Dropbox IPO Could Come Soon, Goldman Sachs May Be Appointed Advisor

Dropbox Inc. is expected to hire Goldman Sachs as lead advisor for an initial public offering it is planning to roll out soon, Bloomberg reported Friday.

The file sharing company is rumored to have a valuation of $10 billion, and raised $600 million debt financing from JP Morgan Chase & Co. among other investors in March. Till date, it has raised $1.7 billion in funding. The company passed an important milestone in January — it became cash flow positive with $1 billion annual revenue run rate i.e. revenue for a short period extrapolated for a whole year.

Despite companies such as Google and Apple offering their own cloud storage plans, Dropbox is still way ahead of the competition. Its major rival Box had only around $300 million in revenue in the fiscal year 2016. Dropbox stated in March 2016 that its user base had crossed 500 million.

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Dropbox’s consumer usage is mostly among loyal users who still use it to store photos and other files in the cloud.

And now might be the right moment for the company to venture into an IPO, since it has been operating at high profit rates despite not offering a unique product. Its CEO and co-founder Drew Houston stated in April the company was still profitable post taxes.

"It’s rare for software companies to be operating at our scale with our level of profitability and to be growing at the rate that we are," Houston told Bloomberg Television at the time.

In January, business website Mattermark called its projected IPO the "shiniest unicorn IPO of 2017."

The MIT Technology Review stated the company’s revenue as of January was at almost double the level it was in 2014.

“Investors may be in for a pleasant surprise. According to people familiar with the company’s finances, sales are running at more than $750 million a year, up from around $400 million in 2014. That’s thanks in part to growing sales of Dropbox Business, a souped-up version of the free app that costs $150 per employee per year. The company has been cash-flow positive since early 2016, even as it has made heavy investments in engineering, sales, and IT infrastructure,” it said.

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The way Dropbox has been able to do this, according to TechCrunch is because of two reasons — its enterprise users and ease of simplicity. The company has also been diversifying its offerings — it launched its note-taking app, Paper, in January. In addition to this, Dropbox intends to offer business softwares such as content creating systems.

The Dropbox IPO is expected to be the second-biggest IPO of 2017 after the one offered by Snap Inc.. While Snap’s IPO actually outperformed expectations, whether Dropbox matches expectations remains to be seen.