Dropbox: Going From Storage To Collaboration and Profits
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.”
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.
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