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Storage Wars Continue: Dropbox vs Box

VC Experts Intelligence Team


Every entrepreneur who aspires to raise capital looks forward to "talking valuation" with potential investors. Some dream about it, only to wonder, once a deal has closed, what exactly they have agreed to. Many people end a negotiation, agree to terms, and walk away unclear as to how the final valuation of the company was determined. The entire topic of valuation is often shrouded in mystery, largely because of the private nature of the venture capital industry and the extent to which valuation methodology is rarely openly discussed. A valuation is a function of a myriad of elements, none of which will necessarily apply equally when assessing any two companies. Factors that influence a valuation include: [1]

• The current and expected future valuations of comparable companies in the public and, when available, private marketplace

• The supply and demand for capital at the time of financing

• Intangibles unique to a specific company, including the quality of a management team, a company's competitive advantage, and its likely pace of revenue growth and profitability

• The nature and timing of an expected exit for the investor

• The implications of future capital raises, as well as needs to expand a company's options pool on the company's capital structure, going forward

With the confirmation of Dropbox's $325M raise we have calculated a post money valuation at over $9 billion. Looking at their direct competitor Box, we noticed some differentiating factors that set the two seemingly similar companies apart. First, with their Series C round Dropbox has a higher valuation than Box at their Series E-1 round. Second, the Price Per Share is drastically different if you compare both Series C rounds: Dropbox at $19.10 and Box at $1.28. However, interestingly enough the current price per share for Box is $18.00 which is very close to Dropbox's $19.01. As the storage wars heat up we wanted to compare the two companies and have provided data on both companies from the VC Experts Intelligence database below.

[1] "Valuation: Fair Market Value and the Use of Comparables" - Joe Bartlett, Founder and Chairman of VC Experts

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Preferred vs. Common Price Per Share With Valuation






Most Recent Financing Round


DROPBOX INC
Date Amount Valuation Est. Fully Diluted Shares Preferred Price Per Share
01/29/2014 $325.00M $9,379,097,564 491,021,379 $19.10
Round: Series C
Direction: Up Round
Liquidation Preference: Pari Passu
Liquidation Multiple: 0-1x
Stock Type: Conventional Convertible
Capped Participation: No
Anti-Dilution: Weighted Average
Redemption: No
Cumulative Dividends: No
Dividend Rate: 8%
Pay to Play: No
BOX INC
Date Amount Valuation Est. Fully Diluted Shares Preferred Price Per Share
12/06/2013 $100.00M $2,182,989,896 121,277,217 $18.00
Round: Series E-1
Direction: Up Round
Liquidation Preference: Pari Passu
Liquidation Multiple: 0-1x
Stock Type: Conventional Convertible
Capped Participation: No
Anti-Dilution: Weighted Average
Redemption: Yes
Cumulative Dividends: No
Dividend Rate: 8%
Pay to Play: No

Investment Amounts (M)


General Information

Dropbox: Key Management
• Schreier, Bryan - Director
• Houston, Drew - Founder, CEO, Director
• Ferdowsi, Arash - Founder, Director

Address: 185 Berry Street
Geographic Region: Silicon Valley
Industry: IT Services, Software, Business Products and Services
SIC Codes: 7374 - Computer Processing and Data Preparation and Processing Services
NAICS Codes: 518210 - Data Processing, Hosting, and Related Services
Legal Counsel: Fenwick & West LLP
Company Website: http://www.dropbox.com/
Box: Key Management
• Levie, Aaron - Co-Founder, CEO, Director
• Smith, Dylan - Co-Founder, CFO, Director
• Levin, Dan - COO, Director
• Stein, Josh - Director
• Hamid, Mamoon - Director
• Reiner, Gary - Director
• Evan, Dana - Director
• Fu, Winston - Director
• O'Driscoll, Rory - Director

