October 11, 2011 6:06 pm

Box.net raises $81m of new funding

Box.net, a cloud-based document management company in Silicon Valley, has raised $81m of new funding in a deal that values the company at about $650m, according to two people familiar with the financing.

The investment reflects growing confidence in cloud computing services, which allow people to store and access information through web-based software, rather than physical hard drives or network systems.

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Box designs software specifically for businesses, allowing employees to share and access information from whatever device they are using, from any location. The six-year-old company positions itself in direct challenge to veterans in business-focused computing, such as Microsoft, Oracle, and IBM.

“Businesses of all sizes are moving their information and collaboration to the cloud,” said Aaron Levie, Box’s chief executive. “With this new capital, we’ll support their transition by continuing to aggressively out-innovate legacy players like Microsoft.”

Box currently has 7m individuals and 100,000 businesses using its services, with adoption in 77 per cent of Fortune 500 companies, including Procter & Gamble and AAA.

Investors in the current funding round included venture capital firms Bessemer Venture Partners, NEA, Andreessen Horowitz, and Draper Fisher Jurvetson Growth, as well as two strategic partners, salesforce.com and SAP Ventures.

“The market potential for Box is massive,” said Byron Deeter, partner at Bessemer Venture Partners. “The company has already inspired 100,000 businesses to rethink the way they share and manage content, and they are just getting started.”

Box plans to use the capital to integrate its content management services with the cloud-based collaboration tools of salesforce and SAP, to expand its international presence, and to continue building its US infrastructure, including opening a third data centre in 2012.

The alliance with other cloud-based software companies strengthens Box’s position as it takes on wealthy companies such as Microsoft, Oracle, and IBM, which Mr Levie regularly criticises for misunderstanding recent evolutions in technology that have led to a more mobile, more collaborative “post-PC world”.

“The way people interact with information and use the internet has changed in the past decade,” he said, citing Apple and Facebook’s consumer-oriented, aesthetically pleasing, easy-to-use products as the new paradigm for software. “Most companies in the enterprise space have been around for 20 or 30 years and haven’t been able to adapt as quickly as they need to.”

Box’s fundraising comes on the heels of significant fundraising rounds by other start-ups, including Tumblr, which raised $85m for an $800m valuation last month, and Airbnb, which raised $112m, giving it a $1.3bn valuation, in July. There is ongoing speculation that Dropbox, which offers cloud-based storage of files, photos, and videos for consumers rather than businesses, is also looking to complete a massive fundraising round that could value the company at $4bn.

The financings come at a time when venture capital firms are at a low point in raising their own funds. Dollar commitments to venture capital funds decreased 53 per cent in the third quarter of 2011 to $1.72bn, down from $3.5bn during the same quarter the year before, according to a new study of 52 firms by Thomson Reuters and the National Venture Capital Association. It was the lowest amount raised since the third quarter of 2003.

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