Box: Building the Next Generation Enterprise Software Company
Discuss Box's need for capital as it grew. Wasn't it benefiting from increasing returns to scale? Why the need for additional capital?
Box’s need for capital as it grew was to actually finance their growth. For instance, in 2004, Box received their first investment of $80,000. Levie and Smith were able to grow their user base to 1000 paying users in just a few short months. However, as the user base grew rapidly in a short period of time there were still only two employees, Levie and Smith. They had bootstrapped the company, which meant they had to do everything from coding of the platform to marketing, support and sales. Levie and Smith could not possibly support 1000 users by …show more content…
Box’s business growth would quickly outrun any profits, operating and free cash they had. For instance, it was important for Box to move to Los Altos, CA to be closer to the talent, venture capitalists, culture and the environment that software companies thrive in. The move and office procurement all required capital beyond what Box was able to produce on their own.
There are several factors, which changed in importance as Box’s business developed. These factors became more prominent in determining the need for capital and ultimately their success. Personnel resources, relating to numbers, depth, and quality of people, particularly at the management and staff levels needed to accommodate Box’s growth as well as the change in customer mix required capital investment. Personnel resources were absolutely critical in ensuring that Box achieved a constant return to scale that could sustain the growth Box was experiencing as well as execute SMB and Enterprise business growth strategies. The appendix A - Employee Breakdown 2009-2013 highlights the hiring done to support Box’s growth. Box went