
Dropbox Is in Talks with Advisers for Possible 2017 IPO - surement
http://www.bloomberg.com/news/articles/2016-08-15/dropbox-said-to-discuss-possible-2017-ipo-in-talks-with-advisers
======
chollida1
Founded in 2007. I think its fair to say that dropbox is one of the more
successful starups around. So when you join a startup, I think its reasonable
to ask them for either:

\- long option exercise periods after they leave the company, like the 10
years that has been thrown around before.

\- or written authorization to sell vested options on a secondary market at
the market price

\- or plan to stay with the company for 10+ years, remembering that you
probably can't sell for the first 6 months of going public.

Because ifyou join a startup where some of your comp is in the form of
options, this is what you are signing up for.

~~~
jdavis703
Or you could just exercise your options within the 90-day window. Me
personally I'd much rather lose a fixed sum of money, then realize I missed
out on being a millionaire.

~~~
chatmasta
Then you might owe an absurd amount of money to the tax man. As far as the IRS
is concerned, you need to pay the AMT on the difference between the price per
share of Dropbox at exercise time, and your strike price. If you joined before
Dropbox went through a couple rounds of funding, this tax bill could easily be
in the hundreds of thousands, or even millions of dollars. You need to get
that money from somewhere, but you can't sell on the secondary market, so what
do you do?

~~~
bduerst
Yep, you're basically rolling the dice.

It gets worse if you're at a unicorn startup that doesn't exit well, because
then you may have paid thousands in taxes on stock that is essentially worth
pennies:

[http://www.nytimes.com/2015/12/27/technology/when-a-
unicorn-...](http://www.nytimes.com/2015/12/27/technology/when-a-unicorn-
start-up-stumbles-its-employees-get-hurt.html?_r=0)

~~~
encoderer
Any tax paid only for exercising options is AMT. It is refundable as AMT
credits in future tax years where your conventional tax liability is less than
your AMT liability. It's still bad news, and an unfortunate result for the
fairly well off "little guy" in this story, but it's not as bad as it was in
the dotcom bust in an era before the AMT credit existed.

~~~
mrgordon
Yep this matches my experience with unicorn stock options. It was a pain to
come up with the exercise price & AMT upfront in the first place but the AMT
was refunded in full the next year.

------
TAForObvReasons
> One of Dropbox’s closest competitors, Box Inc., went public last year at a
> $1.7 billion valuation -- 29 percent below the value it fetched in a private
> funding round six months earlier. Box shares traded at $12.88 at 12:36 p.m.
> in New York, below its $14-a-share IPO price.

Will Dropbox valuation be affected by BOX's performance in the last few years?

~~~
kmfrk
I'm obligated to mention Box's S-1 filing:
[https://news.ycombinator.com/item?id=9407229](https://news.ycombinator.com/item?id=9407229).

I don't know whether Dropbox is profitable, but Box always seemed like it was
abysmally managed from a financial standpoint.

~~~
TAForObvReasons
That is fairly standard language. Expect Dropbox's S-1 filing to contain
similar warnings about profitability and discussions about investment in
various parts of the company

------
gsg21
I'm a paying Dropbox user (for personal stuff) and I use Google Drive and
Box.com at work. Dropbox is far and away the easiest to use. Case in point, my
very non-technical grandmother once called me because she was worried there
was a virus on her computer, only to find out that she accidentally changed
the homepage on her browser. But when it comes to using Dropbox, it's easy for
her to navigate and look at her pictures.

~~~
dx034
+1 Also, the sync works much better than with Google Drive. The Google Drive
app uses an absurd amount of resources and takes much longer to sync changes.

------
ruffrey
I wish they would add something like a .dropboxignore file. It's unusable for
software development otherwise. It could be extremely useful.

~~~
cm2187
What is the problem? Constantly uploading to the cloud every build?

