What’s in store for Dropbox after receiving a big pile of cash

Wed Oct 19, 2011 11:38am EDT

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Dropbox, one of the most watched companies in Silicon Valley, officially announced on Monday that it raised an astounding $250 million in a Series B round led by Index Ventures, reportedly valuing the virtual file cabinet company at a whopping $4 billion.  This massive round stands in contrast to the first bit of money raised — about  $7 million –  from early investors including Sequoia Partners, Accel Partners, and Ali Partovi.

Founded in 2007, Dropbox is virtual storage that allows consumers to access documents, photos and videos from several devices. So if you happen to snap a picture on your Android operated phone and store it to your Dropbox, you can pull that same photo on your iPad or laptop, for example. It eliminates the need for thumb drives or even email as long as you keep a storage box on each device.

The company has about 45 million users. Dropbox provides a certain amount of storage for free before charging people for extra capacity. People can also get more storage by referring friends. Dropbox won’t reveal revenue or profit figures.

Drew Houston, the co-founder and CEO of Dropbox, spoke with Reuters yesterday about the pile of cash the company just landed and what they plan to do with it.

It’s a huge jump in funding from $7 million to $250 million. Why?

DH: It was completely opportunistic. We are profitable. We actually don’t need the money. The way we think about is a couple of things. Last year we had millions of users, this year we have tens of millions of users, soon we will have hundreds of millions of users. We are scaling to this other level. For example, for many people it’s great you can take pictures and HD video with your phone but how many people have seen that on their TV? Or if you leave that phone in a cab then it takes baby pictures with it. And so people love all the things that technology can do but it brings with it other problems and we think we can contribute a lot in solving them.

 

I think one thing people don’t realize is that we are so early in terms of our audience and in terms of what we are building. Take a number like 40 million users. That is actually only a couple of percent of the 2 billion people that have phones or computers or Internet connection all of who ought to be using Dropbox. We’ve actually reached a small percentage of people we want to reach. The ability to get their as fast as possible and be flexible through partnerships or acquisitions or grow the team aggressively and just as importantly to bring people around the table who have built these iconic companies – Danny Rimer at Index who is on the board of Skype, Reid Hoffman at LinkedIn and Matt Cohler at Benchmark who is early on at Facebook We just thought it was a really interesting opportunity for the company.

 

Is part of this money  going to go towards customer acquisitions?

DH: Probably not directly. We don’t advertise right now. We do things by word of mouth and viral growth—we might do experiments. That is the thing flexibility – if we wanted to, we could.

Any types of companies you are looking at for acquisitions?

It’s a wide variety. We don’t have any specific companies that we are looking at. More broadly the surface area of what we do is so large –anything that remotely deals with how you consume, access or create data or interact with it is tangent to what we do. There are lot of great entrepreneurs working on ideas we think are interesting. If we can help them reach a much larger audience and have a much bigger impact.

Do you want to stay independent, IPO, or  to be acquired?

DH: The plan is stay independent. That is what gets us so excited– the opportunity to do bigger and bigger things not only in terms of reaching more and more people but in terms of becoming a more important part in your life.

How do you plan to compete with Google and  Apple who have their own cloud based storage services?

DH: First we are agnostic of any of those companies. We are the only ones that are going to put just as much emphasis on building out a great Blackberry experience as we are an iPad experience as we are a PC experience.  iCloud is a great example. There is some overlap in functionality but only if you are an Apple user. My mom has an iPad but she also has a Droid. That is exactly the kind of frustration that emerges when you have these things from different vendors that doesn’t work well with other vendor’s stuff.

We’re were not the first or the tenth or the 100th company to have this idea. Take Google. Anybody can make a text box that returns links to Web pages but when you hit search all kinds of crazy stuff is happening under the hood. The same thing is true with Dropbox. If it were easy to build, someone would have built it already. That includes Apple and includes Google.

(Photo of Drew Houston courtesy Dropbox)