Sounds like a round for the founders and employees to sell some shares (called a series f?), unless Dropbox has some major expansion planned to build its own CDN and data centres instead of using S3. The amount of savings at there scale (200 million new files / day [1]) would be huge as data via S3 is already more expensive then running your own bare metal boxes. I would imagine that Dropbox pays some sort of bulk price, but I can't find any information.
I don't think the 5 billion dollar valuation is out of the ball park considering that they solve a problem that a lot of people encounter including my mother. Their solution is simple and elegant and seems to work. Last statistics I heard they had 25 million users [1] and growing, while I dont know how many of those users are active subscribers I can imagine the conversion ratio is much higher then normal freemium products.
While there has been a lot of anti-Dropbox news in the tech press lately, we need to remember we live in an information bubble that doesn't reach the normal user.
Assuming they're at the highest tiers, we're looking at about $0.055/gb storage, $0.050/gb transfer out, $0 transfer in. Transfer out could certainly be less, though, if they're in the >524TB/mo range.
Netflix also uses Amazon S3 and is probably an even larger customer, but I agree with your assessment that custom rates are very likely (for both of them).
I also wonder if they are selling shares because Microsoft is nipping at their heels. Live Mesh is a serious contender and starts with 5G instead of 2G. I switched.
Windows Live is the online brand, all their free-download software/online services are "Windows Live X". I'm not sure how it cheapens it any more than if it was "Microsoft X" or "iProduct"...
Okay, I should rephrase: when I see Hotmail so prominently featured on the Windows Live ID page, I worry because of Hotmail's spammy past.
Also, the only times I've encountered Windows Live ID are times when it was being forced on me. E.g., when I got my broadband, I was forced to use a Windows-only CD to install a lot of (to me: irrelevant, useless, copycat) consumer software (photo sharing etc.), then get a Windows Live ID, and then finally activate the broadband.
So I pulled a Windows machine from a dumpster, did the install, got the Live ID, activated the broadband and then installed Linux. It felt dirty (and not from the dumpster).
After activation, the Live ID was not required, nor the software, nor Windows. So the whole experience was dictated and had no value for me, the customer.
There's a difference between 200 million new files and 200 million 'uploaded' files.
eg a song has a fingerprint. If 100 other users 'upload' the same song, it's counted towards their usage but no actual upload or storage is performed, saving costs.
Yes it is very clever, I had forgotten they ensure they only store unique files (I wonder what percentage of files "saved" are unique). I actually went and looked through the TechCrunch articles from April 17th that announced the Dropbox 25m user mark and 200 million file saves but it doesn't distinguish between unique and saved files. I imagine its the latter as it would be the more impressive number.
About the percentage of unique files: I guess if you go by volume, the percentage of unique files is small. And if you go by number, the percentage of unique files is big.
I.e. bigger files are more likely to be stuff that you didn't make yourself.
Congrats to Drew, Arash, and the whole Dropbox team.
(Ordinarily I would say that giving congratulations before a deal is confirmed as closed is a jinx, but at this point there is no such thing as jinxing Dropbox. Their ultimate success, whether this report is true or not, is inevitable.)
Yes, but as explained in the post, that's a decent estimation for the value of the whole portfolio (of the 210 companies through S10).
This is because startup valuations follow a power law, which among other things means that almost all of the value in a portfolio will be in the top 10%. This round of funding is a good example of that principle - if TC is correct, then even among the top 21 companies, a majority of the value will be in the top single company.
From the link: "For 18 of the top 21 I used the postmoney valuation of the most recent funding round. The other 3 had grown significantly since their last round, and to estimate the values of those I used the opinions of independent experts and the valuations of the funding offers they are currently receiving."
Dropbox has traction and paying users. Why do they need $200 million? Of course it's not just a two-man gig anymore, but... what is it for?
If their business model isn't supporting the growth they want and they're not going to change it, is throwing money around going to be all that helpful?
Maybe I'm doubting that they'll be able to bring in that many new users because I can't imagine how anyone hasn't heard of dropbox by now -- which is pretty silly. I've just known about it for a long time because of HN.
Or maybe there are economies of scale that I don't know about, and by spending $x they'll be able to save/make $y>>$x?
(...Are they going to get off of s3, set up their own datacenters?)
Current traction and paying customers may not be enough to satisfy their growth/evolution goals. The cash could be used for a lot of thing. One guess is that they may be trying to ramp up the attack the enterprise storage/backup market and need a war chest to have any major impact.
