Five Interesting Things in the Box IPO Filing

Cloud storage company Box has 25 million users, large revenues, and larger losses: That cloud storage and collaboration can be useful is hardly in doubt, but the prospects for Levie’s company in particular and the similar but more consumer-focused Dropbox remain unclear. - by Philippe Mora (@philippemora)

Philadelphia, 03/26/14 - We're seeing yet another tech story that defies gravity, everybody is rolling their eyes, and yet, the gravy train is once again making the headlines. Don't get me wrong, Box is a really good product (disclaimer: I've been a dropbox premium customer since 2008) however here we're looking at the numbers. A public offering is fundamentally a funding event aimed at helping a company grow. In order to grow, you must first have a proven business model that is profitable and makes money. Growing a money losing business logically only grows the hole deeper. Today we're back in 1999-2000, when IPOs were all about giving the VCs their money back on the dime of the US investors: Box does not make money, the company's loss is widening, and it is in an industry where its competitors are thriving, and making real dollars. 

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Cloud storage collaboration company Box announced its intention to go public and raise $250 million. We profiled the company in November (see “The Continuous Productivity of Aaron Levie”), when the company’s colorful cofounder, Aaron Levie, summed up his company like this:

“It’s about real-time, collaborative, synchronous information sharing. It’s going to change work. Not just the technology of work, but work itself.”

That cloud storage and collaboration can be useful is hardly in doubt, but the prospects for Levie’s company in particular and the similar but more consumer-focused Dropbox remain unclear (see “Dropbox Founder Simplifies the Cloud”). Here are five nuggets from Box’s S-1 filing with the Securities and Exchange Commission that shed light on how the company is faring and the challenges it faces:

1. Box has 25 million registered users and counts 40 percent of Fortune 500 companies as paying customers. The filings don’t break out how many active users the company has or how many of the 25 million are paid accounts. Other figures related to its user group suggest that Box is set to become more focused on mobile work: the company says that 2.5 million users accessed Box on a mobile device in the three months running up to the end of January 2014–an increase of 73 percent over the same period in the previous year.
2. Revenue is sizeable and growing fast. Box reports revenue of $124 million in the 12 months ending in January, more than double the year before.
3. Losses are also sizeable and growing. Box had a net loss of $169 million for the 12 months ending in January. That’s 33 percent higher than the previous 12 months, when net losses were $113 million. Tech news site Re/code notes that:
   “Even after backing out $46 million in annual research and development costs, Box has been burning through cash at a rate of $17.5 million a month on its operations alone.”
4. Box doesn’t own and run its own data centers. The company stores its users’ files in two third-party hosting facilities in California and a second copy of all data in a third rented facility in Nevada as a backup. Those three facilities use a total of 3.6 megawatts of power (that’s about enough for 3,600 homes). Another copy of all user data is held in a rented cloud storage platform on the East Coast.
5. The company is fighting both established computing giants and newer startups. Box’s S-1 claims it has many competitors but singles out existing enterprise giants EMC, IBM, Microsoft, and Citrix, as well as younger, more consumer-centric companies Google and Dropbox.

[ Read More Here. Thank You MIT Technology Review 03/24/14]

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Philippe Mora

Hughes Creative LLC

Managing Director

Philippe Mora is a co-Founder of Hughes Ventures (twitter @hughesventures) and a Managing Partner at Hughes Creative (hughescreative.net), a business consulting firm based in San Francisco and Philadelphia. Obsessed with Technology, Sports, Fitness and Wellness, Philippe is an entrepreneur, a startup advisor and a speaker.

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