Dropbox $8 Billion Valuation – Is It Justified?

Dropbox
Drew Houston is the CEO of Dropbox, which has been recently valued at $8 Billion. Is it justified?

Dropbox is the latest internet phenomenon that is boasting ridiculous figures when it comes to valuation. The company has raised a jaw-dropping $257 Million so far, and all of that in just five years. According to some reports the company will be seeking to raise upwards of $300 Million in the upcoming weeks. This move, combined with information that Dropbox will be seeking an $8 Billion Valuation leaves many cautious investors asking, “is it justified?”

The trend of ridiculous money being thrown around in the tech world lately might indicate that the price-tag that Drew Houston (Dropbox CEO) and the company is seeking might not be that outlandish. Since the mid-2000’s, with the advent of social networking sites like Myspace and later Facebook, the price that internet start-ups have been able to command has been steadily on the rise.

Facebook took the social networking world to new heights in terms of global membership and, with the recent IPO, opened up a new frontier of tech valuations. Most recently the Twitter IPO has been responsible for encouraging web-based social networking and IT solutions companies like Dropbox to aim for the stars when setting growth and valuation targets. That kind of thinking is certainly present in the statements by Dropbox regarding its new target of $8 Billion after this round of fund-raising.

Dropbox
Dropbox is serious about its $8 Billion price-tag.

 

There was once a time, back before the “modern era”, when computers were not even in the average persons sci-fi fantasy. A time when everything was done on paper, and kept in libraries or file cabinets. Sensitive documents had to be stored and protected. When the computer came around there were worries about a loss of security, perhaps not entirely groundless. That argument was long before the days when ideas like Dropbox could become a reality however.

Now, it seems that cloud storage is to present day mainstream IT, what the computer was to the old file cabinet. Dropbox might be a bit ambitious, leaving skeptics viewing its $8 Billion Valuation and wondering if it’s justified. However, Drew Houston and the company are doing everything they can to back up their big talk. Last week the company acquired a team of tech-geniuses from the San Francisco start-up PiCloud. Moves like this suggest that they may not consider their recent valuation goals as unrealistic.

How are these numbers possible? Well, even though the recent news of the new IT-revolutionizing start-up seems big, consider the precedent that has already been set by other internet giants. Youtube commanded huge money almost overnight, and all that without much if any revenue to show in the beginning. Facebook cracked into to new heights for the potential money that social networking could command. Most recently and perhaps the most amazing, Twitter with no legit profits to show drew a huge IPO windfall. So when Dropbox, which actually earns some money,  claims $8 Billion Valuation, the question “is it justified” certainly seems to tilt in the companies favor.

Specifically how much earnings will be pulled in this year is still in question. Although there are conflicting reports, rumors are that earning will exceed $200 Million this year, which suggests that Dropbox may be more justified in its high valuation than Twitter is in theirs.

We will see what kind of future ultimately awaits the fast moving upstart Dropbox, and just how much they will be worth as the years go by. Their recent valuation is drawing the attention of many, but it may be a trend that we will see more of as  innovation continues to rapidly change the face of tech around the world. Dave Goldberg of SurveyMonkey provided some insight into how these kinds of prices were being reached so quickly saying, “we are seeing that these are global businesses being built very quickly at scale.” So the latest news in this tech trend is Dropbox and its $8 Billion valuation, and we’ll watch to see how the markets answer the question, “is it justified?”

By Daniel Worku

Network World

Businessweek

Forbes