~~~
Corrado
I think it could be annoying to have Dropbox sync things like binaries or temp
files. Some builds could generate hundreds of artifacts that are short lived
or unwanted in the long run. As it works now, Dropbox would see all of these
files and burn up your network (and some CPU) copying them to the cloud, which
in turn copies them to your other computers, phones, iPads, etc.

~~~
gcr
Files on phones and iPads are only download on demand. They're certainly not
stored locally.

------
bluedino
I really think they've missed their time. Dropbox is an incredible product,
definitely the best option out there for most people.

However, they're just not making enough $ or have enough future growth to be
worth it. If they rejected an offer a few years ago, they really are going to
be sad when they get an offer for half or one quarter that in a year or two.

~~~
steveklabnik

      > If they rejected an offer a few years ago,
    

Funny story, that: [https://techcrunch.com/2011/10/18/dropbox-said-no-to-nine-
di...](https://techcrunch.com/2011/10/18/dropbox-said-no-to-nine-digits-
acquisition-offer-from-apple-steve-jobs/)

------
electriclove
It would be interesting to see what the public valuation would be. I don't
believe it will be anywhere near the "$10 billion valuation it was awarded in
a 2014 funding round."

------
T2_t2
Will DropBox be the first (/only) YC company to go public?

I can't remember any others going public ever, can someone correct me on this?
Seems weird that, despite being so successful, no YC companies have IPOed
before. Seems almost improbable, but I can't find evidence of any going
public.

~~~
dharmon
There have been no IPOs. The largest acquisition was Cruise, then Heroku, then
OMGPop, then Parse.

The fall-off of acq prices is pretty steep, but given that they put up hardly
any money ($17k early on, now $120k) the returns are insane.

When you look at annualized returns, they actually demolish avg. VC returns
just from the number of companies that flip in 1-2 years for $10MM (or more).

Their biggest hurdle is scale (in terms of putting a lot of money to work).

~~~
jd007
dont forget twitch, second largest after cruise i think

------
eldavido
Anyone have any sense of their financials? Revenue, cost, etc?

Would love to take a stab at valuing their equity although I'm sure their cap
structure is a wedding cake of preferences on top of ratchets on top of pro
ratas and pari passus and conversion preferences...

~~~
joshjkim
RE: financials -

around $400m in annualized revenue as of last summer
([http://www.bloomberg.com/news/articles/2015-06-24/dropbox-
is...](http://www.bloomberg.com/news/articles/2015-06-24/dropbox-is-
struggling-and-competitors-are-catching-up)). no recent news of their growth,
but I would be surprised if they did more than 20-30% user growth since then
(not bad, but not a rocketship anymore...which FTR is totally cool with me,
even admirable at this stage!)

Jives with back envelope calcs: 400m+ users, assume 1% paid users = 4m+ paid
users. each user pays something around $100/year (8.99/month if you pay up
front, 9.99/month if you bill monthly, some legacy cheaper, some business
customers). 4m x $100 = $400m. It's actually not a bad business! =)

Not sure about costs, but they are cash flow positive from what they've said
publicly ([http://www.recode.net/2016/6/14/11937132/dropbox-cash-
flow-p...](http://www.recode.net/2016/6/14/11937132/dropbox-cash-flow-
positive)) and that's been confirmed from what I've heard
anecdotally/personally from some senior folks over there and some VCs who I
think would/should know (and that I trust..ha).

so overall, seems like a solid business, i think the issue now is whether they
can grow at a rate that's exciting enough to the market to justify a $10b+
valuation...TBD!

as one kind of comparison (not definitive by any means, just one that we have
the #s to do..): box did around 300m in revenue last year (so less than DB),
but Box market cap was around 1.5B at that point, so 5X revenue. if you did
the same math to DB, we're looking at around 2B market cap for DB...1/5 of
their last raise at 10B =/

could be viewed as example of raising at higher valuation than prudent (not
unusual ha), but who knows, maybe they'll pull a rabbit out of a hat =)

~~~
eldavido
Yeah, they just might.

