Dropbox May Not Be LeBron James, but Is Still in the Game
nytimes.com
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Honest question: WTF are they doing?
Buuut I guess they could. I guess it just kind of looks like the explosive hiring you see sometimes when a company has projected huge growth but then falls flat and realizes it has way too many employees :(
Maybe, are those 600 people there to fight fires and work on tickets, or adding product features?
I'm not an expert - just learning more about this myself over the last few months, but it sounds to me like the investment style you're talking about exists inside the world of private equity.
They're not playing the venture game - it's a different model. Buy and hold for either cashflow/dividends, or do some financial/managerial engineering and flip the asset.
Outside of the world of Venture Capital, there's a HUGE spectrum of investors out there doing every kind of investment - just gotta tune into it I've found.
(Great place to start is a podcast called PE Funcast - seems to me they've been doing this type of investing.)
Say A round wanted 100x. B round 10X. C round 7x. D round 5x. That will bring the total expected return to around 8B. However I am sure C and D would not mind a 3X or 2X, while B would probably settled happily for a 5X.
Regardless, once investors pay for growth, they require it, in order to be paid out on their bets and remain profitable.
how well did that work out for basecamp?
They could have been the next slack if they had not stuck to their stupid philosophy of staying small.
But we are specifically talking about dropbox here.
I am sure they were not exactly aiming to "be small" raising million of dollars in multiple investment rounds.
Why would an asset class like medium-size technology companies pursuing highly competitive cut-throat markets, requiring long lock-ups of capital (Dropbox was founded in 2007, so someone has been sitting on those shares for 9 years already) be more attractive than similar dividend-flowing asset classes like real estate or energy MLPs?
Are the dividends so outsized that Dropbox is basically swimming in cash and the yield is much better than I can get with similar asset classes? Do they have a stronger foothold in the market with expected longevity to out-survive an office tower, apartment complex or gas pipeline? Is it likely to attract better talent than Valley's established public companies (GOOG, AAPL, FB) or Valley's hyper-growth startups with IPO potential (Uber), and that better talent will out-compete the rivals on products, execution and market share (and, as corollary, fall under "dividend growth" umbrella, in theory allowing me to buy larger yields at substantial discount)?
Dropbox would have to compensate investors for (a) lack of liquidity and (b) for being in technology software market, known to be particularly unforgiving with its "winner takes all" mentality. Its peers would be highly risky single purpose private REITs (think casinos and fracking companies in North Dakota).
To accommodate that compensation the yields would likely have to be in the double-digits range, so let's say with profits of $20 mln of which $10 mln is allocated to dividends the expected valuation would be in the range of $60-100 mil (10-15% expected yield which seems reasonable in this rate environment with the type of risk described).
If Dropbox is delighting its customers and no longer interested in the lightning-fast one-uppsmanship of enterprise software/storage, then it can trim costs and pay an attractive dividend, sure.
The only reason I use Dropbox is that it is not made by either Apple, Microsoft or Google, so I can sort of trust that there will be client support for all platforms.
But my dropbox was super slow in Japan, MS Office products keep spawning conflicting copies, Photoshop randomly pauses batch processing because of sync file locking, and they are shutting down Carousel.
So I am moving to Google Drive. All the frustrations above are not unique to me. Dropbox even has a Japanese web site. But this is what destroys consumer confidence. There were trivial complaints on their support site regarding speed issues and Carousel issues with pages of responses. It is the loyal customers that bother to post, yet the impression everyone is getting is seriously, WTF are they doing?
You can't have it known that you are healthily funded, have hundreds of engineers, not free, and NOT care.
Also, I don't want any more features. Same with Evernote. I just want to keep notes, and it works quite well for that.
Too bad the investor pressure will likely make each of these products worse.
Also, will I be able to sync my locker with my desk drawer? :)
In enterprise, about a dozen vendors do it already.
Have an actual profitable syncing business with several pricing tiers and tons of hooks to third party apps?
I mean, unlike tons of billion-valued "unicorns" that not only don't have an income plan (apart from "some day we'll maybe sell ads") but are also losing money.
