Is Dropbox doomed to fail?'


I highly doubt it. But if it is — then Maybe. In 2040.

And that’s a worst case, doomsday scenario.

We don’t have Dropbox’s direct financials, but let’s assume they are at +-$500m in ARR. And with the addition of more, bigger customers, let’s assume roughly they have 100% net revenue retention (it may be lower if they haven’t penetrated as many big accounts as we expect, but it’s still possible it’s >=100%).

That means as a cohort, that $500m in ARR renews for $500m next year. And this without any new customers.

And that’s an almost impossibly terrible scenario that assumes zero new sales.

More realistically, that $500m this year may “only” become $600m next year, who knows.

But it will take many, many years for $600m in ARR to decline. If it ever does. And likely it will peak at, at least, $1b in ARR before it declines.

And if it does decline, it’s SaaS and recurring revenue, with high gross margins (70%+). So it will take far more than a decade to decline to something irrelevant.

Which B2B platforms with $200m+ in revenues and >100% net revenue retention have failed?

Like Zero.

It takes way too long to fade away. In fact, the slower you grow, often, the much more profitable you become. You stop so aggressively investing in sales (and marketing) … and those 70%+ gross margin deals renews … and cash rains.

Yes, you can get acquired, and ignored, and re-branded, and all that. Your technology can become dated and stale.

But failure after $200m ARR?

Worst case — worst case — that’s decades away.

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Published on October 11, 2016
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