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What's in The BOX

Money on  fire

In what many are calling a market-defining event IPO, Box, a free-to-use consumer file sharing service created by a University of Southern California dropout  Aaron Levie, has  offered its shares for sale to the public Yesterday.

It was forecast as a good first public outing  for BOX. It was speculated that the financial markets have regained their appetites for IT companies after a dismal 2014 where investors questioned if the bubble had burst again.

Box experienced considerable investor interest during its first day of trading. This IPO certainly is going to be interesting to market-watchers for a number of reasons.

Aaron Levie, Box's founder and CEO, was looking for £9 ($14) a share which will help to pay down the £318 ($483) million of debt Box has accumulated since it was founded.

Box shares soared higher on their first day of trading Friday 23rd January, closing at $23.23, a 65% increase over the $14 per share IPO price - a clear signal of solid demand for a highly criticised cloud technology company.

This could lead pave the way for a mounting queue of other IT companies across the world to list on the stock market. But is this a copy of the Dot Com boom, will it all end in tears.  With the cloud storage and file sharing market predicted to be worth £15 billion by 2018, a good listing would be good news for Box, but also for Box’s rivals.

The next weeks will be a telling time, Box’s freemium business model which favours user numbers over paying customers and which Box admits in its filing will not be profitable in the foreseeable future - the company currently claims 25 million registered users, but only 7% are paying users.

Investors are excited because of its growth potential. Box doesn't lead the cloud industry, it is very much the small guy in a land of tech giants such as Google, Microsoft and Apple, all of whom are cash rich. Privately held Dropbox boasts about 300 million users, compared to 32 million for Box.

One of Box's key criticisms is that it has spent too much on sales and marketing over the past few years to make any net profit, spending $123 dollars for every $100 of business gained.

However, as the business matures, sales and marketing costs are more controllable, meaning  in theory, budgets can be set and maintained. Also, given that the industry is heavily dependent on the subscription-based model, a sale today will generate revenue for months and years to come, but not in the freemium world.


Box offers enterprise-class security features, such as SSL, SSO, and state-of-the-art data-loss prevention. It offers a multitude of compliance with industry-specific laws, including HIPAA privacy regulations in use in healthcare.  Offering  a large suite of tools to track, report and manage file sharing/utilisation.

security and perceived security is essential to cloud computing not just for the corporate world but also for smaller business  going forward. As cyber crime continues to have substantial negative impacts on business, reliable security platforms will be not only highly desired, but required. This emphasis on security also points toward positioning the product toward paying customers (businesses). Individual free users would never justify paying for added security measures, but paying businesses will.

With-out the confidence in the security or perceived security, the larger market of Medium sized enterprises, available through the channel, with resellers, dealers and hosting companies being the key. Will the business model limp along, with Box relying on Fortune 500 companies and that is the crux of the problem there are only 500 companies in the Fortune 500 and as already mentioned, they are the new guys on the block. Well what is the burn rate for Box Inc, We understand the will be approaching the channel and using resellers, so watch this space!