Box raises $175m with IPO, but what is next?
Tomorrow's Schedule: 7 AM: Wake up, drink lots of coffee 8 AM: Do this and that 10 AM: Work— Aaron Levie (@levie) January 23, 2015
Box enjoyed a very successful IPO last month, raising around $175 million despite a lot of ridiculous nay-saying about its growth strategy. I have defended its business model extensively in the past, so it was great to see a company that was once foolishly dismissed as “the Groupon of SaaS” enjoys such an emphatic public debut (I hate to say I told you so but I did).
I am sure that Aaron Levie and his management group had a busy and productive IPO Friday (see his tweet above), but what comes next for his company? I do not have any insider information about what Box has up its sleeves, but you can take a look at the firm's business model for some clues.
Without getting into too many numbers, Box is a very disciplined subscription-based business, which means it has healthy margins before customer acquisition costs are included, and that it is able to efficiently acquire new customers. And similar to other great subscription businesses like Evernote and New Relic, it offers a service that people wind up incorporating into their daily lives, leading to strong renewal rates.
High renewal rates (and correspondingly low churn) are particularly important, because in the Subscription Economy, the "win" does not happen when you convince someone to buy your product. The win only happens when you deliver a compelling experience that makes customers keep coming back for more.
Take music. Just a couple of years ago the experience of legally enjoying digital music used to consist of purchasing and downloading rights-managed digital files through iTunes. Today it is about discovering new music through Spotify: creating playlists, finding curators, sharing songs with your social graph. So the experience has shifted from buying a basic product to enjoying an ongoing service, but the catch is that Spotify has to keep happily surprising its users with new features and smart recommendations to earn their £10 a month.
Box is a great service. It helps more than 280,000 businesses keep their information secure while allowing their employees to work effectively with colleagues and clients. But the storage and collaboration space is rapidly changing. Storage costs are going to zero, and collaboration can be... well, anything. So much like in digital music, the basic Box experience (online file storage) is starting to evolve and collide with all sorts of interesting new features and experiences, from editing an online document to video conferencing to automated workflows.
With that in mind, here are five directions I think Box could go:
1. Open the enterprise
Box now has a significant enough client base that it can persuade other large enterprise companies to open up and collaborate. Along with Citrix and Salesforce they recently announced a cloud storage partnership with Microsoft that will some day allow Word and PowerPoint users to access Box files from any device.
2. Bring legacy sectors into the present
Risk-averse, highly regulated industries like healthcare, banking, and government represent huge opportunities for Box. They are rolling out a new security platform that it will hopefully convince the auditors and law firms to let their employees become more nimble and effective.
3. Enable creative benchmarking
If you are managing a software company, what lessons could you learn about mobile collaboration from a construction firm, or a movie studio? Probably more than you think. Box could turn this fascinating usage study of their client base into a live benchmarking tool that would allow companies to get new ideas from interesting new sources.
4. Revolutionise retail
The big box shopping experience is broken, but showrooms still have lots of inherent advantages over digital product shots and questionable reviews. Box can help big retailers use their vast troves of online shopping behaviour to re-imagine their physical spaces and services.
5. Prioritise security
Given all the digital security concerns right now, Box has a huge opportunity in terms of offering government-grade protection protocols to both large enterprises and private consumers. Users may come to see Box as less of a place where they store information securely, and more of a place where to they go to actively secure sensitive information.
The list goes on. Looking past 2020, when nearly every physical device on the planet will have some kind of digital component, Box’s opportunities seem limitless. In the meantime, they’re investing wisely in their product and their growth roadmap. I wish them luck.
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