You'd be surprised with how many 1000+ people companies are there, profitable and fine in all kinds of sectors, that are way less known than Dropbox.
Source? Everything I've seen says Dropbox isn't even close to being "profitable" -- the vast majority of their customers don't pay a dime according to their CEO.
That doesn't matter as long as those who do pay subsidy the others. From what they said, they have 100,000+ paying businesses and smart ways (like hash-based de-duplication) for minimizing their storage costs.
Their CEO also said that they have enough cash to not need new financing.
And "not need new financing" is no indication of profitability either.
+ sync works better than any other out there
+ its quick in sync esp between other machines in same network
+ sharing folders and links is much easier than other including iCloud
+ developer adaptation is high on mobile apps which is turning out to be increasingly valuable last year or so
- expensive and limitation of option plans
- extremely poor biz plans and tools, esp if you're a startup
- privacy: hugely concerned about it and haven't heard much from their comms teams about what they are doing to protect me or providing backdoors or govt snooping. (better to move to iCloud for personal info)
- no new noteworthy features - almost 'feels' like the product is stuck in 2012 era
- MS and DBX integration sounds awesome on paper, i have had an incredibly frustrating time using it. Both companies are pointing finger at each other for live editing and sharing.
Once developers start offering iCloud as sync option often, i'll move over.
Edit: formatting
Mostly DBX makes me sad, as there is so much potential there. I also find it frustrating that they cannot come up with a pricing model that allows me to actually give them money.
This stopped me from becoming a paying customer for years. I had 20GB of free space from referrals and it's a big leap from not quite enough space for nothing to too much space for a $100/yr. I started using the free space from Google and Box for my overflow while waiting for Dropbox to offer a $50/yr plan... and I blinked first.
The Google and Box clients are serious contenders for dethroning iTunes as the worst software on my computer. Dropbox just friggin' works and I've never noticed it crash or have a negative impact on any computer I've put it on.
My first renewal is in four months. Maybe I'll find some time to give ownCloud a try before then... or maybe not.
But seriously, it's a bit odd. Dropbox's product seems fairly mature. Are these sales staff, or developers, or...?
Reading between the lines, it sounds like Dropbox is going all out to build up a sales team so they can be more like Box, and I imagine the bulk of those new hires were picked up for their skills in cold calling, not coding.
Why you ask? Obviously because storage will be infinite and free in the future. Google Drive for education is already completely free.
https://www.google.com/edu/products/productivity-tools/
What that means is that Dropbox is shifting from a consumer to an enterprise company. We all know for consumers they're way too expensive - 1TB for $100 is way to much free space for the average person.
The problem is they've screwed up other things. Google owned Carousel with Google Photos. Mailbox turned out to be an overly expensive acqui-hire. Luckily that doesn't affect them that much because they raised a boatload of cash and have lots of customers.
Now will Dropbox go away or die? Probably not but they'll always be behind Box when it comes to enterprise features.
It's too bad Box and Dropbox can't merge. Box has crap sync and Dropbox lacks a lot of Enterprise features Box has.
For all of the employees that received options based on the inflated $10bn valuation, not a good problem to have.
This is the danger of VCs wanting everyone to be a unicorn, and structuring their firms around that mindset. I agree that a $5bn or $2bn company is fantastic. Until those with capital agree, however, founders are almost required to pitch a fantasy.
So even if money was raised at a 10bn valuation based on the expectation of future value, a 409(a) valuation would probably place the company at somewhere closer to 10-40% of that, which puts employees in a much better situation.
Employees granted options recently after the highest valuation financing would probably be completely underwater if the company is really worth $2b.
When common is equal to prefererd, you have a public stock price.
Once I forgot to disconnect my dropbox and someone at the studio trashed the folders and they were deleted on my home machine. I remotely disconnected their connection from the web interface and restored my folders to the previous checkpoint.
I can't imagine a simpler, more efficient mechanism for keeping things organized and backed up. I also have a separate backup service on the same drive of course, just in case.
The only annoyance with dropbox I have is there are certain scenarios where you can't play audio from the website and are forced to download it, which is annoying when sharing links.
