DropBox: Going From Intern To $400m

[Rickson9]

Several summers ago, an MIT student named Drew Houston showed up for an internship at Bit9, a Waltham network security company. After graduation, he landed a job there as a software engineer, but left in May 2007 to do his own start-up.

Since then, Bit9 has had a pretty good run. It has grown to 150 employees and set up sales offices in Europe and Asia. Among the customers it helps protect from hacker attacks are the Air Force, 7-Eleven, and Toyota Financial Services. Last Monday, it announced a fresh round of venture capital funding: $34.5 million, bringing the total amount Bit9 has raised to more than $70 million.

But the business that Houston started in 2007, Dropbox, has proven to be a rocket ship. Dropbox helps more than 50 million people store and synchronize digital files so the latest version can be accessed from any device. Investors have pegged the San Francisco company’s current value at $4 billion. Steve Jobs, the late Apple chief executive, tried to acquire it. Dropbox has raised $257 million in venture capital — some of it from Sequoia Capital, the same Silicon Valley venture capital firm that just put money into Houston’s old employer, Bit9.

Has there ever been a summer intern who has done so much, so quickly? Forbes estimates Houston’s net worth at $400 million.

Drew Houston and Dropbox: From summer intern at Bit9 in Waltham to tech rockstar in San Francisco - Innovation Economy - Boston.com

 

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[JasonR]

Dropbox is an incredibly simple app that just works. Great idea, excellent execution. I use dropbox every day. I don't pay for the service (I have 20 GB free space), but I would if I needed the space.

Good for him. I wish I had thought of the idea first.

 

[LuckyPhil]

I don't pay for the service (I have 20 GB free space)

Dropbox only offers 2gb for free account -would love to know how do you get 20?

 

[JasonR]

Referrals... https://www.dropbox.com/login?cont=https://www.dropbox.com/getspace

I used Adwords to refer as many people as I could to earn almost 18 GB of Free Space, and I also earned free space through their camera upload beta program (I believe that's closed now).

 

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[NaPal]

What is dropbox?

 

[nzerinto]

JasonR - wow, very smart using Adwords to get the referrals ... I totally didn't think of that. I've got 27 gigs of extra space from referrals, mostly when connecting with businesses and clients etc. Very useful, but I am a paying member as well, love the product!

 

[chubbyrain]

Nice idea with the Adwords!

 

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[bophisto]

The 400m is paperwealth right?...what the company is "valued at"? This can change quickly...

How much cash does he have in the bank. I'm sure he's not struggling but to say he's "worth 400mill" ?...

 

[Rickson9]

The 400m is paperwealth right?...what the company is "valued at"? This can change quickly...

How much cash does he have in the bank. I'm sure he's not struggling but to say he's "worth 400mill" ?...

You need to ask Forbes. However, I just want to add that: My net worth is far larger than my "cash in the bank" and this is likely true of most actively wealthy individuals. No offense, but only the average financially illiterate tend to overvalue "cash in the bank".

The problem with "cash in the bank" is this: most things are divided into either cash-generating assets or price-declining liabilities. A car is a good example of a price-declining liability. So are boats, personal residences, and roller skates. Cash, in and of itself is a liability. It devalues at the rate of inflation. Very wealthy individuals spend a lot of time (and cash) figuring out how to properly deploy "cash in the bank" into cash-generating assets.

No actively wealthy individual relishes the idea of spending years sitting on a huge pile of "cash in the bank". That dream is reserved for the common person with no money.

It is irrelevant that an asset's value can change quickly. This is the fear of the average financial illiterate and used by the financial industry to scare them into mutual funds, "high interest" savings accounts and CDs. Wealthy individuals take huge advantage during "quick price changes" to either scalp/arb or (you guessed it), amass more cash-generating assets.

Now here's the rub. As individuals like me continue to collect cash-generating assets (and I'm a slower collector than most), the amount of cash generated increases at an increasing rate forcing us to constantly look at ways to sensibly deploy the cash which generates more cash and so on and so forth. It is a never-ending cycle.

 

[andviv]

As individuals like me continue to collect cash-generating assets (and I'm a slower collector than most), the amount of cash generated increases at an increasing rate forcing us to constantly look at ways to sensibly deploy the cash which generates more cash and so on and so forth

Oh, life is tough....

I'd love to have that terrible problem in my hands right at this time.

Rep++, great thread and, particularly, great latest post.

 

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[andviv]

What is dropbox?

Have you heard of Google?

Great.

Go there. Type "dropbox" in the search box and press enter or click on the [Google Search] button.

Read.

It works wonders!

 

[bophisto]

I'm not a financial illiterate. Perhaps I shouldn't have used the term cash in bank. I didn't think anyone would take that literally to mean someone with millions would keep their money in a bank account earning barely any interest.

My point is the media tends to make these people out to be much richer than they are.

What does $400million mean if you can't spend that money? We all know that websites go in and out of favor. That "$400million" could go to a fraction of that pretty easily.

Cash is still king. Basically my point is that ownership in a private company isn't very liquid at all. You have to admit it is better to have cash in the bank that you can SPEND rather than some ownership in a company that may or may not go public.

