50-people shop, the more "inefficiencies" they can afford. If they're on the S&P500, they're auto-propped-up. If they're directly or indirectly close to big-gov or mil or finance contracts, they can simply overcharge "the biggest spending debtor entity in human history" who won't bat an eye. If they are a big "NGO" or UN or EU institution, they'll ask for a nominal discount and pretend to be tight-budgeted but are essentially same-same.

That's not to say that box is useless, overpriced or that such customers hand out unlimited money freely to any and all. But they may well be slightly less "lean & frugal" than your shop, in fact most of them are guaranteed to be, and if their "urgent necessary needs" (even if they change their minds about their importance half a year later) are met, they pay up.

Reading the Risk Factors was a bit depressing.

http://www.sec.gov/Archives/edgar/data/1372612/0001193125141...

They legally are required to list every imaginable risk. The actual chances of some of these happening are not that likely.

It's not exactly that they're legally required to list every imaginable risk -- it's that listing a risk gives their future trial counsel a useful sound bite.

Suppose that the company were to miss earnings targets, and the stock price dropped as a result. Just as sure as shootin', there will be plaintiffs' lawyers claiming that the company wrongfully failed to disclose Risk X or Risk Y or Risk Z. Proactively disclosing every risk you can imagine is thought to be one way of combatting that plaintiffs' bar strategy.

Personal anecdote: I used to be the general counsel of a public software company. I had to draft the risk-factors section of our Form 10-K annual report, which likewise is filed with the SEC. The first time I did it, I read a lot of other software companies' S-1s and 10-Ks and harvested as many risk-factor ideas as I could.

It struck me as peculiar to proceed as if investors were utterly ignorant of basic facts of business life. But many jurors, and even some judges, might fall into that category. You can pretty much count on having a plaintiff's lawyer, professing to be outraged, accusing your company of having covered up Risk X. In responding to such an accusation, it's a whole lot easier (A) to be able simply to point to your public disclosure of Risk X, and possibly get the case dismissed early, without an extremely-expensive and risky trial, than it is (B) to have to try to convince the judge or jury that, well, no, you didn't disclose Risk X, but it doesn't matter because everyone supposedly knew about Risk X already. Option B can be a real roll of the dice; far better to go with Option A.

I wish the product wasn't so intolerable to use. It's a ten-year-old approach to syncing two folders with a minimal amount of collision detection.

Why does everything have to live in their folder? Why do I have to use my boss's crappy organization structure? Why is everything (sharing, permissions, history, changes) done through their website instead of on my local machine?

It's amazing to me they've spent as much time and energy on marketing as they have and haven't spent time getting a product that's usable in an enterprise in a serious way. It just becomes a bin that marketing throws a bunch of documents into and no one else in the company uses.

I think I speak for many that we like Aaron but don't know if Box can become that iconic enterprise software company that Aaron or others in the company would like us to believe.

- It had a net loss of $168 million over that period, compared to a loss of $112 million the year before. - Revenue for the year ended January 31, 2014 was $124 million, which is up 111%. - Sales and marketing expenses were $171 million. Note that this is higher than its revenue. - Box has $109 million in cash on hand, and it just raised $100 million in December.

Like most initial S-1s, there's a lot of information left out (the number of shares being offered, the price, etc). You can get alerts on the updated filing at http://www.wellreadinvestor.com/companies/105975

</shameless-self-promotion>

Anyone care to speculate on when the IPO will happen? I know from the JOBS act that the S-1 must be made public no less than 21 days before the roadshow. Beyond that, the roadshow itself would likely last at least a week. That puts us at end of April at the earliest?

25M registered users but I wonder how many of those are active? Box has been quite active with their promotions of free storage space, but the actual limitations on the service made this free space not very useful.

I loved having 50GB for free, but couldn't stomach using the product. Their absurd process for selecting a custom location for the Box folder, from their own website, included uninstalling the software and doing some registry magic by hand. With that kind of attention to detail, I couldn't have any trust in their engineering or product teams.

The idea that actual enterprises would entrust their data or operations with a company I wouldn't use for casual syncing of unimportant data is something I'm still trying to stomach.

Box is just way too slow at syncing. From a product perspective they are terrible compared to Dropbox as many of us know.

I'm not a fan of either, Google Drive is enough for me.

To those who read this cover to cover: Bravo.

Deleted comment

Nope. She doesn't own anything. You are reading the wrong line, the 25.5% is DFJ.

She's on the Board...but doesn't own any shares to speak of. Line tracking issue.

Looks like 1999 again.

We have incurred significant losses in each period since our inception in 2005. We incurred net losses of $50.3 million in our fiscal year ended December 31, 2011, $112.6 million in our fiscal year ended January 31, 2013, and $168.6 million in our fiscal year ended January 31, 2014. As of January 31, 2014, we had an accumulated deficit of $361.2 million. These losses and accumulated deficit reflect the substantial investments we made to acquire new customers and develop our services. We intend to continue scaling our business to increase our number of users and paying organizations and to meet the increasingly complex needs of our customers. We have invested, and expect to continue to invest, in our sales and marketing organizations to sell our services around the world and in our development organization to deliver additional features and capabilities of our cloud services to address our customers’ evolving needs. We also expect to continue to make significant investments in our datacenter infrastructure and in our professional service organization as we focus on customer success. As a result of our continuing investments to scale our business in each of these areas, we do not expect to be profitable for the foreseeable future. Furthermore, to the extent we are successful in increasing our customer base, we will also incur increased losses due to upfront costs associated with acquiring new customers, particularly as a result of the limited free trial version of our service and the nature of subscription revenue, which is generally recognized ratably over the term of the subscription period, which is typically one year, although we also offer our services for terms ranging between one month to three years or more. We cannot assure you that we will achieve profitability in the future or that, if we do become profitable, we will sustain profitability.

Probably a fake account, but apparently Mark Cuban was an early investor but had his investment returned over a disagreement on strategy.

story>http://pando.com/2014/01/31/box-is-the-unicorn-that-mark-cub...

It's a pretty silly story. To keep even 10% ownership of Box through their massive dilution would have been extremely expensive. Cuban owned a small position in it. Very understandable how that would not have been worth it for a guy like Cuban (who has demonstrated he's content with a couple billion, and never puts even a small % of his fortunate at risk, having stated over the years that his biggest fear is losing it all).

"DFJ got in early, contributing the whole $1.5 million Series A round in 2006, and participated in every round after to build its 25.5% position. The Wall Street Journal says the latest $100 million round was at a $2 billion valuation, which implies Box will likely be valued higher than that at IPO."

Cuban invested $350K in the seed, so it was just his call.

That was understood when I commented.

Not sure what your point is.

"Cuban owned a small position in it"

No, not if he invested $350k in the seed round (in 2005).

Take a look at the capital raises.#

_________________

# "DFJ got in early, contributing the whole $1.5 million Series A round in 2006"

So where is the inevitable comparison to DropBox?

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