Shhh! DropBox 'quietly files' for IPO

DropBox has reportedly filed for an IPO, giving it fresh capital to fund a significant expansion.

Bloomberg has reported that DropBox has lodged confidential papers registering for a public share offering. "Confidential offerings" were introduced in 2012 in the JOBS Act, allowing companies to perform a fund-raising roadshow without lodging a formal public registration with the SEC. Public statements must include accurate and extensive financial statements and identify potential risks. Hey, who needs those?

DropBox was valued at $10bn in a 2014 fundraising round - but that figure is meaningless today. That's because of the legacy of arch-rival Box's IPO in 2015. Both were consumer offerings with big enterprise ambitions.

Box had beaten DropBox to going public, but it was a mixed blessing. Box was obliged to reveal some volatile and curious numbers. In one quarter, Q3 of 2015, sales and marketing opex was 91 per cent of revenue. The decision to pre-sell stock at a fixed price didn't look so smart after first day gains: the company was estimated to have paid 76 cents to raise each new dollar of capital, leaving over $100m on the table. Box still loses money today.

DropBox's valuation suffered, and then was questioned even more closely after its decision to move from Amazon's cloud services. Previously, Dropbox had hosted the raw files on Amazon's S3 while DropBox retained the metadata on its own servers. Now it decided to build its own S3, in effect. It remains to be seen whether this can offer a long term advantage over Amazon. Or put another way, whether Amazon is willing to cede any of its cost advantages to some retail brand.

DropBox has claimed it will net $1bn in revenues in 2017 and has 500 million users, with NASDAQ, Boots and HPE amongst its enterprise customers. The pitch is content collaboration. The problem here is content collaboration tools sell on their own merits. Storage may always be a feature of someone else's business.

Then again, remember a box is not a box: it's a "collection of surfaces". ®