In 2007, when Drew Houston introduced Dropbox (the cloud-based file storage provider) to investors, he often had this exchange:
Venture Capitalist: “There are [already] one million cloud storage initiatives ”.
Houston: “Do you use any? ”
Venture capitalist: “No.”
Houston came out and built Dropbox …
… in what is now a $ 11 billion public company with 700 million registered users and – by 2020 – $ 1.9 million in revenue, according to The Wall Street Journal.
There is a problem, though.
Unlike the Houston conversations of the early days of Dropbox, there are now a lot of cloud storage companies … that people use. You may know these 2: Apple and Google, which offer a lot of free storage.
Dropbox has expanded its product line
It includes efforts in centralized document editing and two notable acquisitions: DocSend (document tracking) and HelloSign (digital signatures).
However, revenue has shrunk and its core business in the cloud is basically commodified.
Elliott Management Activist Hedge Fund …
… has taken a considerable stake in the company, according to WSJ. To get a return on your investment, the hedge fund will probably need to find a private equity buyer for Dropbox or a merger partner.
The hedge fund has garnered some recent high-profile wins, which have catalyzed the switch to AT&T (to leave the media business) and Dell (to exit VMware).
While this is shaken, Houston will likely face much tougher investor talks than in 2007.