Dropbox: Going From Storage To Collaboration and Profits

Executive Summary

Dropbox has successfully ridden the wave of growing interest in cloud storage. However, it risks being crowded out by large providers of personal cloud services. Dropbox needs to create differentiation and become the de facto engine for online content storing and sharing on all devices and platforms. Although Dropbox has been known as a provider of consumer-facing online storage solutions, the company has recently transitioned to a public cloud-based enterprise file synchronization and sharing (EFSS) solution. Our investment thesis is driven by the company’s execution and proliferation of an overall next-generation enterprise content collaboration (ECC) platform. We feel optimistic about Dropbox’s execution and track record to date, as validated by the continued growth in number of consumers and businesses adopting the service. As services and products continue their relentless “march to the cloud,” Dropbox is well positioned to both capture and accelerate this move, from individual consumers to entire enterprises. Dropbox is disrupting the file-storage space by providing a best-in-class solution for users to easily share, edit, store, and access files from any device at any time. The company’s freemium model has proven to be a powerful driver of user growth, ultimately creating a massive barrier to entry for competitors.

What are people forced to do now because what you plan to make doesn’t exist yet? Email themselves attachments. Upload stuff to online storage sites. Carry around USB drives.

Dropbox Y-Combinator application,
Summer 2007

Investment Positives and Upside Catalysts to Track

Dropbox faces a large and growing market opportunity. Computing, networking, and storage are the three pillars of cloud computing. Industry experts believe that storage is undergoing a renaissance, which will likely change the way computing and networking inter-operate. Dropbox’s market opportunity remains subject to debate, as it is difficult to estimate the growth in both customer adoption and pricing. Our analysis indicates that Dropbox’s serviceable market could grow to more than $75 billion in annual spend over the next five years, implying a fairly robust and sustainable growth trajectory for key players in the space.

Global Public Cloud Services – Gartner Predicts $383 Billion Spend in 2020
Global Public Cloud Services – Gartner Predicts $383 Billion Spend in 2020
Source: SharesPost Research; $ in billions; Gartner report published in February 2017


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Contact

For information on research and analysis

Rohit Kulkarni
Managing Director
Private Investment Research Group
(650) 273-7905Email

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Dropbox

Dropbox

Sector: Hosting/Storage
Founded: 2007
Last Round Estimated Valuation: $10.02B
FULL COMPANY PROFILE

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CONFLICTS: This report is being published by SharesPost Financial Corporation, a member of FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management, LLC., an investment adviser registered with the Securities and Exchange Commission, are wholly owned subsidiaries of SharesPost, Inc. SP Investments Management, LLC is the investment manager of the SharesPost 100 Fund, a Registered Investment Company, and other funds. These entities and funds (hereafter “SharesPost”) does, seeks to do business with, owns and/or seeks to own positions in the companies covered in this research report. Consequently, investors should be aware that SharesPost has a conflict of interest that could affect the objectivity of this report.

This report was originally prepared and distributed to institutional and certain private clients of SharesPost Financial Corporation. Recipients who are not market professional or clients of SharesPost Financial Corporation should seek the advice of their own personal financial advisors before making any investment decisions based on this report. None of the information contained in this report represents an offer to buy or sell or a solicitation of an offer to buy or sell any security and no buy or sell recommendation should be implied, nor shall there be any sale of these securities in any state or governmental jurisdiction in which said offer, solicitation or sale would be unlawful under the securities laws of any such jurisdiction. This report does not constitute an offer to provide investment advice or service. Registered representatives of SharesPost Financial Corporation, do not (1) advise any member on the merits or advisability of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax or transactional advisory services.

Information regarding companies in the SharesPost 100 List available on the website has been collected from or generated from publicly available sources. The availability of company information does not indicate that such company has endorsed, supports or otherwise participates with SharesPost. Company “thesis” are the opinions of SharesPost and are not recommendations to buy, sell or hold any security of such company.

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Analyst compensation is based upon various factors, including the overall performance of SharesPost, Inc. and its subsidiaries, and the performance and productivity of such analyst including feedback from clients of SharesPost Financial Corporation and other stakeholders in our ecosystem, the quality of such analyst’s research and the analyst’s contribution to the grown and development of our overall research effort. Analyst compensation is derived from all revenue sources of SharesPost, Inc., including brokerage sales.

DISCLAIMER: This report does not contain a complete analysis of every material fact regarding any issuer, industry or security. The opinions expressed in this report reflect our judgment at this date and are subject to change. The information contained in this report has been obtained from sources we consider to be reliable, however, we cannot guarantee the accuracy of all such information.

Any securities offered are offered by SharesPost Financial Corporation. SharesPost Financial Corporation and SP Investments Management, LLC are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative and involves a high degree of risk and should only be considered a long-term investment.

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