Dropbox Files for $500M IPO to go Public

After 11 years as one of the buzziest startups in tech, file-sharing company Dropbox filed its S-1 on Friday, kicking off the road to an initial public offering.

Since its launch in 2007, Dropbox’s customer base has grown to more than 500 million registered users, with 100 million joining just in the last year. Dropbox hasn’t managed to convert many of those to paying customers just yet. Unlike many cloud companies that rely on enterprise sales teams, over 90 percent of Dropbox’s revenue comes from users purchasing their own subscription, the company said. In its S-1 filing, Dropbox said it has 11 million paying users between individual accounts and people who are part of a paying team.

Still, the loss-making company has about $1.7 billion in contractual obligations, like leases, outstanding. Dropbox also has a multi-million dollar relationship with Hewlett Packard Enterprise. The San Francisco-based company, which started as a free service to share and store photos, music and other large files, competes with much larger technology firms such as Alphabet Inc’s Google, Microsoft Corp and Amazon.com Inc, as well as cloud-storage rival Box Inc.

Proceeds from the IPO will be used to fund an expansion plan of upgrading more users to subscriptions and expanding integration with third-party software. Goldman Sachs, J.P. Morgan, Deutsche Bank and Allen and Company are among the top underwriters for the IPO.

Revenue grew 31% in 2017 to $1.1 billion, up from $844.8 million in 2016. Dropbox’s net losses also shrank from $210.2 million in 2016 to $111.7 million in 2017. The company also had a positive free cash flow of $305 million in 2017.

While typically compared to competitor Box, Dropbox’s business approach to attracting paying customers is a little different. The company said in its S-1 that 90% of its revenue comes from “self-serve” customers, or users who “actively purchase a subscription through our app or website.” Dropbox spent $314 million on sales and marketing in 2017.

Dropbox will list its shares on the Nasdaq under the stock ticker “DBX.” The company was last valued at $10 billion during a 2014 funding round. Its closest publicly traded competitors, Box and Atlassian, had market caps at close on Friday of $3.17 billion and $12.37 billion, respectively.

With over 25 years’ experience consulting with industry-leading companies, Talley understands the challenges facing entrepreneurs with generating and protecting income. Whether you’re looking to improve your profitability, build your brand through a business transaction or capital raise, Talley is the consulting and financial services firm dedicated to strategic business solutions that deliver meaningful results.

Archives