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Dropbox Cuts Several Employee Perks as Silicon Valley Startups Brace For Cold (businessinsider.com) 119

Not everything is working out at Dropbox, popular cloud storage and sharing service, last valued at $10 billion. Business Insider is reporting a major cost cutting at the San Francisco-based company. As part of it, the publication reports, Dropbox has cancelled its free shuttle in San Francisco, its gym washing service, pushed back dinner time by an hour and curtailed the number of guests to five per month (previously it was unlimited). These cuttings will directly impact Dropbox's profitability. According to a leaked memo, obtained by BI, employee perks alone cost the company at least $25,000 a year for each employee. (Dropbox has nearly 1,500 employees.) From the report: Dropbox isn't the only high-profile startup to unleash a company wide cost-cutting campaign lately. A number of unicorn startups, worth over $1 billion, including Evernote, Jawbone, and Tango, have all gone through some form of cost cuts, whether layoffs, office closures, or reduced employee perks. [...] A lot of this has to do with the slowing venture funding environment in Silicon Valley. Investors have become much more conservative with their money lately, and are losing patience for startups that have failed to generate returns after years of free spending. For Dropbox, the cost cuts may have less to do with the state of the VC market than with its own ambitions. Dropbox CEO Drew Houston has repeatedly said in the past that he doesn't need to raise capital in the private market anymore. Instead, Dropbox may want to show investors that its business is strong enough to IPO.
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Dropbox Cuts Several Employee Perks as Silicon Valley Startups Brace For Cold

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  • by Anonymous Coward

    I love this phrase "A number of unicorn startups,"

    Considering that the actual number of real unicorns - you know, with the horn part, and the horse part - is zero.... well, this metaphor is a pretty huge devaluation from the original concept. Lol

    • how does it even apply here? What make it a unicorn?

      • by Anonymous Coward

        how does it even apply here? What make it a unicorn?

        Worthless bullshit company that somebody has declared to be "worth" 1 Billion or more = Unicorn

        • Worthless bullshit company that somebody has declared to be "worth" 1 Billion or more = Unicorn

          No, someone did not just "declare" it was worth that much. They invested real money at that valuation. If a VC invests $50M for 5% ownership, that implies a value of $1B.

          It is unlikely that Dropbox is still worth the valuation of its last investment round, and those late stage investors are likely to lose money. But VCs expect to lose money on most of their investments.

          • Re: (Score:1, Insightful)

            by Anonymous Coward

            Worthless bullshit company that somebody has declared to be "worth" 1 Billion or more = Unicorn

            No, someone did not just "declare" it was worth that much. They invested real money at that valuation. If a VC invests $50M for 5% ownership, that implies a value of $1B.

            I

            "Implies" is the important word here. 5% ownership . . . of what? And where's the other $950 Million of that 1 Billion?

            If you give me $50M and I say "OK, you now own 5% of the company" that's fine, but what if that $50M is actually the only money I have? In reality, my company is only worth $50M, but because I said I'm giving you 5% ownership, my company magically becomes "worth" $1 Billion.

            And that's the point. It's all made up numbers.

            • by ShanghaiBill ( 739463 ) on Sunday May 08, 2016 @02:53PM (#52071579)

              5% ownership . . . of what?

              Of the company. Which means, among other things, 5% of future profits.

              And where's the other $950 Million of that 1 Billion?

              Equity.

              but what if that $50M is actually the only money I have? In reality, my company is only worth $50M.

              No. A company's value is not the same as the cash in their current account. Not at all.

              • It depends what is meant by 'value' or 'worth'.

                Market capitalization means the market value of a company's outstanding shares at a particular point in time (simply number of shares * stock price). If I start a company which promises to sell bottled unicorn farts and issue 1 billion shares, and some fool buys a share in my company for $1, then the market capitalization of my company is worth 1 billion shares * $1 = $1 billion. This is why Theranos is 'worth' $9 billion, or whatever. $400 million venture capi

            • You got confused by the word "declared" when the actual word is "valuated."

              Once you realize that valuate is a technical verb, and not a made-up word, then you can start to understand what is meant by valuation, and assign value to the process.

              It is actually very similar to home equity. It isn't actually worth anything unless sell the house. You can't hold equity in your hand; if you sell the house and find out how much equity you really had then it is also gone; you no longer have any, just the actual cash.

          • by Alomex ( 148003 )

            The law of diminishing marginal returns says that the first few costumers (or in this case investors) assign a much higher value to the first batch of product than subsequent ones, both individually and as a group. Say the first batch of customers for an antibiotic are fighting life threatening infections and hence they value the drug at a $40 a pill. The next batch of customers is simply fighting and ear infection and thus assign a value of $1 a pill.