I was thinking about how to value companies like this over the weekend: fast
growth, huge revenue, where it all gets eaten by opex. In a normal business
you just look at gross profitability and assume a lot of opex will lead to
long-term appreciation of the equity but, software is so damned competitive
that it's like they need to keep plowing cash into opex just to stay relevant
(vs grow the business)

In any case it's hard to fathom that a company with $400MM in ARR can be going
public just now...nowhere near unprecedented given the recent huge financing
rounds but man, that's just a big company, no two ways about it.

EDIT: One more comparable I've been watching a lot recently. New Relic is on
track to do about 230-250M in the next 12 months. Their aggregate common is
worth something like 1.6B right now, so your "5x revenue" might be a little
conservative, I think they'll get more like 6-7x, and likely even more as
consumer companies tend to get more interest from individuals because it's a
name they know. My over/under on aggregate equity value at IPO is ~$4bln, will
be interesting to see how big the float is.

------
econner
Hm.. I wonder if this is because they have option grants expiring in 2017 (10
year mark) and are trying to get some liquidity for early employees.

~~~
tkinom
The founders, VC, LP also want their returns (exit).

~~~
econner
That's a good point. Presumably the funds that invested were raised around
2007 and also have a 10 year window.

------
sdegutis
Look. As a non-business, I recognize the fact that Dropbox is useful for both
personal users and businesses. But _every, single, time,_ that I login to
their website, they INSIST on suggesting "hey why don't you try Dropbox for
Business?" to me. This level of stupidity shakes my confidence in the
competence of their upper management, and in Dropbox's future.

~~~
the_watcher
> This level of stupidity

Why do you assume this is stupidity? Just because it annoys you doesn't make
it stupid. For one, Dropbox makes exponentially more money from a Business
user than an individual.

~~~
sdegutis
Because I'm definitely an _individual_ user, and _not_ a business.

But on every page, Dropbox's website has a box, that either says:

    
    
        Dropbox Business is here!
    
        [Free Trial]
    

or

    
    
        Dropbox Business is here! Only $12.50/month.
    
        [Upgrade now]
    

No matter how compelling an offer that is, _it 's completely irrelevant to me,
since I am NOT a business._

~~~
the_watcher
That doesn't mean it's stupid to ask. Extrapolating what annoys you to the
totality of users would be far, far dumber.

------
lyonlim
Many many years back, I used Sugarsync but ditched them a few months later for
Dropbox when they screwed up my file sync.

Recently, I switched from annual to monthly subscription for Dropbox because I
wanted to push myself to migrate my files off their service..mainly due to
concerns about privacy..

I use Google Drive at work.. it's not great, but it works better than
OneDrive. Wanted to use OneDrive as it came with my Office365
subscription..but their Mac and Android clients really need improving.

Almost moved to SpiderOak..but stopped due to their poorly designed Android
app.

I can't seem to get myself off Dropbox. I don't use external hard disks for
backup now. I digitize everything, so it's important to find a service I can
trust...both on privacy and on sync reliability..

The sad truth is Dropbox clients across different platforms and their sync
stability is unmatched in this space.

~~~
toddmorey
I completely agree. What's so nice about DropBox is how little I notice it.
I'm a happy customer but interestingly I would be a wary investor. I'm not
seeing their growth strategy. I've been looking for them to build on their
advantage for about 7 years now. New products they've introduced to satellite
around their core sync technology don't ever seem to hit traction.

That doesn't mean I think they're a decent business and will stay around. I
just don't see much on the horizon that would push the business (and the
stock) forward.

------
ArtDev
I still don't use dropbox anymore. There are tons of alternatives, many of
which are better anyhow. [http://www.drop-dropbox.com/](http://www.drop-
dropbox.com/)

------
tdkl
Dropbox is one of the products that I hope it never goes away. Been using it
since I got invited to beta in May 2008 and the sync is trustworthy, what
can't be said for other solutions (enough issues have been mentioned already).
Extended the storage with the specials and treasure hunt, but kinda wish for
more flexible plans though, I'd never have a use for full 1TB.

