October 18, 2011 8:25 pm

Cloud service Dropbox reaches for the sky

Arash Ferdowsi (left) and Drew Houston, founders of Dropbox, at their San Francisco offices

Arash Ferdowsi (left) and Drew Houston, founders of Dropbox, at their San Francisco offices

Dropbox has raised $250m in new funding in a deal that values the digital file-sharing service at $4bn.

Founded in 2007 by Drew Houston, then aged 24, and Arash Ferdowsi, then 21, Dropbox has rocketed in popularity among users and investors. Its service allows people to access documents, music and videos from whatever device they are using, and to store them in a so-called internet cloud. Dropbox now has more than 45m users, and is on track to triple its user base by the end of 2011.

Mr Houston said the cloud, and the need to connect all user information across all devices, would be the biggest technological transformation over the next decade.

“If you leave your iPhone in a cab, it’s going to take all your baby pictures with it,” Mr Houston told the Financial Times. “We’re really trying to help solve this by making all your stuff work together.”

Steve Jobs expressed interest in the company before he died, though no formal offers or rejections transpired before Apple announced its own competing iCloud service.

“We had always been planning that this is such an important space that we won’t be the only ones here,” said Mr Houston. “ It’s just recognition that this is a critical part of all the connected devices you use, not just Apple ones.”

The latest financing was led by Index Ventures and included participation from Benchmark Capital, Goldman Sachs, Greylock Partners, Institutional Venture Partners, RIT Capital Partners, and Valiant Capital Partners. It is Dropbox’s second round of funding, a huge leap from its $1.2m in seed funding and first round of just $6m from early investors Sequoia Capital and Accel Partners.

“[We] believe Dropbox has the potential to become an iconic technology company,” said Danny Rimer, general partner at Index Ventures.

“Over the past four years, Dropbox’s talented team has created a great service with a very strong business model.”

Unlike many other Silicon Valley darlings raising millions in venture capital, Dropbox is profitable, though Mr Houston would not say by how much.

The funding, he said, was “completely opportunistic”. The company would use the funding to launch new products, make acquisitions, pursue strategic partnerships, increase staff numbers from 70 to 200 within a year, and move them into a new 85,000 square foot office in San Francisco.

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