            Ditto with shares in the company. The first batch of inv

            • Ditto with shares in the company. The first batch of investors are gong-ho on the business proposition, so they readily pay $50 million for 5%. But if you were to go public the next 5% batch of shares would go for say $45 million and the next one after that for $40 million. The last batch would sell for as little as $10 million for a total valuation of around $500 million.

              This is nonsense. Later stage valuations are usually higher than early rounds, because the company is bigger, with a longer track record, and there is less risk. Otherwise, why would anyone ever be an early investor? "Down rounds" happen, but they are not common.

              • by Alomex ( 148003 )

                You never heard of a downround kid? Look it up. They are fairly common nowadays, particularly with unicorns.

                More importantly I was talking about if all the shares were to b made available at once.

                • "Down rounds" happen, but they are not common.

                  You never heard of a downround kid? Look it up. They are fairly common nowadays, particularly with unicorns.

                  Well, which is it?

                  Wikipedia [wikipedia.org].

                  Hmm... dot com crash of 2000 again [investopedia.com].

                  Looks like history repeating itself to me.

                  Business Insider [businessinsider.com], from 2013:

                  After a few years of massive hype in the startup sector, absurd-sounding valuations are starting to correct themselves. Startups are confronting the prospect of raising "down rounds" from investorsâ"or rounds of financing that value the companies at less than the previous round.

                  LivingSocial, for example, was once valued at $5.7 billion; it's now worth a quarter of that, or less, depending on whom you ask. ...

                  Many of the businesses started were consumer-facingâ"things like photo apps and social networks that require a lot of people to use them to survive. They weren't transactional businesses that make money when they sell something. And that was okayâ"a lot of investors encouraged entrepreneurs to build up their user bases before trying to generate revenue.

                  But when some of the biggest consumer Internet companies, like Groupon, Zynga, and Facebook, went public, their stock prices got slashed. Suddenly, these incredibly valuable companies weren't worth as much money as the tech world initially thought.

                  FuckedCompany [fuckedcompany.com] is no more, but Wired informs me that CB Insights is where the action is at [cbinsights.com] this time around.

                  More evidence of the coming shitstorm.

    • you can actually "make" a unicorn if you start with a young enough goat

    • by HornyBastard ( 666805 ) on Sunday May 08, 2016 @04:15PM (#52071931)

      this metaphor is a pretty huge devaluation from the original concept.

      The only unicorn i have ever seen was a mule with a strap-on dildo on his head.
      To me, most of these unicorn startups look just as stupid.

      • this metaphor is a pretty huge devaluation from the original concept.

        The only unicorn i have ever seen was a mule with a strap-on dildo on his head.

        It's literally impossible to decide if I want you as a Facebook friend.

      • by wwalker ( 159341 )

        Heeey! Why do you insult mules with a strap-on dildo on the head?

  • Investors have become much more conservative with their money lately, and are losing patience for startups that have failed to generate returns after years of free spending.

    I keep hearing that the current tech bubble burst will be worse than the dot com bust. Uh, no. Professional money is drying up after these unicorns spent too much money on perks rather than the actual business. While that impacts Wall Street and The Wall Street Journal proclaiming the end of trading profits in daily articles, it has no impact on Main Street. Remember, kids, a bubble is when your grandmother and her dog are throwing money into the stock market. After the dot com bust and the real estate bust

    • by Anonymous Coward
      Money spent on perks is money spent on the actual business. Giving incentives for skilled employees to work for you is a core of business, not an unfortunate side effect that must be dealt with as cheaply as possible. Of course, just like any other money, it can be thrown at bad things (buying a full swimming pool-sized ballpit is probably not the best idea from most perspectives)
      • by 93 Escort Wagon ( 326346 ) on Sunday May 08, 2016 @02:07PM (#52071383)

        Money spent on perks is money spent on the actual business. Giving incentives for skilled employees to work for you is a core of business

        And the fact that "dinner" is considered a perk demonstrates why anyone with a life outside of work should never, ever consider working for a startup.

        On a side note... it seems to me this announcement also did double duty as a passive-aggressive method of informing Dropbox's workers they'll be expected to work an additional hour each day, going forward.

        • And the fact that "dinner" is considered a perk demonstrates why anyone with a life outside of work should never, ever consider working for a startup.

          I think your statement overreaches a bit. I work for a startup where we all work from home, and I have a lot more time with my family due to the lack of daily commute.

        • by Shawn Willden ( 2914343 ) on Sunday May 08, 2016 @10:14PM (#52073087)

          And the fact that "dinner" is considered a perk demonstrates why anyone with a life outside of work should never, ever consider working for a startup.

          Bah.

          You're assuming that the offer of dinner tells you something about required work hours. It tells you nothing about that. It may be that employees are required to work long hours and company-provided breakfast and dinner are indicators that employees should be at work before breakfast and not leave until after dinner. Or it may legitimately be a perk, a company-provided convenience for employees who are working late because they don't come into the office until 11 AM or because they actually choose to work long hours because they're excited about their projects and enjoy what they're doing.

