Box enjoys a bullish IPO, but where will all the cash go?


So, enterprise content collaboration vendor Box finally went public last week. The hotly-tipped IPO of early 2014 cooled somewhat mid-year -– a combination of turbulent times for tech stocks and a luke-warm reception for Box’s numbers in its original S1 filing. The company gambled on a final round of venture funding over the summer to tide it over and buy some breathing space (rather than risk going to the market in far from ideal conditions), and it appears to have paid off.

Between July’’s $150m cash injection and Friday’s listing, Box was able to report an increase in its paying customer base (44,000 -– up from 34,000 nine months ago) and revenue (up 80%), and a reduction in customer acquisition costs (so at last money’s flowing in at a faster rate than Sales and Marketing need to spend it). It’’s a combination of the last two data points that gave potential investors their qualms last year -– at the time, despite consistently healthy revenue growth, Box still spent more on sales and marketing alone than it earned overall (the value from cloud service subscribers, of course, taking a while to come good after the initial effort required to hook them in). However, that burn rate seems to have been arrested somewhat in the intervening months – this time around Box can now report more control over its costs, and it’’s bagged some big name customers (notably GE, with the potential to roll out the service to some 300,000 employees) in the meantime too.

Early trading upon the company’s public debut has signalled there’s certainly been some pent-up demand for Box shares. They opened at $20.20 (nearly 50% up on the IPO price of $14, which itself was above the upper end of the Box roadshow guide price of $11-$13) and closed their first day at $23.23 (up nearly 66%), representing a market capitalisation of just under $2.8bn,– exceeding even the company’s last private valuation ($2.4bn -… which must all come as a relief to Box’’s management and existing investors alike.

Now, of course, it’’s time for the start-up to grow up -– with big investments, come big expectations. Box has pocketed $175m in cash from its move out of private hands. If that gets frittered away solely on sales and marketing without a significant uptick in its revenue trajectory, Wall Street won’’t be kind. All eyes are now on how it delivers on the promise that its evident momentum still commands… and on what its still venture-funded competitors, notably the likes of Dropbox and Egnyte (whose newly announced ‘‘adaptive enterprise file services’’ we covered last week), do next. Undoubtedly they’’ve also been eyeing Friday’’s trading and pondering their own IPO timetable. 2015 is set to be a big year in the content collaboration, sync and share market.


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