June 21, 2013 / 2:57 PM / in 5 years

Box's sales model evolves as 'inevitable' IPO nears: CEO

SAN FRANCISCO (Reuters) - Box, the closely watched data storage company, is shifting its growth strategy ahead of an initial public offering that could come in 2014, Chief Executive Aaron Levie told the Reuters Global Technology Summit.

In its early years as a scrappy startup, Levie advocated a sales strategy that sought to convince individual employees or small units within larger companies to use his service for free, before charging them for additional features.

The 8-year-old Mountain View, California-based company has swapped that “freemium” business model and is now investing heavily in selling directly to chief information officers at the top of the corporate hierarchy, Levie said.

He acknowledged the expense associated with such a strategy but said it was necessary.

“You get to a certain scale where that business model hits a limit. There’s no way to sell to Procter & Gamble, Coke, Disney, Walmart” without a direct sales effort, Levie said at the summit in San Francisco on Wednesday. “We have to go to talk to that CIO and have a consultative process with that buyer. They might be living with that decision for the next decade.”

Levie’s comments are part of an ongoing debate in Silicon Valley about growth strategies for software companies that cater to businesses.

Shaken by a series of disappointing IPOs in the consumer tech sector such as Zynga Inc (ZNGA.O) and Groupon Inc (GRPN.O), investors have funneled money into enterprise-focused startups. But there has been little consensus over how exactly the industry should win customers and grow their business.

Aaron Levie, co-founder and chief executive of Box, speaks during Reuters Global Technology Summit in San Francisco, June 19, 2013. REUTERS/Stephen Lam

Levie, who has talked up his company’s IPO prospects, said its sales have risen 100 percent over the past year, without disclosing specifics. Half of Box’s employees are now in sales, he added.

The 28-year old acknowledged the threat from larger companies like Microsoft Corp (MSFT.O) and Google Inc (GOOG.O) that could use economies of scale to offer lower prices for pure storage space. But he hoped to differentiate Box by offering more industry-specific functions such as features for healthcare providers to securely share documents on the cloud, Levie said.

    Levie ruled out another round of pre-IPO fundraising for Box, which had last received a $125 million capital infusion last July that valued the company at $1.2 billion.

    But he called an IPO “inevitable.”

    “It’s something that’s absolutely on our mind,” Levie said. “Over time we intend to probably do more acquisitions and having that public currency is helpful for that.”

    “But don’t hold your breath about this year,” he added. “Don’t call your stockbroker yet.”

    Follow Reuters Summits on Twitter @Reuters_Summits

    Reporting by Gerry Shih; Editing by Richard Chang

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