Dropbox To Raise $250M Based On $8B Valuation

dropboxBy Dropbox (https://www.dropbox.com/branding) [Public domain], via Wikimedia Commons

Dropbox is planning to launch another round of fundraising, this time aiming for $250 million based on a company valuation of $8 billion. The money will be used to build the capacity and sales team necessary to win corporate clients instead focusing on individuals, reports Ashlee Vance for Businessweek.

Value of Dropbox has doubled side fundraising

Dropbox has already raised $257 million over the last five years, and CEO Drew Houston claims that it hasn’t spent all the money it has on hand. Still, for a company that doesn’t have any net revenue, $8 billion seems pretty ambitious. This assumes that the value of the company has more than doubled since the last round of fundraising, a bold statement when it has mostly just increased the number of free users.

“What we can say is that with over 200 million users and 4 million businesses, Dropbox has continued and strong momentum,” says Dropbox spokesperson Ana Andreescu. But the battle for corporate sponsors puts Dropbox up against heavyweight IT companies like Google Inc (NASDAQ:GOOG) that already have enormous capacity and a deeper product lineup. While Dropbox’s user base has been growing incredibly fast, the number of free accounts isn’t necessarily a good measure of how many people or companies will be willing to pay for your services.

Dropbox and Twitter comparison

At the same time, comparing Dropbox to a company like Twitter Inc (NYSE:TWTR), which had an enormously successful IPO earlier this month, is unfair because it’s at least clear how Dropbox intends to make money. Individual accounts with limited storage and features get people to use the platform, and a premium service (or range of services) brings in the money. The question is whether Dropbox can pull it off.

Sequoia Capital, Y Combinator and other serious investors have given money to Dropbox in the past, and since they aren’t filing for an IPO we won’t get to see the level of detail that potential investors have in front of them, but this still seems like another sign of bullishness in the tech sector. We’re nowhere near the hysteria of the dot com bubble, but Dropbox is probably smart to raise some cash while investors are in such a good mood.

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About the Author

Michael Ide
Michael has a Bachelor's Degree in mathematics and physics from Boston University and Master's Degree in physics from University of California, San Diego. He has worked as an editor and writer for several magazines. Prior to his career in journalism, Michael Worked in the Peace Corps teaching math and science in South Africa.

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