Why Is Dropbox Worth More Than $4 Billion?

Dropbox is awesome and is worth $4b+ valuation. A company is valued on 6 main things: Past performance Financial health Growth potential Team Exit Options Moat/Entry barriers/stickiness – how a company protects its terrain. Past Performance: Let me do a quick back of the napkin calculation. They have 2 million paid users who pay $120 per year.

That gives them $240 million revenue. Then there is a business version that cost upwards of $800 per year. Dropbox claims that they have 200k businesses signed up. So, their total revenues could be anywhere above $400 million ($240m + 200k*$800) .

 That’s awesome for a 4 year old company. Financial Health: Let us assume their net margins are 33% and that could give a net profit of $133 million and a 4 Billion valuation means a 30 P/E (defined as: total value of the company/net profits). Not too bad, given that average PE for publicly traded companies is about 22 and for many pre-IPO companies the ratio is in the triple digits. They also have less than 150 employees (only a third are engineers) and that gives the revenue/employee at above $2 million. This means they are efficient and better at scaling. That is good.

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