That and I wish I could give them more money for more space.
The only annoyance with dropbox I have is there are certain scenarios where you can't play audio from the website and are forced to download it, which is annoying when sharing links.
Agreed.... and once they really get their media and file rendering act together, that multi-billion dollar valuation is going to make a lot more sense. Despite what I said earlier about renaming the company, they're not in the "storage" business, but rather the "delivery" business.
The latter category has an unbounded upside.
I am a very happy paying Dropbox customer. It's a solid product that does the job very well and isn't stuffed with a bunch of other useless features I don't need. It's pretty much perfect.
https://pando.com/2012/02/26/steve-jobs-was-right-dropbox-is...
That's the benefit of cash. It solves almost every problem.
Sure, but if they did who says they will let you write files directly to Dropbox?
They'll probably have you store your stuff in a hundred different crappy SQLLite databases tied to iNamed applications on your phone and Macbook, just like they do now.
They'll be here in 5. 10 is the bigger question mark when files go away.
Can you expand on that? What do you see replacing files?
but i don't think it will happen anytime soon. even on iOS, i often find the need to make data backups using files.
iCloud backs up your entire phone. Most apps store stuff remotely on their servers. And even in the case of photos various services will sync those off your phone as well.
Iphone user spotted.
On my Android I have a full file system, with files, and I intend to keep it that way.
A few years ago when I was doing a help desk job, the sentiment was similar. I asked a user to navigate to a directory on Windows and he stopped me. He said, "Hold it now, I'm not a computer person."
So maybe not 'go away,' but perhaps become increasingly invisible and especially so to average users.
Few of them have block-level sync or LAN sync. In practice, Dropbox is often much faster than alternatives, especially when syncing/modifying large files.
The only programs that are better at it are Bittorrent Sync and SyncThing. And they are specifically made for peer to peer syncing.
> I'd be shocked if Dropbox is still in business in 5 years.
I agree that Google Drive, iCloud, Amazon Cloud Drive, Box, etc. are all viable competitors. But (admittedly, anecdotally) everyone I talk to seems to use Dropbox. Personally, I use it on all of my devices.
I also use Box for business-related storage, and Google Drive for presentations, documents, etc. I use Amazon Prime Photos to store my photo roll. I don't think that any of those detract from Dropbox's primary use case of sharing files between different machines. I don't think people think of Dropbox as "cloud storage," but instead as a way to move files back and forth and have constant availability on machines they use.
> Our company actually banned Dropbox.com
I work in information security, and although I haven't banned Dropbox from a network layer, I can certainly relate to the sentiment. You have to remember that it's not just corporate use that caused the Dropbox ban -- your sysadmins also don't want people putting work documents in Dropbox to work on from home, because so many people already use Dropbox in their personal lives. The fact that your organization blocked Dropbox, instead of just saying "we use Google Drive," speaks to the fact that so many people are already happy Dropbox users and would just as soon continue to use it.
That said, I agree with you wholeheartedly that Dropbox, if going for major corporate adoption, will fail in its endeavor. I don't think that Google Drive is the primary competitor -- in my opinion, it's Box. Yes, you have to actually pay for Box, but in many corporate environments, that's not really much of an issue.
Said another way, I predict Dropbox failing in a corporate environment for the same reason they will continue to succeed with personal users: businesses want "cloud storage," and personal users want "easy file share with myself."
Maybe I'll look back on this comment in a few years and see that I was dead wrong, but for now that's where I'd put my money.
If Apple ever gets their act together and makes iCloud actually fast and reliable a syncing service, Dropbox might be in trouble.
Edit: It was probably a reference to that it is "preinstalled" on retail machines.
It integrates really nicely to become the default document storage location for most (non-developer) apps as well.
The only trouble I had was to have it replace the "Documents" folder in the Dock so I could just treat it like a cloud version of the regular documents folder.
I'll admit I haven't tried yet, but I'm going to hazard a guess that if I try to setup icloud on my Linux machines at home or my Android devices, I'm not going to get very far.
