Box's on-again, off-again IPO may be off again:
Box Inc. In Talks With TPG for Funding
Online-Storage Startup Seeks to Buy Time Before IPO
By Douglas MacMillan
Wall Street Journal
Updated June 20, 2014 4:48 p.m. ET
Online-storage startup Box Inc., three months after filing for an initial public offering, is in talks to raise a round of funding from private-equity firm TPG that would help buy it time before an IPO, said people familiar with the matter.
The talks started up in recent weeks, as Box delayed its IPO plans in order to wait out a period of weak demand for technology stocks, one of these people said. The discussions with TPG are still early and may not result in a deal, they said.
A private investment would give Box more cash to invest in its rapid growth and greater freedom to control the timing of its IPO. Box's March 24 IPO filing came shortly after tech stocks began their precipitous slide, putting the offering in limbo. The company was valued at $2 billion in December during its last funding round.
The timing of an IPO is uncertain, but Box expects to go public by the end of the year, said one of the people familiar with the company's plans.
"Our plan continues to be to go public when it makes the most sense for Box and the market," a Box spokeswoman said.
While many tech stocks have rebounded from their steep declines of March and April—and companies including Zendesk Inc. and Arista Networks Inc. have held successful IPOs—concerns remain about public investors' appetite for cloud software companies like Box, which is unprofitable because it spends heavily on salespeople, marketing and expansion into more countries.
Box burned through $92 million more in cash than its business brought during the year ended Jan. 31, and the company had $109 million in cash at that point.
That spending helped Box land large enterprise customers like General Electric Co., which is rolling out the online storage and collaboration tools to its 300,000 employees across 170 countries. If GE and other large customers continue to pay Box for several years, those contracts could eventually offset its heavy upfront sales and marketing costs.
But the company's losses have also created the possibility—though still very unlikely—that Box could run out of money. At the end of January, Box had enough cash to operate through March 2015 at the rate of spending in its last fiscal year.
To help put off that day, management has begun pulling back on spending in sales and marketing, according to a person close to the company. The company is expected to show a lower burn rate when it discloses its fiscal first-quarter results, the person said. A cash infusion could further extend its runway.
It is rare for companies to raise capital from private investors after registering for an IPO. Out of 124 IPOs of venture-backed companies in 2012 and 2013, just 14 raised a round of private investment in those years while registered to go public, according to VentureSource data.
Box has raised a total of more than $400 million from a wide range of investors, including Draper Fisher Jurvetson, General Atlantic, Bessemer Venture Partners and Salesforce.com Inc. Chief Executive Officer Aaron Levie owns just 4.1% of the company he co-founded after having his stake diluted in multiple rounds of funding.
—Mike Spector, Deborah Gage and Telis Demos contributed to this article.
Write to Douglas MacMillan at douglas.macmillan@wsj.com \
online.wsj.com |
