8 ms·

Box faces Make-or-Break Moment

75 points by marban 12y ago

kmfrk 12y ago
Every time someone mentions Box, I find myself obligated to quote one of the funniest passages in recent tech history: the Risk Factors chapter from their S-1 IPO filing: ## Risks Related to Our Business and Our Industry ## ### We have a history of cumulative losses, and we do not expect to be profitable for the foreseeable future. ### We have incurred significant losses in each period since our inception in 2005. We incurred net losses of $50.3 million in our fiscal year ended December 31, 2011, $112.6 million in our fiscal year ended January 31, 2013, and $168.6 million in our fiscal year ended January 31, 2014. As of January 31, 2014, we had an accumulated deficit of $361.2 million. These losses and accumulated deficit reflect the substantial investments we made to acquire new customers and develop our services. We intend to continue scaling our business to increase our number of users and paying organizations and to meet the increasingly complex needs of our customers. We have invested, and expect to continue to invest, in our sales and marketing organizations to sell our services around the world and in our development organization to deliver additional features and capabilities of our cloud services to address our customers’ evolving needs. We also expect to continue to make significant investments in our datacenter infrastructure and in our professional service organization as we focus on customer success. As a result of our continuing investments to scale our business in each of these areas, we do not expect to be profitable for the foreseeable future. Furthermore, to the extent we are successful in increasing our customer base, we will also incur increased losses due to upfront costs associated with acquiring new customers, particularly as a result of the limited free trial version of our service and the nature of subscription revenue, which is generally recognized ratably over the term of the subscription period, which is typically one year, although we also offer our services for terms ranging between one month to three years or more. We cannot assure you that we will achieve profitability in the future or that, if we do become profitable, we will sustain profitability. http://www.sec.gov/Archives/edgar/data/1372612/000119312514112417/d642425ds1.htm#toc642425_2 http://www.sec.gov/Archives/edgar/data/1372612/0001193125141...
- a2tech 12y ago
  Thats hilarious. Why would anyone invest in them? I work at a very large institution that uses Box and I can tell you its no Dropbox
  - JonFish85 12y ago
    It's probably the same people who invested in GoDaddy. These are people who's investments I do not understand in the least!
- ctz 12y ago
  The risks section of an S-1 will always focus upon the worst case outcomes; if they don't and those outcomes are realised, investors will sue. Other recent S-1s have similar dire warnings, with almost identical language.
  - ceejayoz 12y ago
    How many are running a third of a billion dollars in deficit?
    - x0x0 12y ago
      saas companies are a little tricker to value. Acquiring customers for say 1/3 of the clv is a great deal for a saas business but will show up as big losses because the acquisition cost is paid out up front while the revenue is earned monthly over the account life. see eg http://a16z.com/2014/05/13/understanding-saas-valuation-primer/ http://a16z.com/2014/05/13/understanding-saas-valuation-prim... if those customers are sticky, box should do well for themselves; if not, they're in trouble
- dagw 12y ago
  Isn't that just standard language for basically all S-1 filings?
  - wwarren 12y ago
swimbtfly76 12y ago
The whole premise of the article is centered around a single quote from a Morningstar analyst. Does Box really face a make or break moment right now?
- itg 12y ago
  This seems to be on par for tech journalism. Take a quote from some analyst, accept it as truth without doing any further research, and then write a story around it.
  - ams6110 12y ago
    Seems on par for most mainstream journalism these days, tech or otherwise.
- skuhn 12y ago
  Maybe not right now, but soon. Box lost $167mm in FY2015 ($158mm in FY2014). They expect to lose $140mm in FY2016. Their IPO only raised $175mm, so at this rate they will run out of money in FY2017 or shortly after. It's a mystery to me why anyone bought into their IPO, and I think their stock performance since then shows that they will not have an easy time raising additional money from public markets. They spent too much to acquire their customers, and now they only have demanding and expensive customers. The poor economics of their business forced them to raise money on poor terms (which helps to explain their IPO), and now their options for raising additional capital are going to be increasingly sub-optimal.
theklub 12y ago
What happens to all the data if a big cloud provider goes under? They must give their clients time to move the data, no?
- sososoko 12y ago
  they will give time, e.g Ubuntu One file services closed shop and gave some time and even free migration services to another provider.
  - Kurtz79 12y ago
    This was because the company behind Ubuntu (Canonical) shut down the service, they didn't go under themselves. If the cloud infrastrucure is Box's, and they cannot pay the maintenance fees anymore, I would start seriously worrying. In a way, committing to a company whose main business is cloud storage gives you more guarantees they won't shut down the service out of the blue (since it's their only, or main, source of revenue), while committing to a big company with their eggs in more baskets (MS, Google) gives you more guarantees that if they shut down the service you'll be given some time to react.
    - pavel_lishin 12y ago
      Is there insurance coverage for this sort of thing? "In case Company X goes under, Insurance Company Y will pay $Z to cover hosting costs for AA months so that customers can download their data"
- pjc50 12y ago
  It's sold to the highest bidder like everything else. Not quite the same, but if you count Megaupload as a cloud storage provider, it's possible for data to be seized and held inaccessible for years. http://www.wired.co.uk/news/archive/2013-06/20/dotcom-data-deletion http://www.wired.co.uk/news/archive/2013-06/20/dotcom-data-d...
- dagw 12y ago
  Possibly, possibly not, depends on the circumstances. The real thing to remember is that Box, Dropbox etc. aren't a replacement for backups and if them shutting down without warning tomorrow means you lose data then you are Doing It Wrong.
pkaye 12y ago
Maybe they are losing money because they have 1200 employees. Do they really need that many?
ashwinaj 12y ago
I work near their Los Altos office and I see a lot of Box employees (How do I know? They wear the Box tees,shirts hoodies, caps etc.) roaming around the San Antonio shopping center and surrounding areas (Which begs to question what am I doing outside the office? Ha! I have a large floor to ceiling window overlooking El Camino and the SA shopping center). I know it's totally anecdotal, but it looks like their employees have given up too. Do they really need 1200 employees?
codecamper 12y ago
backblaze is 5 bucks a month for unlimited. box is 6 or 7 bucks a month for 2 GB. why would anyone use box?
- atYevP 12y ago
  Yev from Backblaze here -> bit of a different use-case. Box isn't a backup service, and Backblaze isn't a syncing/sharing/collaboration service. But you're right, if they are paying to house their data somewhere, that gets expensive. We can charge so little because of our own infrastructure that we rolled out, but it's not designed for the type of stuff that they are doing. Though, I suppose if you design it right it could be.