With Dropbox I get all the way, everywhere, with no hassles. Thus Dropbox has my business.
makes sense for me. I don't use iCloud because of that. It doesn't have the features that I need. Although "Better" is subjective. Dropbox might not be better for you, but it "makes sense" for some people
I'm not sure I can answer generally but from a personal point of view currently my notes are not syncing with my iPhone - God knows why - and last year when my iOS update f'kd up and I had to wipe the phone my iCloud backup wouldn't restore - some kind of corruption. Luckily there was a 3 month old iTunes backup on my disk so I didn't lose all data. So it's not perfect.
Every cloud service needs a "delete, damn it, I really mean it" option, otherwise it seems their sync mechanisms are too conservative and resurrect things forever.
The main reason I pay for Dropbox is that simple model. I have a full copy on every machine, and if my internet connection fails, they go down, or something breaks I can just copy files like normal. If I see something odd, there's a full log & the ability to revert any changes.
There are times where boring is good and your core personal data is one of them.
1. It works, with fewer problems than any other sync / cloud storage that I've used.
2. It has enough people using it outside of work that it's getting paying business customers (the Linux effect?)
If either of these falters (if 1 falters, 2 does too) then they'll be gone. There are plenty of competitors and some even do sync well enough that people will use them.
I'm rather upset that they've dropped Carousel, as it's probably the app my girlfriend and I use most on our phones, but I'd only leave Dropbox if they didn't fold enough of the Carousel features back into the Dropbox client - or there wasn't a third party app that could provide similar functionality using our Dropbox storage.
They were the first dominant syncing solution. Practically everything needing this feature has integrated DB. Beyond DB, the competition is a mix of Google Drive and iCloud, and maybe something else. Maybe if iOS and Android had centralized the interface to these types of features, DB would have gone away years ago, or adapted to the market.
Obviously, this is a non-issue for the general public, but it's a bit tone-deaf for "power users".
My dayjob uses Box, and it works OK, but has just never seemed unique enough to switch over too.
I think I have the $100/year or whatever it is Dropbox plan, I honestly don't even know. I don't seem to run out of space, and it doesn't cost very much so I just don't think about it at all. That, to me, is the hallmark of a valuable service.
But how long will it be until OneDrive or iCloud Drive catch up? I have 1TB of OneDrive space for "free" with Office. I have plenty of spare space in my iCloud storage plan. If either of those two options catch up to Dropbox's reliability, why would I stay with Dropbox?
Long term, why will Dropbox survive?
[citation needed]
Office: http://www.amazon.com/Microsoft-Office-Personal-Year-Card/dp...
$57 for 1 year of Office + 1 TB of storage
Dropbox: https://www.dropbox.com/plans?trigger=homefoot $9.99 for 1 month of dropbox with 1TB (=> $120/year)
Apple's cloud storage offering includes 50GB ($12/year), and 200GB ($36/year) tiers. I'd bet 99% of Dropbox users could fit in one of those tiers and save a lot of money.
I have a 1TB OneDrive and 200GB iCloud, but I spend money on Dropbox because I trust them to be reliable. If the others catch up on reliability, where is the path for Dropbox's survival? (They're smart guys, so I'm sure they've thought about it)
That is not particularly hard, but it still means that you are storing your files in a honeypot from which the NSA regularly draws a juicy feed.
Especially users outside the USA should never use a cloud service that lacks automatic end-to-end encryption.
As a non-American, you would also reveal your identity (along with your data) to a host of American surveillance agencies by paying by credit card. So, that is another non-starter. Along with unencrypted data, that is just an accident waiting to happen. They would store your dropbox data alongside Angela Merkel's digitized private phone calls to her husband. "I love you honey!". Seriously, I pay for cloud services only with bitcoin.
So let's say the average employee count is 2k and they negotiated to pay $100/user/year. 13 * 2000 * 100 = $2.6M. Even if we double the average employee count and assume they pay standard $150/yr, it's $7.8M.
Assuming that business offering is their strongest bet to get as strong as some investors might like (i.e. justify the valuation), how many of these do you need to justify $10B valuation? And how big is the market?
