Box, once a clear-cut darling, has had a rough 2014. It delayed its IPO due to a softening SaaS stock market. This forced another financing round that was less than favorable for it. Add in Apple and Amazon entering the Enterprise File Sync and Share (EFSS) world, and it's safe to say things are getting challenging for Box. Can Box weather these challenges and pull the entire EFSS market along with it?
Due to the delay in going public, Box had to take another round of financing. According to their most recent S-1, Box’s Series F financing was for 7.5 million shares at $20 per share. This $150 million will help keep Box chugging along until it goes public.
Though Box had to make some guarantees to get the money.
If you read the fine print, you see some strong promises. The first is a promised 11 percent return on the initial price of $20. If Box goes public at less than $22.22 per share, the Series F investors will receive enough additional shares to make up the difference, diluting the value of all other stock.
If Box doesn’t go public in a year, that $22.22 jumps to $23.00 on July 7, 2015. For each three months afterwards that the IPO is delayed, the price goes up an additional $0.75. That is an additional 3.75 percent return on the original investment each quarter.
None of this will matter if the SaaS market continues its June rebound. If it doesn't, Box’s newest investors are going to make money at the expense of every other investor.
The EFSS market hasn't been sitting still while Box goes public. Amazon has jumped into the fray with Zocalo. While still a few months from its final release, it's reported to have a very solid design. Zocalo is going to appeal to the CIO who is already spending money with Amazon and is under pressure to provide an EFSS solution for staff.
The most important feature is the ability to pick the Amazon data center in which content is stored. While initially only in data centers in the US and Ireland, this has huge ramifications for international customers worried about the privacy laws in the countries holding their information.
This is going to be an interesting play. Box may have more features, but for some organizations, Zocalo could be the path of least resistance, especially with the choose-your-own-data-center approach.
Features that Count
Box has already responded by giving business users unlimited storage. This is going to drive the discussion towards features and away from the cost of storage. The amount of storage being offered was already enough for most business customers -- this completely removes storage from the equation.
Box has features that organizations need and will do well when selling further up the organizational stack. The key here is keeping their roadmap appealing for enterprise buyers without complicating the exiting ease-of-use for the everyday worker.
The BoxWorks conference in September will be especially important from a roadmap standpoint. Box has a history of mixing consumer and enterprise feature announcements. Box always hypes the consumer features more as those drive the "cool kid" publications. When it comes to long-term viability, what it announces as enterprise features next will matter more.
What does Box need to work on to stay ahead of the other EFSS vendors? Adding metadata to the user interface is key as the API is not enough. Implementing Information Governance support would also be a positive differentiation. Box should not target full Records Management, but the ability to start applying analytics to classify content based upon business rules would go a long way towards helping organizations track the information they have. If it can later add rules-based retention and mass purge/deletion then there will be some real distance between them and their competitors.
Those features are likely a long way from today. If Box wants to get there, it needs to keep adding high profile clients and working to become the default EFSS solution. It has a head start but the big boys in the cloud world have noticed and are coming for it.