75 points by marban 12y ago

kmfrk 12y ago

Every time someone mentions Box, I find myself obligated to quote one of the funniest passages in recent tech history: the Risk Factors chapter from their S-1 IPO filing: ## Risks Related to Our Business and Our Industry ## ### We have a history of cumulative losses, and we do not expect to be profitable for the foreseeable future. ### We have incurred significant losses in each period since our inception in 2005. We incurred net losses of $50.3 million in our fiscal year ended December 31, 2011, $112.6 million in our fiscal year ended January 31, 2013, and $168.6 million in our fiscal year ended January 31, 2014. As of January 31, 2014, we had an accumulated deficit of $361.2 million. These losses and accumulated deficit reflect the substantial investments we made to acquire new customers and develop our services. We intend to continue scaling our business to increase our number of users and paying organizations and to meet the increasingly complex needs of our customers. We have invested, and expect to continue to invest, in our sales and marketing organizations to sell our services around the world and in our development organization to deliver additional features and capabilities of our cloud services to address our customers’ evolving needs. We also expect to continue to make significant investments in our datacenter infrastructure and in our professional service organization as we focus on customer success. As a result of our continuing investments to scale our business in each of these areas, we do not expect to be profitable for the foreseeable future. Furthermore, to the extent we are successful in increasing our customer base, we will also incur increased losses due to upfront costs associated with acquiring new customers, particularly as a result of the limited free trial version of our service and the nature of subscription revenue, which is generally recognized ratably over the term of the subscription period, which is typically one year, although we also offer our services for terms ranging between one month to three years or more. We cannot assure you that we will achieve profitability in the future or that, if we do become profitable, we will sustain profitability. http://www.sec.gov/Archives/edgar/data/1372612/000119312514112417/d642425ds1.htm#toc642425_2 http://www.sec.gov/Archives/edgar/data/1372612/0001193125141...