I am not sure that it all adds up.
Bottomline, I have less need for Dropbox outside of backing up photos. And there are any number of services for backing up photos that are frankly better from a usage PoV (though not from a syncing PoV where they are clearly better). I have an iPhone - I used iCloud to download the pictures to my MBP and then have Google Sync running to push them to Google Photos. iCloud's photo service is still pretty terrible - but using this method I get all the goodness of Google Photos (e.g. let me find all the pictures of my dog or my kid).
Probably a few of them, but I'm guessing some other company with a similar business model would have come along with VC backing and eaten their lunch (sure, that company might then be in the exact same place as the current over-valued late stage companies).
Damned if you do, damned if you don't?
[0] http://blogs.wsj.com/digits/2010/07/14/accel-invests-60-mill...
With regards to the second point, as long as as potential outcome of the VC method can bring about some EV of $1B, then there will be someone willing to spend $999M to capture that market.
The problem isn't with early VC money. Dropbox's early backers would have still made a gigantic return on Dropbox setting at a $1bn valuation.
Really, it's not even a problem with their series B ($250M at $4bn). $4bn is a reasonable eventual valuation for Dropbox.
The problem is that they didn't stop there. They raised another $850M in 2014 (in two rounds), which was basically sold on the promise of it being necessary to "win" the storage wars and acquire a monopoly.
By 2014, Dropbox was already a stable company with hundreds of millions in revenue. The only reason to raise money was to shoot for hitting Google/Facebook status (owning a lucrative monopoly). If they had instead accepted that their eventual outcome was a $3-5bn software company, everyone could have won: employees, investors, founders, etc. (Atlassian is an example of a company which did eventually raise substantial VC, but instead of gunning for a monopoly IPOed at a $4bn valuation.)
The problem is that founders ultimately have huge egos and want to be the next Mark Zuckerberg or Larry Page: commanding monopolies so lucrative that they can spend billions on zero-return "cool nerd shit."
So it makes sense why companies would want to stay private if someone is willing to give them the cash they think they need. Problem is, those investors also want to make a huge return, so a 20B valuation is going to come with some nasty liquidation preferences/ratchets etc. to protect the money.
Why do you need more people when you grow past a certain size? At Drop box's scale they surely must manage their backend at scale and not have people babysit servers. If DBX are using Amazon's S3 for storage then that's one less massive headache to take care of.
Just for comparison, Instagram had 13 employees when they sold to FBK and they sure had scale at that point.
Can't you just raise money at a lower valuation (the dreaded down-round)? You might lose the employees who bought options at the unicorn valuation, but it wouldn't necessarily kill your business.
I like a lifestyle business, however if you can clearly go for a $10B instead of $30M while spending the same 10 hours at work and surrounding yourself with 10 times the amount of smart people, then why not.
If Dropbox does need more money, if it can't get profitable with the funding it already has, then it will be in for tough times. If it is forced to go public before it's ready, like Square, then its employees will suffer much like Square's employees have with its stock price.
I'd hope their customers are also looking at the security of their data in light of this and seeking out alternatives.
Fine interface with customizable options that I need.
Finally someone said it.
Putting my files on someone else's computer is a concept totally alien to me.
If the mob or a russian crime ring offered free online storage, openly advertised as such, I'd fully expect people to line up to store their tax returns and visa statements on it.
I keep that stuff encrypted and offline most of the time in my own home, much less on dropbox.
This follows the Unix philosophy where a utility does one thing and does it well, and if you need two jobs done, you pipe one through another.
Google Drive still thinks it's normal to re-download the cloud folder instead of letting me install Drive in the same location after a system reinstall, where all the files already exist. And to trust them 1TB with that behaviour ? Hahaha.
It's not that Dropbox can't offer less space, it's that they're not interested in making the baseline price anything lower than $10. Put another way, Dropbox is perfectly happy to get along without customers who think the difference between $5 and $10 is something to care about.
A bigger company with more resources will eventually be able to put them out of business.
It would have been better to cash out. Unless they truly have something proprietary with a higher barrier to entry, it will be a difficult road ahead.