Online storage, once a backwater of the Silicon Valley technology scene, is suddenly a hot commodity.
Dropbox, a five-year-old San Francisco start-up that allows users to access stored documents via the web, is seeking $250 million in funding in a round that would value it at more than $8 billion, according to people with knowledge of the matter.
If successful, such a fund-raising round would more than double the company’s valuation. It last took on money in October 2011, when it raised $250 million at a valuation of about $4 billion.
Though it was not immediately clear who was prepared to invest in Dropbox at this lofty valuation, venture capital firms are sitting on billions of dollars, looking to pour late stage capital in well-established companies that are likely to go public or be sold. News of Dropbox’s efforts to raise the round was first reported by Bloomberg Businessweek.
Dropbox is just the latest young technology company to seek a sky high valuation. Last week, it was revealed that Snapchat, a photo sharing application with no revenues, turned down a $3 billion offer from Facebook. Twitter is valued at more than $22 billion after a week and a half of trading. Box, another online storage company that competes with Dropbox, is valued at more than $1 billion and is looking to conduct its initial public offering next year. And Pinterest, a bookmarking service, recently raised $225 million at a valuation of $3.8 billion.
Dropbox is growing quickly and now has more than 400 employees. As it grows, it is looking to shift from a focus on consumers to an emphasis on enterprise services. Active users have doubled to 200 million this year, and more than 4 million businesses now use its services, up from 2 million a year ago.
Though Dropbox could go public now, given strong investor appetite for shares of new technology companies, people familiar with the company’s thinking said this was an “opportunistic†round that would allow it to stay private for at least several months more, while increasing its valuation ahead of a likely I.P.O. next year. Funds from the round will be used to continue to hire new staff, and market its services as it shifts its focus to the enterprise.
Drew Houston, the 30-year-old chief executive of Dropbox, said that the market for online storage was growing quickly. “It’s a huge market,†said Mr. Houston, speaking at a conference in San Francisco organized by Salesforce on Monday. “The experience of Dropbox will be hugely different a year from now â€
And while critics claim online storage companies do not have defensible business models, given the low barrier to entry, Dropbox believes that it can succeed by becoming a one-stop shop for users’ online storage needs, and that with time, its business does become “sticky,†because it becomes a hassle to move documents to a new platform.
“We think about what are the problems out there that people don’t know they have,†Mr. Houston said.
For a young company, Dropbox has already been acquisitive, buying a number of smaller companies in recent years. An infusion of capital would give it the ability to continue its shopping spree.
“I’m sure we’ll do a lot more,†Mr. Houston said on Monday.
