Go public or stay private? That's a question that all big tech firms face, and it's one that Dropbox CEO Drew Houston understands better than most.
As head of Dropbox (DBX) a onetime 'unicorn' startup that went public in March 2018, Drew Houston has led the 11-year-old tech firm through some choppy waters before. Since debuting at $28.48 per share on March 23, Dropbox's stock is down about 5% but has largely held steady in its five-month tenure as a public company.
"The orthodoxy in [Silicon Valley] has been that being a public company is super onerous, you can't invest in anything long term, and so on," Houston said at the Techcrunch Disrupt conference in San Francisco on Wednesday. "As a private company, your scorecard is your users or your momentum. As a public company, investors will grade you pretty clinically by how much money you're making, how fast you're growing. You have to bridge that gap."
Dropbox has undergone a significant evolution since it was first created as a file-sharing service, in Houston's words, that made carrying around a thumb drive unnecessary. Nowadays, Dropbox is more focused on its suite of collaboration tools, which work alongside its core file sharing and storage products.
That places Dropbox in a complicated competitive landscape that's dominated by Alphabet's (GOOGL) G Suite and Microsoft's (MSFT) Office suite of products. Others, like Slack, offer an instant message alternative to email, and there are also smaller productivity tools such as Trello and Asana. That's led to a spate of partnerships that make it easier to use a few of these tools at once, and Dropbox is no exception. Despite competing with Microsoft and Alphabet on some fronts, Dropbox also maintains partnerships with both that integrate its tools into the other companies' work suites.
Dropbox's partnerships with players such as Microsoft, Adobe (ADBE) , Salesforce (CRM) and Slack have added fuel to rumors that Dropbox could be an attractive takeover target. In June, alongside a mysterious 14% single-day surge in the company's stock, takeover chatter focused largely on Salesforce, owing in part to the relatively cozy relationship between the two tech firms. So far, however, nothing has come to fruition.
Houston echoed the sentiments of many recently public tech CEOs in saying that you can't focus too much on the quarterly earnings 'treadmill,' but admitted that it was vindicating to see Dropbox cross a $10-billion market capitalization. (Dropbox's March IPO had valued the company at about $7.4 billion, less than its valuation of about $10 billion as a private company.)
As one of the so-called unicorn herd of private tech companies valued in the billions of dollars, Dropbox attracted its share of scrutiny while private for its astronomical valuation, strategic pivots and spending habits. Despite receiving the quarterly scrutiny of Wall Street, Houston said that in some ways, it's made the job of running Dropbox easier.
"The advantages of being public are: Now when I think about my team, what they hear on earnings calls, what they see in the press, and what they see in their bank accounts are all the same," he said. "Even though there are a lot of companies that are in 'growth at all costs' mode, that's not sustainable...we turned cash flow positive in 2016 and we've gone from there."
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