Dropbox IPO Also Coming Soon?

According to a recent IDC report, Worldwide Enterprise Storage for Public and Private Cloud 2011-2015 Forecast: Enabling Public Cloud Service Providers and Private Clouds, cloud computing will drive IT spending over the next five years. Overall spending by public cloud service providers on storage hardware, software, and professional services is projected to grow annually at 23.6% from 2010-2015. During the same period, enterprise spending on storage for the private cloud is projected to grow at CAGR of 28.9%. Together, both the public and private cloud storage segments are expected to account for $22.6 billion in spending worldwide. But it is not only the enterprises that use cloud storage services. Many individuals and smaller groups are also reaping the benefits of being able to store data on the cloud.

Dropbox’s Financials
California-based Dropbox is focused on addressing growing demand among these smaller users. Dropbox was founded in 2007 by university graduates Drew Houston and Arash Ferdowsi. The two MIT students at were inspired by the need to offer a service that let people access files over multiple computers, thus avoiding the need for external drives and email attachments. The idea appealed so much to Ferdowsi that he dropped out of MIT with a semester to go to help develop Dropbox.

The company received its seed funding of $1.2 million from Y Combinator. Since then, they have received nearly $257 million in funding from investors, which include Sequoia Capital, Hadi Partovi, Ali Partovi, Pejman Nozad, Accel Partners, Index Ventures, RIT Capital Partners, Valiant Capital Partners, Benchmark Capital, Goldman Sachs, Greylock Partners, and Institutional Venture Partners. The latest round of funding in October last year helped them raise $250 million at an impressive valuation of $4 billion.

Dropbox claims to have 45 million users across the globe storing an average of 1 billion files every three days. Through a simple download, Dropbox users are able to access their files across multiple OS capable to handle both computers and mobile devices. Dropbox claims that their users can access a file across 18 different operating systems, four browsers, and three mobile OS. Further, users can also share their data and media content with family and friends. Dropbox lets their members use 2 GB of data storage for free and charge a monthly fee for additional capacity. They normally charge $19.99 a month for storage space of up to 100 GB. Analysts expected Dropbox revenues to be over $240 million last year even though 96% of their user base are free users.

Dropbox does not reveal its financial performance, but the strength of their business model can be assessed by the fact that Apple themselves had offered to buy out the company a couple of years after inception. A recent report on Forbes revealed that Steve Jobs was interested in Dropbox’s business and did make an unsuccessful attempt to buy them out.

Dropbox’s Growth Plan
Dropbox has been focused on international expansion and recently tied up with Japan’s leading wireless carrier, Softbank. According to the agreement, Samsung Ericsson mobile phones on Softbank’s network will now come preloaded with Dropbox’s Android app. Softbank’s customers will also get an additional 1GB space free of charge. Dropbox hopes to use this Samsung–Ericsson partnership to expand their footprint in the Asian and European markets.

But while they expand, they will have to keep a tighter check on security. Last year, their security measures came under question as their systems let users log on to their accounts even with an incorrect password. A bug in their authentication system had led to the problem, which lasted nearly four hours.

Despite such incidents, the company’s prospects still appear strong. CEO and co-founder Drew Houston sees opportunity in the fact that their 45 million user base is still a tiny share of the 2 billion phone, computer, and Internet users worldwide. Dropbox have not conveyed any plans to go public, but analysts expect them to file for an IPO soon.