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Dropbox founder Drew Houston responds to IPO rumours, reveals new collaboration features

Tom Macaulay | Dec. 8, 2016
Rumours of an IPO are swirling around Dropbox, with speculation linking the company to a potential valuation from Wall Street. Internet entrepreneur Drew Houston addresses the speculation, and details his strategy to take Dropbox from its file-sharing origins to a collaboration platform.

Speculation has grown in recent months that an initial public offering (IPO) for Dropbox could be imminent, with reports that the company has already discussed the possibility of an listing in 2017.

Dropbox founder Drew Houston has neither confirmed nor denied the rumours until now, but he has made some revealing remarks on the merits of each option.

"To build a great public company, you want to build a great company first, so that's what we're focused on," he told reporters at the company's London offices last week.

"It ends up being more of an implementation detail or capital-raising detail in some ways, but it's a pretty complex package deal, where on the one hand through public you can get all the liquidity you need and access to the capital markets [...] and all the other reasons that people go public.

"But yeah, it also comes with a lot of expense and overhead and distraction and can draw your focus away from the long term."

Competition in the market

Dropbox's arch-rival Box made the switch in January 2015, 10 months after its original S-1 filing. The company presold its stock at a bargain IPO price of $14 and saw the stock soar initially, but it soon dropped back down. It was trading at $14.73 a share as of 5 December.

Tech companies in general have endured volatile public listings recently, as investors shift towards safer bets. IPO listings have been notably lacking in 2016, as the overpriced funding rounds that precede public listings limit potential profit for investors.

Houston will have watched his adversary's turbulent experience with interest. Dropbox has faced its own accusations of being overvalued at the $10 billion figure it was awarded in a 2014 funding round, and he admitted that staying private brought benefits of its own.

"We alongside other companies have been able to access, or get a lot of benefits of accessing the capital markets or have been able to get some of the same shareholders," he says, pointing to institutional shareholders Fidelity and T Rowe Price that have long-term interests in Dropbox.

"We've been able to do things like meet our community needs and meet our financing needs through the private markets, and then we've found investors to be pretty excited about participating earlier in the company's progression even if we're not public."

Watershed year

Dropbox has enjoyed a year of significant milestones. The company crossed 500 million registered in 2016 and 200,000 paying customers. It also turned cash-flow positive in April, a major investment landmark.

"As we like to say, we are funded by our customers these days much more than our investors," says Houston. "Being free cash-flow positive is an important step on the way to being profitable."

 

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