Dropbox Could Be A Bargain At An $8 Billion Valuation

According to BloombergBusinessWeek, cloud file storage firm Dropbox is looking to raise an additional $250 million at a valuation of around $8 billion.

The news comes on the heels of Pinterest’s massive $225 million round that valued it at $3.8 billion, and endless hype that Snapchat is raising some god-tier amount of money at a valuation of lots of billions.

So, if your first reaction to the Dropbox news was to spit out the bile that welled up from your stomach, I get you. But hold on, this time round the nine-figure bush, there is some substance in play.

According to the BusinessWeek piece, Dropbox’s revenue has grown rapidly, and is now in the “hundreds of millions of dollars” area, meaning that Dropbox could quite easily have top line close to what Twitter currently generates. For the first three quarters of 2013, Twitter had revenue of $422.2 million, if you had forgotten.

However, Om Malik, a venture capitalist, journalist, and generally good human recently reported that Dropbox is “is on its way to a billion dollars in revenue.” He tweeted today that the company is on a $1 billion run rate, meaning that the firm is generating revenue at a rate that totals a billion when extrapolated forward 12 months.

Depending on how you forecast Twitter’s revenue, Dropbox could be outperforming it handily. And that is precisely why the $8 billion figure feels oddly inexpensive.

From an earlier report on Twitter’s valuation, here’s the revenue multiples that arose from its public offering:

Twitter, in the trailing 12 months (TTM) leading to its final private quarter (ending September 30), had revenue of $534.5 million. […] Twitter filed to go public at $26 per share. Using a fully diluted share count of 705,098,594, Twitter valued itself at $18.3 billion. The company opened instead at $45.10, valuing the firm (again: using a diluted share count) at $31.8 billion.

Comparing those figures to Twitter’s top line, the company valued itself at 34.2 times its trailing 12 month’s revenue. Its forward revenue figure would be substantially less, of course. The market valued Twitter at $31.8 billion, instead, or 59.5 times its trailing revenue.

Now, we’re comparing trailing revenue for Twitter, and forward revenue for Dropbox (measuring past, and future revenue, respectively), so the ratios are not to be taken directly. Still, valuing Dropbox at something around 8 times forward twelve month revenue, and Twitter at up to nearly 60 times trailing revenue feels disjointed.

And the above comparison doesn’t take into account profits because Twitter loses buckets of money, so if Dropbox is also in the red tough snakes, it doesn’t really matter for this comparison. Dropbox could be managing its valuation, hoping to avoid getting its figures too high, and thus spiking its chance of later private money if it wants to delay its path to an IPO. That’s utter speculation, however.

If Dropbox is on a $1 billion run rate, and is raising at an $8 billion valuation, I’m in. Where do I send the check?

Top Image Credit: Flickr