The Power of Negative Churn: Dropbox's business model


VC Perspectives from a Former Entrepreneur – Jeff Bussgang


I love S-1s. I know I am weird but S-1s are loaded with great
nuggetsof insights about business models, company performance
and havefascinating stories embedded in the sometimes turgid prose.    
Dropbox has been one of my favorite startups for many years. I have
taughta Stanford Business School case on Dropbox in my HBS
class onLaunching Technology Ventures for many years regarding their
scaling their sales and marketing operation. We also teach an early
stage case on Dropbox to all first year students at HBS. And a few
of my former students joined the company early and became key
executives over the years. So, when the Dropbox S-1 cameout
yesterday, I was excited to read through it and see what I could learn.
To be clear,I am notan investor in the company and don’t own any
shares (as far as I know!)
In short, Dropbox is a cash machine and possesses a magical business
model. Anyone who concludes otherwise doesn’t understand the
difference between cash flow and GAAP and the power of negative churn.
Let’s jump in...
Negative Churn