OK so it was the worst kept secret in Silicon Valley, but Box finally confirmed it’s going for its long-anticipated IPO, hoping to raise $250 million.
But that news also meant opening the box on some uncomfortable detail on the firm’s inner workings.
So we learned:
- Revenue for the year ended January 31, 2014 was $124 million, which is up 111%.
- Net losses were $168 million over that period, compared to a loss of $112 million the year before
- Sales and marketing expenses were $171 million - so higher than the overall revenues.
The firm also cautions:
“We have a history of cumulative losses, and we do not expect to be profitable for the foreseeable future.”
Citing competition as including Dropbox, Google, EMC, Microsoft, and Citrix Systems, the IPO states:
“Many of our competitors and potential competitors are larger and have greater name recognition, much longer operating histories, larger marketing budgets and significantly greater resources than we do.”
What has raised eyebrows the most is the share allocation within the company.
Venture-capital firm Draper Fisher Jurvetson, one of Box’s earliest investors, owns 25.5% of the company—the single largest stake followed by U.S Venture Partners with 13%; General Atlantic on 8.4%; Scale Venture Partners, which has 5.6%; and Meritech Capital Partners with 5.1%.
As for co-founders Aaron Levie and Dylan Smith - just 4.1% and 1.8% respectively, indicative of how much of the company has been sold off to finance expansion.
It’s a far cry from the firm’s first angel investment back in 2005 when Mark Cuban, the entrepreneur owner of the Dallas Mavericks basketball team, made a $350,000 investment in 2005. He fell out with Levie a year later and sold his stake to Draper Fisher.
On Monday Cuban tweeted:
“I wish @BoxHQ the best, but I would combust if 8 years in I was responsible for $169mm in losses against less revs. I hope IPO gets them going.”
Over at research house Techmarketview, Angela Eager reckons that Box will follow a familiar path:
“No doubt it will follow the pattern of other cloud-based company IPO’s and achieve its initial goal, then see shares rocket before sliding downwards.”
But she sees one merit in Box going to market now:
“Box has stolen a march on Dropbox, who is expected to IPO before long. For all of these [cloud storage] providers, the race is on to secure enterprise customers so expensive resource allocation will be applied accordingly.”
Well, the game's afoot now.
This one will be very closely watched by Wall St and the Valley alike.
Disclosure: at time of writing, Box is a partner of diginomica.