Address: 4440 El Camino Real
Geographic Region: Silicon Valley
Industry: Business Products and Services, IT Services, Software
SIC Codes: 7374 - Computer Processing and Data Preparation and Processing Services
NAICS Codes: 518210 - Data Processing, Hosting, and Related Services
Legal Counsel: Perkins Coie LLP
Company Website: www.box.com/
Dropbox: Investors
• Accel Partners & Co Inc
• Greylock Partners LLC
• Benchmark Capital
• Goldman Sachs & Co
• Index Ventures
• Institutional Venture Partners
• RIT Capital Partners PLC
• Sequoia Capital
• Undisclosed Firm
• BlackRock Private Equity Partners
Box: Investors
• Draper Fisher Jurvetson
• Undisclosed Firm
• U.S. Venture Partners
• Social+Capital Partnership
• Meritech Capital Partners
• New Enterprise Associates Inc
• Hercules Technology Growth Capital Inc
• Emergence Capital Partners
• Andreessen Horowitz LLC
• SAP Ventures
• Bessemer Venture Partners
• Scale Venture Partners
• General Atlantic LLC
• US Venture Partners
• Draper Fisher Jurvetson International Inc
• Mail.Ru Group Ltd
• Telstra Corporation Ltd
• ITOCHU Technology Ventures, Inc.
• Telefonica
• Coatue Management LLC
• Macnica Inc.
• Digital Sky Technologies Ltd
• Mitsui USA
• Mankwitz Kurtz Investments

VC Experts.com, Inc. Disclaimer: The information contained herein is from sources deemed reliable; it does not, however, purport to constitute investment advice nor does VC Experts represent that it contains all information concerning the identified Company deemed necessary or appropriate for investment decisions. VC Experts is neither a broker/dealer nor investment adviser and has no financial interest in the Company analyzed nor in the sale or purchase of any of its securities. The information and data are for reference purposes only and no implied or expressed warranties or assurances as to its accuracy or completeness are furnished by VC Experts. Estimates of valuation are, as indicated, estimates based on such information as we found available, the completeness of which is neither represented or guaranteed; users for any purpose are cautioned and required to undertake and perform their own investigations and due diligence. To the extent that the information incorporates content from specified sources of financial information, VC Experts disclaims any responsibility for the accuracy or completeness of such content.

About VC Experts.com, Inc.: VC Experts.com provides specialized content, valuation & term sheet data on thousands of venture capital financing events, and analytics for managing & modeling private company capital structures. Visit VCExperts.com for more information.




What Do The Deal Terms Mean?

Conventional Convertible Preferred Stock: A type of preferred stock that can also be referred to as "Non-Participating Preferred Stock". This preferred stock typically receives a liquidation preference prior to the common stock, and does not participate on an "as if converted basis" with common stock in any remaining proceeds of a defined "liquidation" event. Upon such a "liquidation" event, holders of Conventional Convertible Preferred Stock must choose whether to receive their liquidation preference or convert their shares to Common Stock in order to participate in the pro rata distribution of assets.

Dividends: The payments designated by the Board of Directors to be distributed among the shares outstanding. The type of share determines the amount. On preferred shares, it is generally a fixed amount. With common shares, the dividend can be omitted if the Directors decide to invest the money in a capital expenditure or if the business is slumping. If the dividend is paid, the amount varies depending on the amount of cash on hand.

There are several types of dividends:

Cumulative—Missed dividend payments that continue to accrue.

Non-cumulative—Missed dividend payments that do not accrue.

Participating—Dividends which share (participate) with common stock.

Non-participating—Dividends which do not share with common stock.

Liquidation Preference/Multiple: The amount per share that a holder of a given series of Preferred Stock will receive prior to distribution of amounts to holders of other series of Preferred Stock or Common Stock. This is usually designated as a multiple of the Issue Price, for example 2X or 3X, and there may be multiple layers of Liquidation Preferences as different groups of investors buy shares in different series. For example, holders of Series B Preferred Stock may be entitled to receive 3X their Issue Price, and then if any money is left, holders of Series A Preferred Stock may be entitled to receive 2X their Issue Price and then holders of Common Stock receive whatever is left. The trigger for the payment of the Liquidation Preference is typically a sale or liquidation of the company, such as a merger or sale of assets.

Anti Dilution Protection: Contractual measures that allow investors in convertible preferred shares an automatic reduction in the conversion price, meaning more common shares on conversion, if a subsequent round is a "down round," thereby mitigating down round dilution.

Pay-to-Play Provisions: A "Pay to Play" provision is a requirement for an existing investor to participate in a subsequent investment round, especially a Down Round. Where Pay to Play provisions exist, an investor's failure to purchase its pro-rata portion of a subsequent investment round will result in conversion of that investor's Preferred Stock into Common Stock or another less valuable series of Preferred Stock.

Post-Money Valuation: The valuation of a company immediately after the most recent round of financing. For example, a venture capitalist may invest $3.5 million in a company valued at $2 million "pre-money" (before the investment was made). As a result, the startup will have a post-money valuation of $5.5 million.


View more terms in VC Experts Glossary