Also, plenty of people who could really use a service like Dropbox have not heard of it. Even with their current product offerings, there is an ocean of customers who haven't been reached yet.
They still need to work on their pricing. They have an opportunity to convert quite a few of their non-paying customers if they'd simply offer a plan between 2GB and 50GB.
Exactly. Given that Dropbox is still on a growth curve and it's time to raise more money, you can bet that Drew is being very shrewd in maximizing his valuation and keeping from needing to raise another round any time soon.
1) Founders may want to take some money off the table.
2) I do not see why DB couldn't end up being a 100B company. They built a huge business with one fucking product. One. I do not even remember the last time I noticed new features. I want to see them starting to move more into backing up/syncing social data as well. There could be a day when all your social data will be simply poured into your DB, and they will do the job at syncing it via all your devices, and social networks.
Go DB.
Edit: Imagine. I take pictures. Put them on my DB. Set privacies (social, private, family, work, etc...). Then Facebook can now directly grab from my DB, Google, Twitter and new startups as well depending on my settings.
Everything is possible. There might for example be a bout of hyper-inflation in the US, making any business more serious than a lemonade stand worth >$100 billion. And that's about it for plausible scenarios. Becoming that valuable in real dollar terms would probably mean being one of the top 25 largest companies in the US.
"They built a huge business with one fucking product. One."
That's not a good sign, that's a bad one. That means if anyone attacks that one product credibly, the whole company is rocked hard. Better to be diversified, broadly speaking. (Details matter, of course.)
What are the odds Google, Amazon, and a not insignificant number of the other backup vendors in the world are planning some form of direct competition?
... actually, this speaks to what sort of concerns me about a bubble right now. Excessive valuations aren't themselves a cause, they have to be a symptom of something else. ISTM there is an excessive optimism over any one company's ability to completely lock up the market forever and ever, amen. To be honest I don't expect one masterstroke that comes in and just destroys Dropbox in three days, but valuating them as if it's just an assured thing that they're going to completely own the home backup market over the next ten years is absurdly optimistic. It's one possible outcome, but not anywhere near the most likely. Valuating Facebook as if it's going to own social networking forever and ever is absurd; look at the very rapid inroads G+ is making, my point being that even if G+ crashes and burns it has clearly demonstrated that it has a chance, and that means other competition has a chance, too. Valuating X as if it's going to own the market is stupid, and a lot of the valuations seem to be based on that; not a reasonable, rational assessment of the possibility that they may own the market or at least do well, but valuations based on the solid, near-100% of that outcome. Seems unwise to me.
And if I remember correctly that linked to just a video of how dropbox works, without Drew actually having a working product (but you couldn't see that on the video).
Kudos to them on a fine product and excellent execution but, wow, this seems pretty frothy. And I don't have a huge problem with some of the other big valuations (Square, AirBnB, etc). But DropBox is going to have to find some other interesting business for investors to see any of that money. Just storing files doesn't seem like it would fit that bill.
We also don't know what percentage YC took. They might have taken a bit more or less than 6%. Regardless, this valuation puts their equity in the $100 million - $350 million range.
All this talk/speculation about how the valuations are done and Amazon S3 costs etc.. Just log in to Dropbox with email ceo@dropbox.com or partner@yc.com on dropbox.com with ANY password and look in their docs folder, S3costs2011.xls and valuation.xls. duh.....
In the past year, Dropbox has lied to it's customers about encryption and how much power Dropbox has over the data (!!!), shown that they deduplicate before encrypting (and that they can view files in your Dropbox and make them unsharable), and finally allowed all Dropbox accounts to be logged into without a password, for four hours.
And yet they are at a $5B+ valuation?
I'm amazed at how dropbox seems to be able to make any mistake and keep going. Very few other companies are capable of this. I'm not sure whether i should congradulate them or be disappointed.
I don't think the 5 billion dollar valuation is out of the ball park considering that they solve a problem that a lot of people encounter including my mother. Their solution is simple and elegant and seems to work. Last statistics I heard they had 25 million users [1] and growing, while I dont know how many of those users are active subscribers I can imagine the conversion ratio is much higher then normal freemium products.
While there has been a lot of anti-Dropbox news in the tech press lately, we need to remember we live in an information bubble that doesn't reach the normal user.
[1] http://techcrunch.com/2011/06/17/billion-dollar-valuatio-clu...