Box IPO: Winners and Losers

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 Several years of debating and waiting ended recently with the much-anticipated announcement that Box is going public. Having filed an S-1 and answered the question of “will they?”, the company’s decision has created inevitable questions about winners and losers.

 Every anticipated IPO creates more than a few discussions by pundits, envious industry watchers, and VCs now kicking themselves for having passed on the company’s seed round years earlier. But who are the real winners and losers from Box’s IPO decision? 

Winner: Everyone delivering software in the cloud

 Firstly, Box’s IPO is huge for the cloud software business. (Note: I’m CEO of a document management platform called Docurated). Anything that further affirms the validity how we (and thousands of other cloud or Software-as-a-Service companies) deliver our value to customers is great.

 Winner: Other cloud storage providers

 Competitors like Dropbox are winners for two reasons:

 1. Some of the biggest companies in the world now entrust highly sensitive data to Box, a fact widely publicized through events like this. Thus, the cloud storage business is further legitimized.

 2. Box hasn’t been the only cloud storage provider reportedly eying an IPO. Dropbox and Egnyte are two others that may follow. I expect Dropbox will have a warm reception among investors so it wouldn’t surprise me to see others “strike while the iron’s hot.”

 Winner: Other enterprise-focused cloud vendors

 The enterprise market is rapidly adopting cloud computing. As I pointed out above, the Box IPO is a multi-billion dollar validation of cloud adoption by global enterprises. Cloud’s share of the enterprise pie is growing fast, and will continue to spread beyond the early adopter industries to more conservative industries such as pharmaceuticals. 

 Winner: Customers

 The influx of cash and post-IPO access to additional capital means Box will be able to more aggressively pursue opportunities in heavily regulated industries. As quarterly performance emphasis rises and Box focuses on growth, customers should be able to negotiate great deals.

 Winner: Box’s partners and developers

 There is so much risk and failure in the IT industry that it is a fantastic comfort to know you backed a winning vendor. Partners should be able to expect more development and marketing resources, and developers will see market for their services expand.

 Winner: Box founders, investors & bankers

 A bit obvious, isn’t it?

Loser: Mark Cuban

 There aren’t many losers in the Box IPO. The biggest loser, though, has to be Mark Cuban. He provided the initial $350,000 in investment capital, an amount recouped less than two years later when he sold his entire stake due a disagreement about whether a freemium-driven landgrab was the best strategy to counter the threat of Google’s GDrive. Turned out he was wrong; that $350,000 will be worth well over $100 million after Box’s first day of trading closes.

 Loser: Established storage vendors

 Large cloud storage vendors like EMC, Microsoft, and Citrix have generally characterized Box (and most likely dismissed it in sales meetings) as just a start-up. When that “startup” enjoys a multi-billion dollar public market cap, the dismissal no longer holds water. They’re going to have to take Box a little more seriously.

 Conclusion

 It’s not quite accurate to claim that the “Box IPO makes winners of us all” - although the above list might suggest that.

 Having had to open its financial kimono and reveal the company’s finances, Box will find it difficult to resist Wall Street’s quarterly fixation. Investors and analysts will focus on gross margins, customer acquisition costs, and lifetime customer value. Box has a large direct sales force and the performance and profitability of this department will be interesting to track as Box works to meet the growth rates expected of it.

 As a startup CEO, though, any time an entrepreneurial peer hits a homerun like this, it affirms that building a company from an idea to a liquidity event is possible.

Alex Gorbansky is the CEO and founder of Docurated, an enterprise SaaS company which makes it easy for sales and marketing teams to find and use content buried in cloud and local file and folder based repositories. Prior to Docurated, Alex co-founded Frontier Strategy Group, a leading emerging markets research and data business. Earlier in his career, Alex was a storage industry analyst at Taneja Group and held product management roles at EMC and Loudcloud. Follow Alex on Twitter @docurated.




Edited by Cassandra Tucker
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