Item — HN Reader

Don't you mean 7X? ... because math.

Also, the logic of directly tying valuations of a private company to the only public direct competitor in the space is flawed (analysis don't use GOOG,MSFT for this). Using the current logic; if Dropbox (private) beats the crap out of Box (public), this would result in reduced growth and reduced quarterly numbers for Box. However, Box's numbers are then used as indicators/benchmarks for the cloud storage space, and then used to price Dropbox.

When you look at Box's valuation, you should be aware that the price is partially because of risk/competition from Dropbox. How much of the price? I have no idea.

* Full disclosure I am an ex-Dropbox employee.

1 comments

Fair enough - 7X to be more accurate.

Well, you'd have to apply the same "risk" of [Box, Google ..] that dropbox faces in it's valuation which effectively cancels out that component. If anything, given that Dropbox is private, it probably amplifies those risks and lowers Dropbox's valuation.

Box's P/E is very much a fair indicator of Dropbox's valuation.

Box has a negative P/E, so I'll assume you're talking about P/S here.

You seem to be suggesting that companies within an industry should all have the same price-to-sales multiple. (Or at least they'd "better have" the same multiple. Or else?) This is because, while all the companies have different quantitative and qualitative aspects, the mutual competition "effectively cancels out" those differences when it comes to valuation.

Snark aside, here are things that actually matter for valuing these sorts of companies:

* cost to acquire a customer (Box's S-1 notoriously had sales+marketing which was greater than their revenue)

* customer churn, or relatedly, lifetime value per customer

* subscriber growth

* margins (i.e. storage costs)

Perhaps your conclusion about the relative values of these companies is correct, but the fact that you're not mentioning any of the points above means that it's very difficult to give any credibility to your argument.

Fair points. Though if Dropbox were significantly better at any of the metrics you enumerate, they would've drummed up the media. And, they'd be in a hurry to go public.