If YOU were selling something wouldn't you rather want cold hard cash that you could spend on anything?

Thinking that this guy is worth $400million is being financially illiterate... No Offense!

 

[Darkside]

I'm not a financial illiterate. Perhaps I shouldn't have used the term cash in bank. I didn't think anyone would take that literally to mean someone with millions would keep their money in a bank account earning barely any interest.

My point is the media tends to make these people out to be much richer than they are.

What does $400million mean if you can't spend that money? We all know that websites go in and out of favor. That "$400million" could go to a fraction of that pretty easily.

Cash is still king. Basically my point is that ownership in a private company isn't very liquid at all. You have to admit it is better to have cash in the bank that you can SPEND rather than some ownership in a company that may or may not go public.

If YOU were selling something wouldn't you rather want cold hard cash that you could spend on anything?

Thinking that this guy is worth $400million is being financially illiterate... No Offense!

There's greater risk in having your assets in stocks. However, there's also a greater upside, since the value of Dropbox could and most likely will go up dramatically when they IPO. So, let's say that Dropbox is currently valued at $4 billion and his ownership percentage of that is 10% which means that he's worth $400 million.

So, let's say they IPO within a year and the companies valuation jumps up to $10 billion, which is reasonable considering that it's a tech startup. So, then his 10% stake becomes $1 billion. He made $600 million extra to add to his already $400 million in just a year.

You can't get that kind of increase in wealth through cash or any other type of asset; that's why so much money flows into public markets, since it's the fastest way to increase wealth. Most wealthy people own stock in companies for this reason as well.

Of course, there's risk involved but assuming that nothing major goes wrong he can start selling off some of his shares about 6 months after their IPO and then start diversifying his assets so that his entire fortune isn't tied to the success of Dropbox.

 

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[theag]

So, let's say they IPO within a year and the companies valuation jumps up to $10 billion, which is reasonable considering that it's a tech startup.

Lol! That bubble is already busted. You should take a look at the latest tech startup IPOs and how their share price developed.

I agree with bophisto. Its bullshit to base a persons networth on the valuation of his shares of a private company, which is determined during investment rounds. That value is mostly made up out of thin air for tech startups.

 

[Darkside]

Lol! That bubble is already busted. You should take a look at the latest tech startup IPOs and how their share price developed.

I agree with bophisto. Its bullshit to base a persons networth on the valuation of his shares of a private company, which is determined during investment rounds. That value is mostly made up out of thin air for tech startups.

Well the Facebook IPO kind of screwed things up for Tech startups looking to IPO for the time being but I think if Dropbox grows their revenues to justify a high IPO then it's legitimate to say that his net worth is $400 million or whatever.

After all, a company like Dropbox which has paying customers is actually more valuable in my opinion than a company like Instagram or these other tech startups that receive high valuations in investment rounds even though they don't generate any revenues but just have lots of users.

 

[DTS Ltd]

You need to ask Forbes. However, I just want to add that: My net worth is far larger than my "cash in the bank" and this is likely true of most actively wealthy individuals. No offense, but only the average financially illiterate tend to overvalue "cash in the bank".

The problem with "cash in the bank" is this: most things are divided into either cash-generating assets or price-declining liabilities. A car is a good example of a price-declining liability. So are boats, personal residences, and roller skates. Cash, in and of itself is a liability. It devalues at the rate of inflation. Very wealthy individuals spend a lot of time (and cash) figuring out how to properly deploy "cash in the bank" into cash-generating assets.

No actively wealthy individual relishes the idea of spending years sitting on a huge pile of "cash in the bank". That dream is reserved for the common person with no money.

It is irrelevant that an asset's value can change quickly. This is the fear of the average financial illiterate and used by the financial industry to scare them into mutual funds, "high interest" savings accounts and CDs. Wealthy individuals take huge advantage during "quick price changes" to either scalp/arb or (you guessed it), amass more cash-generating assets.

Now here's the rub. As individuals like me continue to collect cash-generating assets (and I'm a slower collector than most), the amount of cash generated increases at an increasing rate forcing us to constantly look at ways to sensibly deploy the cash which generates more cash and so on and so forth. It is a never-ending cycle.

It would seem that the prevailing social programming encourages people to fail in their ability to distinguish the difference between an asset and a liability.

 

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[JaySoriano]

Referrals... https://www.dropbox.com/login?cont=https://www.dropbox.com/getspace

I used Adwords to refer as many people as I could to earn almost 18 GB of Free Space, and I also earned free space through their camera upload beta program (I believe that's closed now).

I can confirm this. I have about 22.8GB free space

 

[nzerinto]

Lol! That bubble is already busted. You should take a look at the latest tech startup IPOs and how their share price developed.

If you are referring to all the "popular" IPOs like Facebook, Zynga and Groupon, you have a case in point. But there are other tech companies (that IPO'd recently) that are doing just fine - LinkedIn, Jive, Tangoe, Zillow, Bankrate, Fusion-IO etc.

The valuation might not be based entirely on something tangible (like cash in the bank), but that doesn't mean value isn't there. That's why, for example, accountants have to account for "goodwill" when drawing up the books for companies. Intangible asset, but has value nonetheless.