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Dropbox buys HelloSign (YC W11) for $230M

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Re: Dropbox buys HelloSign (YC W11) for $230M

#151

Post by tomasien »

fjp wrote: post #136
bufferoverflow wrote: post #124

Earlier quoted context omitted.

Revenue is almost meaningless. At least use a multiple of profits or of net income. You know, you can have a crazy revenue, and still lose money, and your company can be bankrupt in a few months.

Those issues end up being reflected in the multiple. Revenue * multiple is just a common way of talking about it, especially because companies within the same industry tend to have similar multiples. In reverse if you notice two public (since the information is easy to find)companies with seemingly-similar businesses that have very different multiple, you can start looking into why, and the quarterly financial report…

correct

Re: Dropbox buys HelloSign (YC W11) for $230M

#152

Post by muhneesh »

nostromo wrote: post #83
chatmasta wrote: post #75

Given DocuSign's market cap of $8B, does this price seem low?

DocuSign makes like $700 million a year. HelloSign makes less than $4 million a year (according to Crunchbase at least). If Dropbox was buying revenue then by Docusign's multiple they handsomely overpaid for HelloSign. But they're not buying revenue, so who knows if they over or underpaid.

CB is usually outdated - unless they're reporting their revenue number or it leaks, it's just a guess.

Re: Dropbox buys HelloSign (YC W11) for $230M

#153

Post by eridius »

jblow wrote: post #122
jph wrote: post #113

Earlier quoted context omitted.

Surprisingly, it turns out that using security based on a URL with a random string is /not/ security by obscurity. The security pattern of a URL with a random string is security-equivalent to a pubic username and a random string password, and also equivalent to the security pattern of a bearer token: so long as the URL is shared only with authorized users, it's the same security hardness. The pattern can tune the sec…

Browsers do not treat URLs as secure. If you just go to the page and happen to be live-streaming on Twitch or whatever, anyone can access the document because the information is printed visibly on the screen. This makes it starkly different from a password.

And if you type your password onto a keyboard and happen to be live-streaming your physical self on Twitch or whatever from an angle where people can see your hands, they know your password too.

Re: Dropbox buys HelloSign (YC W11) for $230M

#154

Post by bogomipz »

tomasien wrote: post #148
bogomipz wrote: post #119

Earlier quoted context omitted.

In the formula you provided how is the number for the multiple arrived at? Is that the multiplier that will be realized at some future date based on the current rate of growth? If so what would that future date be - the next round of funding, an IPO, something else?

It depends on the margin of the revenue and the growth rate primarily

So is there a generally accepted formula for calculating that given those two inputs?

Re: Dropbox buys HelloSign (YC W11) for $230M

#155

Post by nikolay »

Spooky23 wrote: post #126
tombert wrote: post #92

I don't mean to ask this ironically; how do these companies come up with these numbers during a sale? Jet.com was sold for $3 Billion, but Craftsman Tools was sold for only $900 Million. I don't really know anything about HelloSign, but can someone tell me roughly why they might have come up with the $230M number?

Esignature is a huge business and the incumbents have a high cost structure or a history of excessive price increases. (Would you want to build your strategy around Adobe?) This gives Dropbox something to anchor against. Both Google and Microsoft improve every quarter, while Dropbox is mostly the same, with the same premium pricetag. I could move my whole company to Dropbox for a couple of million, OneDrive is $0.

Yeah, but I get a lot more value from DocHub. HelloSign is not that good as a product anyway. Lame purchase, which would only increase my cost of Dropbox, which will force me to move to Google One. So, essentially, Dropbox is stupid squared. DocuSign and Adobe are still leading in the e-signature space.

Re: Dropbox buys HelloSign (YC W11) for $230M

#156

Post by lotsofpulp »

gruez wrote: post #40
chrisseaton wrote: post #26

Earlier quoted context omitted.

Because the ceremony of a signature has been socially recognised for thousands of years. That's what our society expects.

>Because the ceremony of a signature Come to think of it, I remember "signing" pdfs in adobe reader by clicking a form field that produced a signature similar to[1]: John Smith Digitally signed by CN=John Smith [...] This would satisfy the "ceremony" requirement. According to adobe[2] it looks like you can do this with self signed certificates, so it's completely free as well. But this option is significantly less po…

MacOS’s preview app also allows you to e-sign.

