Box raises $150 million and continues to wait on IPO

Box, the cloud software company that has delayed for months its widely anticipated IPO, has raised $150 million in funding from hedge fund Coatue Management and private equity firm TPG.

Los Altos-based Box on Monday updated its IPO filing with the Securities and Exchange Commission to show the new investment, led by Coatue, which now owns 3.3 percent of the company.

The investment allows Box, which sells software to companies to store and manage files in the cloud, to further delay its public market debut — an event the startup has been dragging out since first filing its paperwork in March. The market tumble in April led several tech startups including Box to delay IPO plans, but some experts also blame Box’s unsteady financials, including a $38 million loss from February to April this year. This new cash infusion may help Box buy the time it needs for a successful IPO, according to some experts.

The company on Monday declined to answer questions about the investment, citing the mandated quiet period during the IPO process. But in an email, a Box spokesman said the IPO didn’t have a set date and the company still had its eye on the public market.

“Our plan continues to be to go public when it makes the most sense for Box and the market,” he said. “As always, investing in our customers, technology, and future growth remains our top priority. TPG and Coatue have great track records with growth companies like Box and we’re excited to work with them as we execute on our strategy.”

Other shareholders include Draper Fisher Jurvetson, with the largest stake at 25.2 percent, followed by U.S. Venture Partners, which has 12.8 percent. CEO Aaron Levine has 4.1 percent of the company.  The new investment values Box at about $2.4 billion, according to sources cited by The Wall Street Journal.

Box filed for an IPO on March 24 and could have listed shares by mid-April. While there are no requirements for when a company must begin trading after it files an IPO, companies may announce pricing and begin a roadshow — when executives hold meetings with potential investors to drum up interest in their company — within 21 days of an IPO filing.

But Box’s filing came just in time for gyrations on Wall Street to hammer tech companies — the Nasdaq composite index suffered its biggest loss since 2011 in April – and bring the IPO market to a brief standstill. The second half of April saw no IPOs, and the first two weeks of May saw only seven, according to data from William Blair.

But the market has since picked back up, and the second quarter of this year saw the most IPOs in a decade.  GoPro, the wearable sports-camcorder maker from San Mateo, raised $427.2  million during its first day of trading last month – the largest consumer hardware IPO in two decades — and networking equipment maker Arista Networks of Santa Clara raised $225.8 million in its early June public offering.

Several Silicon Valley companies that filed IPOs after Box – such as cloud service provider Zendesk – have already gone public and saw shares soar on their first day.

Box’s IPO delay may be a sign of deep-rooted financial challenges rather than market turbulence, according to some experts. The company spends heavily on salespeople and marketing, an expense category that last year exceeded $171.2 million, almost four times its research and development investments. Losses have accelerated each fiscal year, from $109.1 million in 2012 to $158.8 million in 2013, although losses began to slow in the first quarter of this year compared to previous quarters.

Some industry experts Box is struggling because the cost of cloud services has come down so low that it’s difficult to turn a profit. Google and Microsoft have also started selling cloud storage for cheap, which threatens the startups going after the same market.

“Price points are coming under increasing pressure,” said Vineet Jain, co-founder and CEO of Egnyte, a Mountain View company that sells software that allows companies to store data both in the cloud and on premise. “The cost of cloud storage is going to be zero.”

The company is also making more money, with revenue up from $58.8 million in 2012 to $124.2 million last year; revenue for the first quarter this year is $45.3 million, almost twice revenue from the same period a year ago. It is also continuing to grow its customers, with 39,000 paying businesses using Box, up from 34,000 in March, according to SEC filings.

Box becomes one of the rare companies to raise capital from private investors after registering for an IPO. Out of 124 IPOs of venture-backed companies in 2012 and 2013, just 14 raised a round of private investment in those years while registered to go public, according to data from Dow Jones VentureSource.

Photo: Cloud storage company Box having their building repainted in Los Altos, Calif., Wednesday, Oct. 30, 2013. By Karl Mondon/Bay Area News Group.

Heather Somerville Heather Somerville (210 Posts)

Heather Somerville is a business reporter covering venture capital and startups for the Bay Area News Group.