          The existence or absence of perks like meals doesn't inherently mean anything about expected work hours. If you want to find out what expected work hours are, you have to ask people who work there.

          it seems to me this announcement also did double duty as a passive-aggressive method of informing Dropbox's workers they'll be expected to work an additional hour each day, going forward.

          I think it's far more likely that the change is intended to dissuade employees from grabbing a free meal on their way out the door, to reserve the perk for the people who are legitimately working later and save money on food.

        • it seems to me this announcement also did double duty as a passive-aggressive method of informing Dropbox's workers they'll be expected to work an additional hour each day, going forward.

          How much work can there be to do? I mean it's a cloud hosting service what can there possibly be for 1500 people to do all day?

          • by creimer ( 824291 )

            How much work can there be to do? I mean it's a cloud hosting service what can there possibly be for 1500 people to do all day?

            Two million lines of Python code.

      • Well my view is that the business model for some of these companies never made that much sense. But then again, I don't see much value in forcing users to endure advertisements of some sort or another, and at the end of the day the infestors really only saw that there were potentially a lot of captive eyeballs, and the possibility of more targeted marketing.

        So now the infestors are weary of throwing money at these companies when they still haven't demonstrated how they are going to get repaid. And now the

        • by KGIII ( 973947 )

          > The employees will come away with something on their resume, and they will have stories about the stupid money that was floating around in the "good old days".

          That sounds vaguely familiar. ;-) Just about 20 years ago, actually.

      • by creimer ( 824291 )

        Money spent on perks is money spent on the actual business.

        Reminds me of a business story I heard. A young man presented a widget factory business plan to a group of investors, got the money and went away to start the business. A while later the young man called to ask for more money to keep the business going. The investors showed up at the young man's place of business to find a very expensive car out in front and a very fancy office inside. The investors demanded to see the rest of the business. The young man informed them that the car and the office was the bus

    • by geek ( 5680 )

      Remember, kids, a bubble is when your grandmother and her dog are throwing money into the stock market. After the dot com bust and the real estate bust, Grandma and the dog are keeping their money in a mattress.

      No Grandma and her dog don't have any money left.

      • by creimer ( 824291 )

        No Grandma and her dog don't have any money left.

        That's because you raided your inheritance from the mattress. Shame on you. :P

    • I keep hearing that the current tech bubble burst will be worse than the dot com bust.

      It's going to depend on how you measure "worse". Unemployment is already massive this time.

      • By the what metric and where?

        • By the what metric and where?

          In the USA, by the metric of the inverse of the labor participation rate. The published unemployment statistic is a lie based on the number of people eligible to receive unemployment benefits.

          • by creimer ( 824291 )

            The published unemployment statistic is a lie based on the number of people eligible to receive unemployment benefits.

            Let me guess... 92 million unemployed.

      • by creimer ( 824291 )

        It's going to depend on how you measure "worse". Unemployment is already massive this time.

        Let's compare measurements. I think today is better than yesterday.

        I was out of work for two years (2009-10), underemployed for six months (working 20 hours per month), and filed for Chapter Seven bankruptcy in 2011. There were seven job applicants for every job opening (a normal economy has two applicants per job opening). Recruiters weren't calling and the few I talked to told me I was unemployable.

        Today I'm employed for government IT on a contract that's fully paid out for the next three years, great ben

  • ...Dropbox may want to show investors that its business is strong enough to IPO.

    The most profitable point in many a companys' timeline is right before the IPO.

  • Not $10 billion (Score:5, Interesting)

    by Alomex ( 148003 ) on Sunday May 08, 2016 @02:03PM (#52071359) Homepage

    Not everything is working out at Dropbox, popular cloud storage and sharing service, last valued at $10 billion.

    Nope, and I quote "T. Rowe Price marked down its holdings in Dropbox by 51% in the fourth quarter of 2015". This places a valuation of $4.9 billion, down from $10 billion. Fidelity and Black Rock had similar mark downs for their holdings of Dropbox.

  • I just did a google check of "gym washing service" and all it came up with was companies that wash school and fitness centre gymnasiums.

    Could somebody please explain what that is and what employees were getting out of it?

    Now, if it was an auto-correct fail, I do have some soiled Jims that are pretty stinky and such a service would be of value to me.

    • by cbraescu1 ( 180267 ) on Sunday May 08, 2016 @02:36PM (#52071511) Homepage

      Washing clothes while the employee is at the company gym.

      • by rossdee ( 243626 )

        Washing clothes while the employee is at the company gym."

        I guessed it was 'washing the employees gym clothes after they had been using the gym, which would be a lot cheaper.
        (send the clothes out to a laundry service overnight.

