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- Over the summer Dropbox raised a $7.25 million Series A round from Accel, adding to $1.5 million in seed money it brought in from Sequoia Capital and Y Combin

• antidaily 17y ago
  Marketing? They could be huge if more people knew about 'em.
• teej 17y ago
  Raising money isn't always a reaction to bleeding money. Maybe they've nailed down their customer LTV and customer acquisition costs. In that case, they'll want a big stack of cash to start buying up customers whereever cost < LTV.
  • netcan 17y ago
    Maybe they did nail down the lifetime value of a customer. But I doubt they nailed down the acquisition cost. It's not like you can pay to have your customers refer more friends.
    • qeorge 17y ago
      Its not as hard as you might think. I'm sure Patrick (patio11/bingocardcreator.com) knows the cost of acquisition for 1 customer. If you're good with AdWords, its pretty doable. Anecdotally, I've heard Amazon shoots for $23. Thus they'll put basically unlimited money into any system bringing in customers for < $23. You can run into a problem of volume though, i.e., you overfish the pond. Then you'll need to find new sources of customers (e.g., Facebook ads if you've only done SEM).
      • netcan 17y ago
        Sure. With adwords you can know the COC. But not with referrals.
        • qeorge 17y ago
          Perhaps not, but you can calculate the chance that a given customer will refer a friend, and factor that into their lifetime value. Even more interesting, you can see which actions are predictive of referring friends (e.g., leaving a comment on the suggested features list). You can use the same strategy to predict the conversion rate from free to paid.
        • jfarmer 17y ago
          A referral effectively reduces the cost of acquisition, and you can calculate the extent to which it does that. http://20bits.com/articles/almost-viral-a-hybrid-acquisition-strategy/ http://20bits.com/articles/almost-viral-a-hybrid-acquisition...
      • patio11 17y ago
        George literally stole the words out of my mouth. $12 to $15 via AdWords, incidentally. Unhappily for me, I'm capable of saturating all of Google's advertising inventory conveniently available at $15 per customer. (Its sort of like oil: the more you are willing to spend, the more exists in the world. I guess if I were an environmentalist I would describe my current state of affairs as Peak Bingo, but with some sustained effort into AdWords I could probably locate more sources of customers between $15 and $30, or alternatively in different mini-verticals.)
        • qeorge 17y ago
          Thanks for sharing your customer acquisition cost. Do you ever buy traffic from anywhere else or are you happy with the volume from AdWords? BTW, still chuckling at Peak Bingo. Well put.
          • patio11 17y ago
            Today is November 25th. A click on November 25th turns into a purchase by, on average, November 27th. I have to pay Google on December 20th, with a credit card. My next statement date is January 7th, and my payment is due somewhere around January 20th. So, basically, if I get N clicks today, I get $30 two days from now and have to pay $15 two months from now. This is a long way of saying that, while I'm happy with my volume, I'd be more happy with, oh, enough volume to hit the limits on my credit cards. In fact, I'd avail myself of pretty much every source of credit less odious than juice loans from yakuza or opening an account with CapitalOne. I have paid for advertising elsewhere. The main issue is that a) Google has a de-facto monopoly on it in no small part due to the fact that b) their competitors s<%= "u" * (10 10) %>ck. Microsoft, for example, takes every bit as much work to get right as AdWords does, but you have to do it within their application, and they have less than one tenth the inventory Google does. To add insult to injury, it is at higher prices. I got a note in the email from them that my credit card had expired and could not bring myself to logging in to give them the updated credit card number, that is how useless they are to me.
            • qeorge 17y ago
• patio11 17y ago
  I wonder why they need so much money. Pretend I have a machine where you insert a quarter and, a year later, a dollar pops out. Do you a) insert the quarter you have in your pocket, wait a year, and then put all four quarters back in or b) go to the bank, borrow as much money as they'll give you, get it changed into quarters, and start stuffing the machine? A freemium startup which has a good idea of what customer lifetime value is and what customer acquisition costs are is, essentially, a quarter-into-dollar machine. This factor becomes particularly acute when the ultimate goal of the startup is to sell their quarter-into-dollar machine for some multiple of the number of dollars it has produced in the most recent year. [Edited in response to the above post going grey: Please do not downvote the post above me. He isn't being malicious. The big picture strategic view is non-obvious and many smart people need to have it explained a few times for it to sink in. If you wish to correct the misconception, either explain it or upvote an explanation.] [Edited to add: P.S. The expert on "(LTV > COCA) + source of capital => blow the doors off" is Dharmesh Shah. He has been banging the drum for a few years now. Example: http://tinyurl.com/doors-blown-clean-off http://tinyurl.com/doors-blown-clean-off ]
  • netcan 17y ago
    I appreciate the tone. That aside, you are assuming growth is constrained in some way that money relieves. IE they need money to promote or they need money to support their free users until they mature into premium users. Either one of those is a sufficient answer.
    • mattmaroon 17y ago
      What he's saying is that perhaps Dropbox can buy a user for $1 (via adsense, whatever) and make $2 off them. In that case, it makes sense to take all the money you can and plow it into customer acquisition. At some point the law of big numbers becomes a limiting factor, but probably not at any point that would make it unwise to take $7m.
      • uuilly 17y ago
        Not to mention that there is a lot more that can be done in that space from an engineering perspective. Files syncing could be just the beginning. What about consumer MVC from files to web services? Edit a photo on iphoto and it automatically changes on every service that uses it. The "data keeper" role is like an octopus, big in the middle, tentacles everywhere. I could imagine a world where that role becomes as important if not more than the OS / services.
• doug_m 17y ago
  I think Dropbox is valuable enough to become ubiquitous but one imagines they need to grow to a certain size before such a feature exactly is rolled into a version of one of the big operating systems. Not that what they've done isn't technically difficult of course, but it just seems like something so valuable it might be on a Chrome wishlist. Cool thing if the guys who make the software are reading this - started a new job earlier this year at a mostly non-software company managing a few development projects. I doubt most of my colleagues are aware of this startup culture or have heard of .NET much less Y Combinator. First week "You've got to see this program we have the sales team using, called Dropbox... its tremendous there's about a thousand things we can use it for". Not only are they using it its their "we're showing this off to the new guy" thing.
  • hyperbovine 17y ago
    It's unlikely that one of the big operating systems would come forth with a feature that worked with all of the other big operating systems as well.