Billion Dollar Unicorns: Box Struggles In Its Public Avatar

I have repeatedly written about the VC funding frenzy that has taken companies with doubtful business models to lofty valuations and exorbitant amounts of funding. Driven by such valuations, it is little surprise then that on the public stock exchanges even Billion Dollar Unicorns have faltered. Cloud storage company Box is one such example. After continuing to struggle with the timing of an IPO, Box went public earlier this year. Since listing, their valuation has been declining and the stock continues to struggle to go past its list price.

Box’s Financials

For the recently reported second quarter, Box’s revenues increased 43% over the year to $73.5 million. Billings for the quarter grew 45% to $79.6 million. They continued to report losses and ended the quarter with a loss of $0.28 per share. The market was forecasting revenues of $69.7 million and a loss of $0.29 per share.

Box expects to end the current quarter with revenues of $76 million-$77 million, compared with the Street’s forecast of $74.2 million. They are looking to end the year with revenues of $295 million-$297 million compared with the market’s expectations of $289.5 million. They revised their guidance for the year upwards from $286 million-$290 million expected a quarter ago.

Box’s Tie-Ups

Box recently entered into several agreements to help gain a bigger market share. They entered into a global partnership with IBM that will integrate their solution with IBM’s enterprise content management, analytics, social collaboration, and security products. Through the tie-up, Box’s solutions will be available to IBM’s customers globally. Additionally, Box will also be incorporated into IBM’s MobileFirst initiative for iOS apps. They also entered into an agreement with Microsoft that will allow for integration of Box with Office 365 for the desktop, Office on iOS and Outlook.

Box’s Product Enhancements

Meanwhile, Box continues to deliver product innovations. During the recently ended quarter, they announced the availability of Box Governance, a new solution that will allow customers to seamlessly manage the entire lifecycle of business documents including creation, retention, and final disposition. Recently, they also added several new enhancements to Box’s metadata service that include metadata templates in the admin console, metadata APIs, and the ability to sync metadata from third party systems.

To expand their reach in other industries, Box launched Box for Education, a new service that has been customized for the education industry. The service will allow universities to develop custom departmental workflows to accelerate collaborative processes, create workspaces that will help in new ways of connecting and learning and reducing the risk and simplifying the governance of end-user IT. They also announced integration with Blackboard Collaborate, an online collaborative learning solution.

Despite the innovations, the market is not too pleased with Box. The company continues to burn through cash and is failing to carve out a defensible position for itself in the industry. Bigger players like Google, Amazon, and Microsoft themselves are at a price war in the space, making it difficult for Box to improve margins.

Their stock is trading at $11.67 with a market capitalization of $1.41 billion. It touched a high of $24.73 soon after listing in January this year. Box had listed on the exchange at $14 a share. As expected, its valuation has fallen since pre-IPO levels. Prior to listing, Box had raised $564.1 million with their last round of $150 million valuing them at $2.4 billion.

Dropbox’s Financials

Things aren’t much better for Box’s competitor, Dropbox. After years of speculation of whether or not Dropbox will list, Dropbox’s management recently suggested that the company would much rather focus on improving profits than going public. Like Box, Dropbox too operates on a freemium model. While their detailed financials are not known, analysts peg their revenues between $300 million-$400 million for 2014. Revenues are expected to have grown from $200 million in 2013.  However, we’re hearing rumors that revenues have now started to decline. These rumors are unverified. According to market reports, of the more than 400 million users that Dropbox has, a mere 100,000 are paying enterprise customers.

The weak monetization has not stopped Dropbox’s skyrocketing valuations. They have raised $1.1 billion so far from debt and equity financing. Their investors include JPMorgan, BlackRock, Innovation Department, QueensBridge Venture Partners, Salesforce Ventures, T. Rowe Price, Index Ventures, Accel Partners, AFSquare, Benchmark, Glynn Capital Management, Goldman Sachs, Greylock Partners, Institutional Venture Partners, RIT Capital Partners, Sequoia Capital, SV Angel, Valiant Capital Partners, Ali Partovi, Amidzad Partners, Bobby Yazdani, Hadi Partovi, Pejman Nozad, Signatures Capital, and Y Combinator. Their last round of venture funding was held in January 2014 when they raised $350 million at an unrealistic valuation of $10 billion.

Well, from here, the only way to go is downhill!

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

Looking For More Hands-On Advice?

I receive many emails from entrepreneurs who want to discuss their specific businesses. I’m very happy to discuss your situation during my free online 1M/1M Roundtables, held almost every Thursday. During each roundtable, up to five entrepreneurs can pitch their businesses and receive my immediate and straightforward feedback.

To give entrepreneurs all over the world access to Silicon Valley’s knowledge, methodology, and network, I founded the One Million by One Million (1M/1M) global virtual incubator. 1M/1M aims to nurture a million entrepreneurs to reach a million dollars each in annual revenue and beyond, thereby creating a trillion dollars in global GDP and ten million jobs.

For those still testing the waters of entrepreneurship, I’ve written my Entrepreneur Journeys book series to inform and inspire. My newest book, Billion Dollar Unicorns, is now available from Amazon.

If you are interested in entrepreneurship topics and my writings, you can follow me here. I hope to publish articles on LinkedIn every week.

Photo credit: Kate Ter Haar/Flickr.com.