Can Dropbox survive an active hedge fund?

Fresh off victorious activist campaigns against Dell and AT&T, hedge fund Elliott Management is going after Dropbox.

June 4, 2021

In 2007, when Drew Houston was pitching Dropbox — the cloud-based file storage provider — to investors, he often had this exchange:

Venture Capitalist: “There are [already] a million cloud storage startups.”
Houston:Do you use any of them?”
Venture Capitalist:No.”

Houston went out and built Dropbox…

… into what is now an $11B public company with 700m registered users and — in 2020 — revenue of $1.9B, per The Wall Street Journal.

There’s a problem, though.

Unlike Houston’s conversations from the early Dropbox days, there are countless cloud storage companies now… that people do use. You may know these 2: Apple and Google, which both offer loads of free storage.

Dropbox has expanded its product line

It includes efforts in centralized document editing and 2 notable acquisitions: DocSend (document tracking) and HelloSign (digital signatures).

However, revenue has slowed and its core cloud business is largely commoditized.

Activist hedge fund Elliott Management…

… has taken a sizable stake in the company, per WSJ. To get a return on its investment, the hedge fund will likely have to find a private equity buyer for Dropbox or a merger partner.

The hedge fund has notched some recent high-profile wins, catalyzing change at AT&T (to leave the media business) and Dell (to spring off VMware).

However this shakes out, Houston will likely be facing much tougher investor conversations than he did in 2007.

Join 1.5m+ professionals getting The Hustle daily news brief

Business and tech news in 5 minutes or less

100% free, no ads or spam, unsubscribe anytime


How'd Bezos build a billion dollar empire?

In 1994, Jeff Bezos discovered a shocking stat: Internet usage grew 2,300% per year.

Data shows where markets are headed.

And that’s why we built Trends — to show you up-and-coming market opportunities about to explode. Interested?

Join us, it's free.

Look, you came to this site because you saw something cool. But here’s the deal. This site is actually a daily email that covers the important news in business, tech, and culture.

So, if you like what you’re reading, give the email a try.

If you don’t like it, unsubscribe any time. Privacy policy.