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Dropbox May Not Be LeBron James, but Is Still in the Game

nytimes.com

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Re: Dropbox May Not Be LeBron James, but Is Still in the Game

#71

Post by abcampbell »

Retric wrote: post #64
tyre wrote: post #39

Earlier quoted context omitted.

Better than a loss-maker, but that's a low bar. 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.

A 2bn company is still a unicorn. So, it's only people that got in between ~2bn and 10bn that lost out.

seems interesting that everyone is so concerned with the fallen unicorns than the ones that are still riding high with little to no revenue...

Re: Dropbox May Not Be LeBron James, but Is Still in the Game

#73

Post by jalonso510 »

mattzito wrote: post #66
tyre wrote: post #39

Earlier quoted context omitted.

Better than a loss-maker, but that's a low bar. 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.

I obviously don't know the specifics of the dropbox option pool, but it's not uncommon to have employee options issued at a 409(a) valuation instead of the fundraising valuation. 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.

You're right that options are granted at the 409a price (the common stock price) instead of the price investors pay in the financing, but as companies become more mature, the common and preferred prices usually begin to converge somewhat. In a seed financing you might see common stock valued at 10% of the preferred price, but in a late stage, billion dollar company there will be much less of a discount applied.

Employees granted options recently after the highest valuation financing would probably be completely underwater if the company is really worth $2b.

Re: Dropbox May Not Be LeBron James, but Is Still in the Game

#74

Post by jonknee »

smt88 wrote: post #60
InvisibleCities wrote: post #28

Dropbox has the same problem a lot of the moderately successful unicorns have; it's a good product managed by smart people that would be much better off as a right-sized stable lifestyle business a la 37 Signals / Basecamp than as an attempt at a world-beating massive-growth juggernaut like Google or Facebook. Unfortunately for them (and Evernote, and a whole host of others), once you've signed that deal for the huge…

There is currently no way that 50 people (roughly the number of employees at Basecamp) could support a Dropbox-like product at scale. It's just impossible. At their scale, the technical challenges of maintaining a decent user experience (good transfer speeds, little downtime, no lost data, etc.) are enormous.

Well luckily they have the revenues to have more than 50 people. There's nothing magical about Basecamp's size, it's just never going to be a dynasty.

Re: Dropbox May Not Be LeBron James, but Is Still in the Game

#76

Post by the_common_man »

huac wrote: post #63
InvisibleCities wrote: post #54

Earlier quoted context omitted.

That's a great question, and one I won't pretend to have the answer to. On one hand, Basecamp has carved out a very profitable niche for themselves despite venture-backed competition from Jira and others, so it's certainly possible. I also think that there is a big difference between taking money when you are small with typical angel / seed-round terms and taking late-stage money with 2x VC liquidation preferences an…

Jira isn't VC-backed either ;)

They are going on public

Re: Dropbox May Not Be LeBron James, but Is Still in the Game

#77

Post by zer0defex »

Spooky23 wrote: post #68

> Dropbox is not laying off workers or shrinking; it hired nearly 500 people last year, 75 since the start of this year, and it plans to soon move into a sprawling, custom-designed office building for which it has signed a long-term lease. Honest question: WTF are they doing?

Nail on the head right here. The only thing Dropbox has these days is consumer confidence in it's syncing process. Beyond that, they trail every competitor feature-wise and frankly, they are succeeding despite their management, not because of it. Recent product enhancements have been, let's be honest, mediocre at best across the board and show no signs of that changing anytime soon. They exist now solely due to brand recognition when it comes to cloud file sync'ing and the moment one of their competitors cracks the consumer confidence equation with the brand image to match, Dropbox is done.

Re: Dropbox May Not Be LeBron James, but Is Still in the Game

#78

Post by capkutay »

InvisibleCities wrote: post #28

Dropbox has the same problem a lot of the moderately successful unicorns have; it's a good product managed by smart people that would be much better off as a right-sized stable lifestyle business a la 37 Signals / Basecamp than as an attempt at a world-beating massive-growth juggernaut like Google or Facebook. Unfortunately for them (and Evernote, and a whole host of others), once you've signed that deal for the huge…

> once you've signed that deal for the huge late-stage VC cash infusion at a fantasy-land valuation, there's no going back.

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.

Re: Dropbox May Not Be LeBron James, but Is Still in the Game

#79

Post by malchow »

zer0defex wrote: post #77
Spooky23 wrote: post #68

> Dropbox is not laying off workers or shrinking; it hired nearly 500 people last year, 75 since the start of this year, and it plans to soon move into a sprawling, custom-designed office building for which it has signed a long-term lease. Honest question: WTF are they doing?

Nail on the head right here. The only thing Dropbox has these days is consumer confidence in it's syncing process. Beyond that, they trail every competitor feature-wise and frankly, they are succeeding despite their management, not because of it. Recent product enhancements have been, let's be honest, mediocre at best across the board and show no signs of that changing anytime soon. They exist now solely due to brand…

What if -- hold your breath! -- Dropbox is simply a medium-sized, privately held, profit-generating company that will end up satisfying a certain customer segment and paying dividends to investors? The horror!

Re: Dropbox May Not Be LeBron James, but Is Still in the Game

#80

Post by jalonso510 »

toomuchtodo wrote: post #46
bad_user wrote: post #43

Earlier quoted context omitted.

If Microsoft and Apple weren't able to build good alternatives, what makes people think that they won't fuck up an acquisition? Clearly storage for them isn't a priority. So I don't get it. But then I wasn't much into sports either.

Building something is hard. Writing a check is easy. Apple could easily make the payout contingent on a smooth integration. Apple could even have a foreign subsidiary purchase Dropbox, thereby allowing for full use of its external profits it hasn't brought back to the US due to taxes. That's the benefit of cash. It solves almost every problem.

I'm not a tax expert, but I think dropbox would have to be a foreign company in order for them to purchase it with foreign cash and avoid tax problems.
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