Spotify vs. Dropbox: Who Will Be Remembered as the IPO of Early 2018?

The first quarter of 2018 brought two tech giants to the table. Spotify, the Sweden-based music streaming service, and Dropbox, the San Francisco-based file hosting service, both went public this March, helping contribute to the biggest quarter in the IPO market in the last three years.  

Different approaches

Spotify’s IPO drew attention for not drawing attention at all. While traditional IPOs are underwritten by major banks and sell new shares, Spotify opted out. Instead, it made its debut as a direct listing, meaning that only current shareholders could sell their existing shares on the New York Stock Exchange floor and no price was set in advance.

Spotify had no choice but to go public before July of this year. According to Recode, the longer that Spotify delayed its listing, the more shares in the company shareholders TPG and Dragoneer accumulated, according to the convertible debt note they held. Stocks began trading at $165.90 on Tuesday, April 3, after a stormy Monday that saw the Dow Jones and S&P 500 fall three points. It closed at $149.01, a drop of over 10%, but still higher than the original reference price of $132. Spotify now has a market valuation of $26.6 billion.

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The Dropbox IPO, meanwhile, was long-awaited and well-hyped, underwritten by the likes of J.P. Morgan, Goldman Sachs, and Deutsche Bank, among other institutions. Their goal was to raise $500 million at a time when the company was already seeing rising profits and narrowing margins. Their March 22 offering garnered $750 million, thus far the biggest tech IPO since Snap Inc. debuted in 2017. Dropbox shares rose by 36% after its first day of trading. The IPO was initially valued at $21 a share; it closed at $28.50, with a high of $31.43. This brings their valuation up to $10 billion, approximately where it was at its last funding round in 2014.  

This is a tough time for a tech company to go public, especially one entrusted with so many users’ personal data. Dropbox already seems to be protecting its image. In February 2017, a Wikipedia user moved the criticism section of Dropbox’s page to a separate article, stating that it “was getting really long and became difficult to navigate properly.” The criticism article includes privacy issues, data breaches, outages, and the inclusion of Dropbox in the NSA’s national surveillance program, among other controversies. It can only be found by clicking on a hyperlink in a single sentence from the last paragraph of the main page’s introduction. The reception section of Dropbox’s current main page is composed entirely of positive press. The main page receives a daily average of 2,853 views; the criticism page receives 42. As Facebook, Google, and Apple stocks have yet to recover from the panic over privacy in tech, Dropbox still managed a strong debut.    

Measuring growth

Both companies made a splash, and their timing and shared status as tech IPOs are begging comparisons. Beyond the Wall Street data, there are other parameters to look at when it comes to measuring lasting success. Spotify which was founded in 2006, has seen a 68% rise in employees in the past two years. Despite the company’s growth – it now boasts 90 million free listeners and an additional 70 million paying subscribers – hirings have more or less plateaued in the last six months, seeing only a 5% growth in manpower. Those they did bring in are distributed across the specializations. In total, 65% of those new hires were in arts and design and information technology, focusing more on user experience and less on product development.

Spotify's growth. Source: LinkedIn


Dropbox, meanwhile, has only seen a 25% growth in employees over the past two years.  Most of those – 43% – have been in engineering and human resources. As Dropbox acquires more and more companies and integrates their technology into its product, engineers are crucial. While Spotify seems to be positioning itself for growth, Dropbox may be working towards streamlining and efficiency.

Dropbox growth. Source:


Spotify and Dropbox both have mobile apps available, which have proven crucial for the sales of both. Frustration with the free version of the Spotify app seems to drive many users to pay for subscriptions, if Google Play reviews are to be believed. With over 11 million downloads, that means more revenue for the company. It’s also the number one music app on the Apple App Store, despite Spotify’s competition with Apple Music.

The Dropbox app gets largely positive reviews on the Google Play Store, but some users are frustrated that Dropbox Paper – the company’s Google Docs competitor – is a seperate app and not integrated into the service. iPhone users on the Apple App Store leave more negative feedback for bugs and software issues. While users are generally happy with the storage service, they face stiff competition in the cloud service market, facing off with the likes of Amazon, Google, and Apple.

Spotify vs. Dropbox vs. the tech establishment

Not only are both companies squaring off against fierce competition, they’re often squaring off against the same competition. Spotify has nearly double the listeners of Apple Music, but brand loyalty means that the latter is quickly growing. With a little over 20 million subscribers but about 10 million more songs in their library, exclusive releases, and iTunes integration, Apple is working hard on catching up. Amazon Music United has also breached the market, and similar streaming service Deezer is still holding out.   

Spotify vs. its competitors.

Dropbox has been competing against Box since its inception, which remains its most direct competitor. It’s also fending off Google Drive, which is becoming more and more ubiquitous, and whose mobile app allows for a wider range of functions. Other major competitors are Microsoft OneDrive and Amazon Cloud Drive. Apple’s iCloud is also an emerging rival.

Dropbox vs. its competition

Source: Similarweb

For the time being, neither company is profitable. The biggest chunk of Spotify’s profits goes to licensing fees, and Dropbox lost $111 million in revenue in 2017. While Spotify’s profits are increasing, Dropbox’s losses are shrinking, and only time will tell which tech unicorn will come out on top. Interested in investing and want up-to-date insights on companies like Spotify and Dropbox? You can order a report on these and other companies here.

So, How Much is Stitch Fix Worth?

Snap and Blue Apron’s disastrous 2017 IPOs left Wall Street tech investors with a bitter taste in their mouths. Over the summer, pessimists even went so far as to predict that these two stock market flops would impede other companies’ efforts to go public, including Uber and Dropbox.

