Weekly Update

What the Box IPO says about the 2015 market

Box is apparently moving ahead with its long-delayed IPO (see Box can’t IPO, so now what? and Box IPO on hold because of iffy markets). The interesting aspect is that its filing with the SEC prices the company at $1.4 billion, which less that the $2.4 billion valuation it received in its last funding round, when the company raised $150 million (see Box raises $150M in an unusual pre-IPO round).

The company dropped the amount that it will raise in the IPO to $162.5 million at a projected $11 to $13 per share.

The drop in valuation is likely to annoy early investors, and the company will have to issue more shares to the investors in the last round, TPG and Coatue Management.

What does this apparent downsizing of ambitions mean for the market?

First, the IPO is going through, at long last. Box has been a shadow hanging over the enterprise software market, and just closing the IPO will make abig difference.

Other enterprise deals valued above $1 billion — like Hortonworks and New Relic — exploded in their IPOs, so there is a possibility for Box to see the same expansion of value. So filing at the to $11-$13 range may be a head fake, intended to open up airspace above the market’s expectations.

There is also a question of shelf life. I’ve argued that file sync-and-share is rapidly becoming a commodity that Internet giants like Google, Apple, Amazon, and Microsoft will soon be giving out for free. Box’s position as providing a value-added level of business and security orientation above the basic capabilities of file sync-and-share still has cachet, but the downward direction of that value argues for going public ASAP. The alternatives – like being acquired by a giant — may have already be explored. But the market is up, the tech economy is resurgent (see Hortonworks and New Relic, above), and time and tide wait for no man.

There is a great deal of money sloshing around, looking for  a safe harbor. And smart investors — like Fred Wilson — are saying that the enterprise software market in 2015 ‘will shine’ as the move toward a new way of work gathers steam.

This may be a case of a rising sea raising all boats, so that Box will benefit from a growing awareness that business needs to be rebooted, that we need to move away from industrial age organizational culture to something more suited for the 21st century. And whatever that is, it will require new tools, most of which haven’t necessarily been crafted yet. But it’s clear that the world’s corporations are willing to invest in tools to create more innovation, agility, and productivity, and the markets are going to benefit from that inclination.