------
whatever_dude
Maybe whoever acquires them will finally add support for per-folder exclusions
(aka a .dropboxignore file). We can only hope.

------
eecsninja
I wonder if we will see a repeat of this story in the Dropbox IPO:

[http://www.bloomberg.com/news/articles/2015-12-17/big-ipo-
ti...](http://www.bloomberg.com/news/articles/2015-12-17/big-ipo-tiny-payout-
for-many-startup-workers)

------
nxc18
Can someone explain the value proposition of Dropbox to me? They don't do
anything that their competitors (OneDrive, Box, Google Drive, etc.) don't do
better. Their UI isn't spectacular. They only really have one big product.
They charge an insane amount for what they do offer. Their file sync is
difficult to control and has an uninspiring client.

I get that people end up used to Dropbox, but what do they have to attract new
users? Why do people see value here? A decade on, first-mover advantage isn't
going to get them (or anyone) very far. It seems like their whole company is a
competitor's marketing campaign away from being basically irrelevant.

It seems their one hope is business. But why would business choose Dropbox
over Office 365, Box, or Google Drive. All of them seem to offer better
collaboration/productivity tools. Office Delve is incredible. Google Drive is
Google Drive. What's the value here?

And then I read articles like these: \-
[http://www.theverge.com/2015/9/22/9372563/dropbox-really-
is-...](http://www.theverge.com/2015/9/22/9372563/dropbox-really-is-a-feature)
\- [http://www.bloomberg.com/news/articles/2015-06-24/dropbox-
is...](http://www.bloomberg.com/news/articles/2015-06-24/dropbox-is-
struggling-and-competitors-are-catching-up) \-
[http://www.businessinsider.com/the-clock-is-ticking-for-
drop...](http://www.businessinsider.com/the-clock-is-ticking-for-
dropbox-2015-4)

What am I missing?

~~~
jamwt
I'm a sync quality engineer at Dropbox--on the team that writes and maintains
the sync engine. So caveat, I'm clearly quite biased. :-)

> They don't do anything that their competitors (OneDrive, Box, Google Drive,
> etc.) don't do better.

I'm not sure on what you base this opinion. We do sync much, much better, and
that's no coincidence--we work very hard on it (I'm new on this team, so I
deserve essentially zero personal credit). It _is_ our business. We're not an
advertising company--doing sync well translates directly to dollars for us.

On a technical level, it is extremely nontrivial to get right multiplatform,
in the face of races, vague filesystem semantics, application-specific
behavior, offline, etc. Our competitors aren't even trying things like
infinite ([https://blogs.dropbox.com/business/2016/04/announcing-
projec...](https://blogs.dropbox.com/business/2016/04/announcing-project-
infinite/)).

We're not sitting still, though. We're actually building a next generation
sync engine right now (btw, more Rust @ Dropbox). The plan is that this will
put even more distance between us and others.

~~~
amelius
Aren't you afraid that once a good standard exists for file syncing, which
every OS then implements, dropbox will lose its business case?

~~~
chengesu
General, aren't you afraid that once all the governments of the world agree to
unify and eliminate all conflict, you'll be out of a job?

------
ksec
I wonder if a Dropbox made NAS linked to a dropbox account make sense. I will
then has the best both world.

Another problem i have with all current cloud storage is lack of file
management features, things like check for duplication by filename or size or
hash. Currently I have multiple SD card, USB HDD all scatter around with many
duplicate data.

------
kin
So I have a question about this, for them to be deciding this now, does that
mean Dropbox has something to confident about at the moment or it could just
mean anything?

------
vadym909
I think this is posturing and a final warning to interested buyers "Buy us
now, or we're going public"