a2tech 12y ago
Thats hilarious. Why would anyone invest in them? I work at a very large institution that uses Box and I can tell you its no Dropbox
- JonFish85 12y ago
  It's probably the same people who invested in GoDaddy. These are people who's investments I do not understand in the least!
ctz 12y ago
The risks section of an S-1 will always focus upon the worst case outcomes; if they don't and those outcomes are realised, investors will sue. Other recent S-1s have similar dire warnings, with almost identical language.
- ceejayoz 12y ago
  How many are running a third of a billion dollars in deficit?
  - x0x0 12y ago
    saas companies are a little tricker to value. Acquiring customers for say 1/3 of the clv is a great deal for a saas business but will show up as big losses because the acquisition cost is paid out up front while the revenue is earned monthly over the account life. see eg http://a16z.com/2014/05/13/understanding-saas-valuation-primer/ http://a16z.com/2014/05/13/understanding-saas-valuation-prim... if those customers are sticky, box should do well for themselves; if not, they're in trouble
dagw 12y ago
Isn't that just standard language for basically all S-1 filings?
- wwarren 12y ago

swimbtfly76 12y ago

The whole premise of the article is centered around a single quote from a Morningstar analyst. Does Box really face a make or break moment right now?

itg 12y ago
This seems to be on par for tech journalism. Take a quote from some analyst, accept it as truth without doing any further research, and then write a story around it.
- ams6110 12y ago
  Seems on par for most mainstream journalism these days, tech or otherwise.
skuhn 12y ago
Maybe not right now, but soon. Box lost $167mm in FY2015 ($158mm in FY2014). They expect to lose $140mm in FY2016. Their IPO only raised $175mm, so at this rate they will run out of money in FY2017 or shortly after. It's a mystery to me why anyone bought into their IPO, and I think their stock performance since then shows that they will not have an easy time raising additional money from public markets. They spent too much to acquire their customers, and now they only have demanding and expensive customers. The poor economics of their business forced them to raise money on poor terms (which helps to explain their IPO), and now their options for raising additional capital are going to be increasingly sub-optimal.

theklub 12y ago

What happens to all the data if a big cloud provider goes under? They must give their clients time to move the data, no?

sososoko 12y ago
they will give time, e.g Ubuntu One file services closed shop and gave some time and even free migration services to another provider.
- Kurtz79 12y ago
  This was because the company behind Ubuntu (Canonical) shut down the service, they didn't go under themselves. If the cloud infrastrucure is Box's, and they cannot pay the maintenance fees anymore, I would start seriously worrying. In a way, committing to a company whose main business is cloud storage gives you more guarantees they won't shut down the service out of the blue (since it's their only, or main, source of revenue), while committing to a big company with their eggs in more baskets (MS, Google) gives you more guarantees that if they shut down the service you'll be given some time to react.
  - pavel_lishin 12y ago
    Is there insurance coverage for this sort of thing? "In case Company X goes under, Insurance Company Y will pay $Z to cover hosting costs for AA months so that customers can download their data"
pjc50 12y ago
It's sold to the highest bidder like everything else. Not quite the same, but if you count Megaupload as a cloud storage provider, it's possible for data to be seized and held inaccessible for years. http://www.wired.co.uk/news/archive/2013-06/20/dotcom-data-deletion http://www.wired.co.uk/news/archive/2013-06/20/dotcom-data-d...
dagw 12y ago
Possibly, possibly not, depends on the circumstances. The real thing to remember is that Box, Dropbox etc. aren't a replacement for backups and if them shutting down without warning tomorrow means you lose data then you are Doing It Wrong.

pkaye 12y ago

Maybe they are losing money because they have 1200 employees. Do they really need that many?

ashwinaj 12y ago

I work near their Los Altos office and I see a lot of Box employees (How do I know? They wear the Box tees,shirts hoodies, caps etc.) roaming around the San Antonio shopping center and surrounding areas (Which begs to question what am I doing outside the office? Ha! I have a large floor to ceiling window overlooking El Camino and the SA shopping center). I know it's totally anecdotal, but it looks like their employees have given up too. Do they really need 1200 employees?

codecamper 12y ago

backblaze is 5 bucks a month for unlimited. box is 6 or 7 bucks a month for 2 GB. why would anyone use box?

atYevP 12y ago
Yev from Backblaze here -> bit of a different use-case. Box isn't a backup service, and Backblaze isn't a syncing/sharing/collaboration service. But you're right, if they are paying to house their data somewhere, that gets expensive. We can charge so little because of our own infrastructure that we rolled out, but it's not designed for the type of stuff that they are doing. Though, I suppose if you design it right it could be.