Uber and Dropbox haven’t gone public yet, but a group of healthy tech companies made some significant inroads into the stock market in the last two weeks. Open source database company MongoDB went public two weeks ago at a $1.5 billion valuation, followed by cybersecurity company ForeScout, which saw its market cap rise by 15% last weekend to $934 million.

At about the same time, two high-profile tech companies, online fashion shopping service Stitch Fix, and marketing email company SendGrid, filed their S-1 forms. Worldwide meal kit delivery startup HelloFresh has expressed its appetite to go public and is aiming to do so soon at a $1.8 billion valuation, ignoring Blue Apron’s challenges in the market from last June.

The public tech market is experiencing its best time ever, with the NASDAQ breaking new records every month. The NASDAQ has been soaring, having passed the 6,000 point mark for the first time last April.. With Apple gaining 35% of its stock price since the beginning of 2017, Google adding 22.7%, Facebook 46%, Oracle 29%, and Amazon 30%, it’s no wonder that others want to join the party.

The S-1 documents filed by Stitch Fix and SendGrid last month gave us some sense of their growth and the good momentum they’re experiencing at the moment. Yet, they did not disclose some critical numbers, such as their valuation and churn data. Using NLP and AI, we might be able to assess both companies’ level of growth and success to complete the picture described in the filings.

In order to learn more about these firms and their prospects, let’s use Zirra’s company analysis platform. Zirra has built an automatic process that delivers insightful outputs on private companies creating high-level analytical insights within seconds. Zirra collects and aggregates data from a myriad of public and private information sources and then utilizes Natural Language Processing (NLP) techniques to process this large volume of unstructured text and data.

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Stitch Fix

Stitch Fix is one of the biggest surprises in tech and e-commerce in 2017. The online fashion retailer sends its customers a package with five items, a “fix,”  according to his or her size and style. On its face , just another Silicon Valley “kit delivery” startup. But Stitch Fix’s numbers are very impressive: the company’s revenue grew by almost 34% to $977 million in the 2017 fiscal year (which ends in July), with a net loss of only $1 million. That’s almost a billion dollars in revenue from 2.2 million active clients, not bad for an online fashion company that was founded just six years ago.

Now, let’s ask Zirra’s company analysis bot, Emmet, about the risk and success criteria we need to know about Stitch Fix. Within seconds, Emmet pulls out the following output:

Source: Zirra

In terms of successes, Emmet mentions the extensive media coverage, the fact that Stitch Fix has recently begun a funding process (IPO) and its many patents and trademarks. As far as risks, Emmet mentions a few challenges: the highly competitive market (with the likes of LE TOTE and Trunk Club) and the fact that the company hasn’t raised much more capital than its competitors.

Emmet also mentions some legal issues that Stitch might be involved in. In order to locate the exact problem, let’s go to Zirra’s homepage and search for Stitch Fix in the search line. Then we’ll scroll down to the Latest Events section and click on “legal problems”. The linked article tells us that Stitch Fix was found in the eye of the hurricane of the sexual harassment claims against Justin Caldbeck from Binary Capital. While Caldbeck was an associate at Lightspeed, one of Stitch’s investors, founder Katrina Lake, accused him of sexual harassment. According to Axios, Lightspeed compelled her to sign a non-disparagement agreement to not sabotage the next financing round. You will not find that in the S-1 document

Source: Zirra

Emmet also flagged Stich Fix’s high number of open positions, which can be a sign of future growth, as a risk factor. Double-checking this with LinkedIn’s Total Employee Count dashboard shows that the company has hit a plateau in employee growth. Did Stitch cut expenses in order to show profitability before filing its S-1? Or else, had its excessive growth in 2015 and 2016 forced it to slow its expansion in 2017?

Source: LinkedIn

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Let’s look at another important indicator, traffic. According to SimilarWeb, a service that monitors web traffic, the number of visits to Stitch Fix’s website has grown significantly in 2017: from January to June 2017, traffic doubled. Yet, this growth isn’t coming from Stitch Fix’s home market. In fact, traffic originating in the U.S. decreased by almost 3% in this period, a bad sign for a business deeply rooted in that country.


Source: SimilarWeb

So, after considering some company health indicators, let’s answer Stitch Fix’s valuation riddle. Let’s ask Zirra’s valuation calculator, which estimate a company’s valuation, had it been a public company. According to Zirra, Stitch Fix’s pre-money valuation is estimated at $600-$700 million. In the case that the company will file for an IPO, it can pursue a valuation of $800-$900 million as a public company (or else would it get acquired).

Source: Zirra

The Zirra valuation process involves both intrinsic and relative valuation algorithms. The intrinsic data includes revenue and expense estimations, traffic trajectories, investment history and velocity, all based on aggregated sources. In the relative analysis, data is compared and benchmarked with a database of thousands of companies,controlling for stage, space, size, and trajectory.

Let’s evaluate SendGrid and HelloFresh, two companies that plan to go public very soon. SendGrid is estimated at $360-$380 million pre-money valuation, and up to $600 million if it chose to go public right now (read the full SendGrid Zirra Premium Insight Report); Germany based HelloFresh is estimated at $1.5-$1.6 billion, and up to $2.2 billion in the case of a liquidation event. In comparison, competitor Blue Apron is now traded at a $952 million valuation (read the full HelloFresh Zirra Premium Insight Report)

Zirra has also valued some of the recent tech IPOs. MongoDB, trads on the NASDAQ at $1.46 billion, but is valued by Zirra at $1.7-$1.8 billion, while ForeScout, now traded at $916 million, can pursue up to $1.4 billion if bought.

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