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By Sara Jameson
The smart VC money continues to move to the nascent cloud ventures.
Just look at this latest investment, VC firms are looking to replicate
the splendid returns realized by the EMC acquisition of VMWare several
years ago. The investment fund of Andreessen Horowitz are placing bets
on web-based enterprise software startups as they gain more importance
in their portfolios. Andreessen in particular has a good track record
with his investments.
In 2005, Aaron Levie and Dylan Smith were college dropouts with
$11,000 and a startup idea for an online storage and collaboration
service. They recently announced that their company, Box.net, has
received a $48 million direct investment.
This large investment by Meritech Partners and Andreessen is the
latest sign that web-based enterprise software startups continue to
gain momentum. Box.net is a file storage and collaboration company.
According to their website they have over five million users, including
enterprise customers like Cisco Systems and Dell .
The basic version of Box's service lets web enabled computer users
store and share files online for free. This is a common entry level
strategy to get users to trial a service and then set the hook and
upsell additional services and customized features. The company
typically charges customers $15 per month for those additional storage
or security enhancements. Is this a valid entry level price point for
the typical web transaction? Yes, if it is a business expense, not a
personal expense.
Box.net has raised a total $77.5 million to date. The latest round
of financing was led by venture capital firm Meritech Capital Partners
with Andreessen Horowitz and Emergence Capital Partners joining them.
According to a press release the company issued recently, the funds
will go towards doubling its team of 140 employees within the next 18
months. It will also enable Box to pour more resources into its mobile
platform, increase international presence and built out its enterprise
sales force.
Box has enjoyed rapid growth among everyday consumers looking to
store photos and documents online. But will this growth translate into
more transaction and storage fees? The trick will be to make sure the
total resources used by the non-paying users are much smaller than the
subscriber base.
To compete with enterprise software companies like Microsoft, IBM,
and EMC, Box.net will need to build a larger, globally focused
enterprise sales team. This will take some time and surely a big chunk
of the funding they received.
Levie admits that they still need to prove that the current business
model is sustainable and that competitive services like a web-based
version of Microsoft's SharePoint software provide who "meaningful
competition" for Box will not box them out of the market so to speak.
According to a recent inteview with Fortune, Levie likes to talk
about the "revolution" that's taking place in enterprise software and
how social tools like Facebook, Twitter and YouTube have changed the
way we think about technology in and out of the workplace.
"This is a revolution that is democratizing enterprise software – the
cloud has dramatically leveled the playing field for the delivery of
services, and for the first time, technology adoption in the enterprise
is being driven by the bottom-up," Levie wrote in a blog post published
recently.
The enterprise IT space continues to mature. Box.net claims that 73%
of the Fortune 500 use Box to share, access and collaborate on
business content online, but the majority of its current users are not
paying customers. That will need to change and the $48 Million is the
funding to make that happen.
"Box's beginnings were modest," Levie wrote in his recent blog post.
"We must invest aggressively to continue this success. We are no
longer a small startup, but a 140-person strong organization that must
do everything in its power to bring better technology to the
enterprise."
Published by myITview.com
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