Re: Dropbox buys HelloSign (YC W11) for $230M

#157

Post by mbesto »

dpark wrote: post #147
mbesto wrote: post #140

Earlier quoted context omitted.

> Revenue * multiple is just a common way of talking about it, especially because companies within the same industry tend to have similar multiples. This is the common way media talks about it, either because they are (1) uniformed or (2) they only hear of top line revenue. Companies are typically acquired for EBITDA * Multiple. However when their is a "strategic" acquisition (which this one is) then there is all sor…

All acquisitions are “strategic”. Even holding companies acquire assets that they believe accrue toward their strategic vision. The EBITDA calculation is at best a sanity check for the acquirer.

> All acquisitions are “strategic”.

I'm just using industry nomenclature. When people sell to a PEG, they don't say "we're selling to a strategic".

Re: Dropbox buys HelloSign (YC W11) for $230M

#158

Post by mbesto »

dpark wrote: post #146
mbesto wrote: post #141

Earlier quoted context omitted.

> but can someone tell me roughly why they might have come up with the $230M number? M&A guy here. Generally companies are valued at EBITDA * Multiple. However when it's a strategic acquisition (which this is) then they tend to adjust EBITDA around an investment thesis. For tech companies, this adjustment can be fairly drastic and multiples can get crazy (general market is about 9x right now, but 15x+ for software pr…

That’s all fine and dandy but EBITDA * X = Y is solvable for literally any Y so long as EBITDA is nonzero. You just have to pick the “right” X, which makes this formula essentially meaningless. You can have a negative EBITDA and still be purchased for millions (indeed this is “common” for startups). The reality is that the buyer pays an amount they think they can make back in some reasonable timeframe by some means.

> pays an amount they think they can make back

You're correct - there is some ROI associated with the acquisition price, and that ROI is generally driven by earnings potential, and hence the adjusted EBITDA.

Re: Dropbox buys HelloSign (YC W11) for $230M

#159

Post by dpark »

mbesto wrote: post #158
dpark wrote: post #146

Earlier quoted context omitted.

That’s all fine and dandy but EBITDA * X = Y is solvable for literally any Y so long as EBITDA is nonzero. You just have to pick the “right” X, which makes this formula essentially meaningless. You can have a negative EBITDA and still be purchased for millions (indeed this is “common” for startups). The reality is that the buyer pays an amount they think they can make back in some reasonable timeframe by some means.

> pays an amount they think they can make back You're correct - there is some ROI associated with the acquisition price, and that ROI is generally driven by earnings potential, and hence the adjusted EBITDA.

Right. The "adjustment" seems to have such a wide range that it makes it almost meaningless, though. Or put another way, I feel like Price/EBITDA produces a number that can be valuable for the sake of sanity checking an offer. It doesn't seem valuable in the other direction. i.e. The multiplier is an output rather than an input to the formula. Picking a multiplier first is basically arbitrary. Comparing the multiplier a price yields has some value but doesn't really drive the price choice.

Re: Dropbox buys HelloSign (YC W11) for $230M

#160

Post by Spooky23 »

nikolay wrote: post #155
Spooky23 wrote: post #126

Earlier quoted context omitted.

Esignature is a huge business and the incumbents have a high cost structure or a history of excessive price increases. (Would you want to build your strategy around Adobe?) This gives Dropbox something to anchor against. Both Google and Microsoft improve every quarter, while Dropbox is mostly the same, with the same premium pricetag. I could move my whole company to Dropbox for a couple of million, OneDrive is $0.

Yeah, but I get a lot more value from DocHub. HelloSign is not that good as a product anyway. Lame purchase, which would only increase my cost of Dropbox, which will force me to move to Google One. So, essentially, Dropbox is stupid squared. DocuSign and Adobe are still leading in the e-signature space.

I'm with you, and just moved to Google One myself (after subscribing for almost a decade). The value for dollar just isn't there for most use cases -- it's not worth paying 2x for a product missing key features like fulltext search and dealing with the constant, never ending upsell.

Dropbox seems to be hyper-focused on a market of graphics and other professionals where the speed to sync is their primary benefit. That seems like an unwise strategy to me, but I can see where those users would benefit from an esignature solution.

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