Does Box really need $284m in VC cash?

Look to Red Hat's model – it's better to make money than raise it


Open ... and Shut Once upon a time Joe Kraus dreamed that future start-ups would be 30 times cheaper to build. Clearly he hadn't talked to Aaron Levie, chief executive of enterprise collaboration company Box, which just raised $125m on a reported $1.2bn valuation. Box is playing a high-stakes poker game which will end in complete victory. Or dismal failure.

Levie, of course, is betting big on success. For the energetic Levie, the $284m he has raised for Box so far is the ante to get in on the biggest shift in enterprise computing history:

He may be right, but those are mighty expensive table stakes. Is it necessary to spend so much to win in the enterprise?

Maybe. Maybe not. After all, one of the most successful new enterprise players over the past 20 years is Red Hat, which raised hardly any venture capital at all. Of course, the company didn't need much since it managed to raise a boatload of cash on the public markets with a dot-com era IPO that helped it live through some lean years as it searched for a business model that would work.

But other big enterprise upstarts like VMware have also raised far less than Box's $284m, and still managed to break into the enterprise in a big way.

Even LinkedIn, which isn't an enterprise software company but does bring an enterprise flavor to social networking, raised far less than its consumer tech peers, and today is a much better stock pick than Zynga, Facebook, Pandora or any of its other free-spending web peers. Boring old LinkedIn just chugs away, making money rather than raising it.

So is Box wrong to raise so much?

I'm not sure it's a question of "wrong" so much as one of prudence. Let's face it: Box isn't going to beat Microsoft based on cash in the bank. Microsoft prints more profits in a week than Box raised in this round. Money is not going to buy Box success. Period.

What has been earning Box a lot of respect (and customers) in the enterprise is its ease of use. This is why I'm a bit troubled by Box's announcement that it raised so much money, in part, to "invest in consultants for big corporate clients." Its message of simplicity goes out the window if "simplicity" means "expensive consultants to make it work."

For Box to win in the enterprise against entrenched giants like Microsoft's Sharepoint, the company must deliver on Levie's pitch that Box is much more innovative than its peers. "If you compare Box to something like IBM Filenet, or Microsoft SharePoint, you get almost a 10x improvement on productivity, speed, time to market for new products." If he's right, he doesn't need $284m to convince enterprises. He just needs a friction-less way to get software into the enterprise.

Back in the 2000s, Red Hat did this with open source. Box is doing it with Software as a Service (SaaS). While no one can begrudge Levie for raising as much money as he can at a great, non-dilutive valuation, the hope is that money won't become a substitute for truly improving the enterprise content collaboration experience for users. Because unless he delivers on that, no amount of money will forklift IBM, Microsoft or anybody else out of their incumbent positions. ®

Matt Asay is senior vice president of business development at Nodeable, offering systems management for managing and analysing cloud-based data. He was formerly SVP of biz dev at HTML5 start-up Strobe and chief operating officer of Ubuntu commercial operation Canonical. With more than a decade spent in open source, Asay served as Alfresco's general manager for the Americas and vice president of business development, and he helped put Novell on its open source track. Asay is an emeritus board member of the Open Source Initiative (OSI). His column, Open...and Shut, appears three times a week on The Register.

Similar topics


Other stories you might like

  • LGBTQ+ folks warned of dating app extortion scams
    Uncle Sam tells of crooks exploiting Pride Month

    The FTC is warning members of the LGBTQ+ community about online extortion via dating apps such as Grindr and Feeld.

    According to the American watchdog, a common scam involves a fraudster posing as a potential romantic partner on one of the apps. The cybercriminal sends explicit of a stranger photos while posing as them, and asks for similar ones in return from the mark. If the victim sends photos, the extortionist demands a payment – usually in the form of gift cards – or threatens to share the photos on the chat to the victim's family members, friends, or employer.

    Such sextortion scams have been going on for years in one form or another, even attempting to hit Reg hacks, and has led to suicides.

    Continue reading
  • 5G C-band rollout at US airports slowed over radio altimeter safety fears
    Well, they did say from July, now they really mean from July 2023

    America's aviation watchdog has said the rollout of 5G C-band coverage near US airports won't fully start until next year, delaying some travelers' access to better cellular broadband at crowded terminals.

    Acting FAA Administrator Billy Nolen said in a statement this month that its discussions with wireless carriers "have identified a path that will continue to enable aviation and 5G C-band wireless to safely co-exist."

    5G C-band operates between 3.7-3.98GHz, near the 4.2-4.4GHz band used by radio altimeters that are jolly useful for landing planes in limited visibility. There is or was a fear that these cellular signals, such as from cell towers close to airports, could bleed into the frequencies used by aircraft and cause radio altimeters to display an incorrect reading. C-band technology, which promises faster mobile broadband, was supposed to roll out nationwide on Verizon, AT&T and T-Mobile US's networks, but some deployments have been paused near airports due to these concerns. 

    Continue reading
  • IBM settles age discrimination case that sought top execs' emails
    Just days after being ordered to provide messages, Big Blue opts out of public trial

    Less than a week after IBM was ordered in an age discrimination lawsuit to produce internal emails in which its former CEO and former SVP of human resources discuss reducing the number of older workers, the IT giant chose to settle the case for an undisclosed sum rather than proceed to trial next month.

    The order, issued on June 9, in Schenfeld v. IBM, describes Exhibit 10, which "contains emails that discuss the effort taken by IBM to increase the number of 'millennial' employees."

    Plaintiff Eugene Schenfeld, who worked as an IBM research scientist when current CEO Arvind Krishna ran IBM's research group, sued IBM for age discrimination in November, 2018. His claim is one of many that followed a March 2018 report by ProPublica and Mother Jones about a concerted effort to de-age IBM and a 2020 finding by the US Equal Employment Opportunity Commission (EEOC) that IBM executives had directed managers to get rid of older workers to make room for younger ones.

    Continue reading

Biting the hand that feeds IT © 1998–2022