Dropbox secures a $500 million credit line:
Dropbox takes capital raising to $1.1bn
By Richard Waters and Tim Bradshaw in San Francisco
Financial Times
April 6, 2014 4:23 pm
Dropbox, the cloud storage company, has lined up $500m in borrowing, making it one of the best-financed private US internet start-ups at a time when capital has been pouring into the sector.
The credit facility, led by JPMorgan, follows a $350m equity fundraising earlier this year and lifts the total amount Dropbox has raised to more than $1.1bn.
The hefty injection of capital reflects a rush by some of the fastest-growing consumer internet companies to stock up on cash while investors and lenders are clamouring to back the perceived winners.
The money has also enabled some of the best-known to delay their initial public offerings and concentrate instead on rushing to expand their businesses globally rather than lose ground to local copycats.
Ride-sharing company Lyft raised $250m in equity last week in one of the biggest fundraising rounds of the year as it prepares to move into international markets.
Dropbox is unlikely to move forward with an IPO until next year, according to one person familiar with the company. Dropbox refused to comment on the credit facility.
However, one person familiar with the company said the infusion of money was partly to pay for building out its infrastructure as it expands its global operations.
Like most internet start-ups, Dropbox initially relied on renting storage and other facilities from Amazon Web Services, and is now thought to be one of the internet retailers’ biggest customers. It also has its own facilities and has expanded these as it has grown.
Dropbox provides free online storage to a claimed 200m users, enabling them to access their information from multiple devices. It makes money by charging monthly subscriptions to a small percentage who want extra capacity.
The low cost of debt available to Dropbox prompted it to borrow such a large amount, said another person familiar with the company. Most fast-growing start-ups avoid taking on debt, fearing that it would leave them with crippling repayment obligations if business conditions turned against them.
However, user subscriptions promise to give Dropbox a more reliable stream of income. Also, in contrast to cloud storage rival Box, whose marketing costs of selling to business customers exceed its total revenues, Dropbox’s focus mainly on consumers has left it with lower operating expenses.
Some other internet start-ups that have taken advantage of a wave of enthusiasm from investors in the private markets have failed to live up to the high hopes. Daily deals site LivingSocial raised nearly $1bn as its bigger rival, Groupon, went public at the end of 2011. But its fortunes waned as local merchants soured on the use of deals as a marketing tool.
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