Box raises $150M in an unusual pre-IPO round

Box continues to engage in unusual pre-IPO financing to keep its growth plans on track while waiting for an IPO post-Labor Day, according to sources cited by the Wall Street Journal. The company has raised an additional $150 million in private equity funding from TPG and Coatue Management, at a valuation of $2.4 billion.

TPG recently invested in Airbnb and Uber, which like Box are later stage, pre-IPO tech darlings.

This round by Box is a timing move, allowing the firm to pick a better time for it’s public market debut. And the funding is necessary because Box is still unprofitable, and spends heavily on sales and marketing to push its products to the enterprise market for file sync-and-share solutions. The company lost $160 million last year (see Box can’t IPO, so now what?) , and this years losses are likely to be higher, as Box expands its operations, development, and sales staff.

The company delayed an IPO originally planned for March because of a weakening market for companies like Box: highly capitalized but money-losing cloud technology companies.

Box has raised over $500 million at this point including those of this financing round, and earlier with VC firms like Draper Fisher Jurvetson, General Atlantic and Bessemer Venture Partners. Salesforce is also an investor, and announced a partnership with Box last September, actually dropping its own competitive offering — Chatterbox — in favor of Box (see Salesforce drops Chatterbox, announces Salesforce Files).

Other competitors to Box have been raising money this year, too, as the market continues to grow. Dropbox raised $250 million in Jan which later grew to $400 million (see Dropbox, now valued at $10B, raises $250M). Hightail raised $35 million in November (see Hightail raises $35M: the file sync-and-share market is red hot).

I’ve argued that this is a market ripe for consolidation. I am writing a Roadmap report for this sector at present, and that will be coming out shortly In that I explore the market forces that are expanding this market, and show that Box, Dropbox, Hightail and other file pure play sync-and-share companies are going to collide with the giants: Google, Apple, and Microsoft. You can see why the start-ups have to get big fast, and that takes a lot of money, as this latest round shows.