        • The wanted to parallelize some off-work activities of their employees. Seems like Soviet Union style of meddling in comrades' private life led to similar type of money destruction.

    • It's one of those things designed to suck up all of the investors money while not actually getting any work done. Many startups, especially those run by young people, act as if money is free (in their life long experience they may as well be right), whereas companies that need to make a quarterly profit have to scrimp and save (relying on used foosball tables).

  • by Mal-2 ( 675116 ) on Sunday May 08, 2016 @03:31PM (#52071737) Homepage Journal

    I thought Dropbox had terminally jumped the shark when they put Condi on the Board of Directors. Certainly I left then, and any time I've pointed it out on a project where they have said "let's use Dropbox" they have immediately changed their minds. I had no idea they'd managed to bloat their operations to over a thousand people.

    To the any employee of Dropbox: Brace yourself. Winter is coming. It seems long overdue, in fact.

    • Why does Condi matter?

      • by Mal-2 ( 675116 )

        Because of her stance against privacy and for government snooping during her tenure with the Bush II administration. It has nothing to do with conservatism, I would feel the same way if they put James Comey on their Board.

      • Someone doesn't like her piano playing, I'm guessing?

  • Cold? the rest of the country is coming into summer - it was 93F in the cities on friday.
    is a California ice age an unexpexted effect of climate change?
    Or are they expecting The Donald to win in November (and therefore Hell to freeze over...)

  • Self-inflicted (Score:5, Insightful)

    by Guspaz ( 556486 ) on Sunday May 08, 2016 @04:15PM (#52071937)

    When every other provider on the market was offering cheap storage (including Google and Microsoft), Dropbox refused to drop their prices. They were charging for 100GB what everybody else was charging for 1TB. As such, they lost a lot of customers to the competition, and a lot of customers who could have been producing revenue stuck with the "free" tier rather than pay $10 a month.

    They've sort of learned their lesson, now offering 1TB for $10/mth, but still haven't quite caught on yet: they don't have anything between $0 and $10 a month. A lot of customers who want a bit more than the free tier, but don't want to pay $10/mth, aren't being served. Google will sell you 100GB for $2/mth, and I bet Dropbox is leaving a lot of money on the table by forcing people to pick between Google at $2 or DropBox at $10.

    • by AmiMoJo ( 196126 )

      They lied about privacy too. They said that their staff couldn't access files, but they can. Their security credentials seem to be quite lacking in general, for example their client stored private keys in plaintext for a long time.

      Dropbox is always going to struggle to complete with Amazon and Google on price. Dropbox can't match their economies of scale, and likely can't match their investment in storage R&D either. Dropbox doesn't seem to offer any unique features either.

  • ... its gym washing service ...

    The fuck is that?

    Do employees have to wash their gyms or the company's gym themselves now?

  • So... for some offices that I work with, who happen to have an old XP machine kicking around for accounting or some other random task... guess what file sync service they are NOT going to be paying for in the future?

  • by grumling ( 94709 ) on Sunday May 08, 2016 @07:48PM (#52072695) Homepage

    1500 hundred people to run a file server.

    Reminds me of this picture from the 1990s:

    https://s-media-cache-ak0.pini... [pinimg.com]

    • Dropbox, like all these unicorns don't make their real money from selling an actual product or service. They make money by selling ownership of the future income stream they say will be produced by those services. The idea is to be able to front load the next 25 years of stratospheric projected earnings into today's share price. Then the initial investors can cash out and leave all the retail investors to sit around for 25 years wondering if they will ever get their money back.

      If you realize this is the bas

  • $25,000, that works out less than than they're paying the average director.
  • Wait, so they actually want employees to go home early so they don't have to spend as much money on free dinners?
  • by eWarz ( 610883 ) on Monday May 09, 2016 @04:27AM (#52074017)
    I'm surprised the benefits last this long. Personally, I was stung by Dropbox. I was offered a campaign that promised 'unlimited storage for photos and videos' via their app sometime back. I used about 25 GB or so before the campaign ended only to discover that at some point the 'unlimited' offering disappeared. I could find very little mention of this 'unlimited' offering, and the fact I can't even DOWNLOAD (back up) the videos/phones I took that went over the newly imposed limit (due to a limit on download sizes) means that I basically lost access to those files. Dropbox is now, and forever, dead to me. Instead I pay Microsoft for a decent amount of storage and an office 365 subscription.
    • by Ash-Fox ( 726320 )

      You going to give up one drive since they stopped their unlimited everything storage too?

  • "Dropbox has cancelled its free shuttle in San Francisco, its gym washing service, pushed back dinner time by an hour and curtailed the number of guests to five per month (previously it was unlimited)."

    I wonder how much cost cutting there has been for executive pay and perks.

  • by ErichTheRed ( 39327 ) on Monday May 09, 2016 @12:40PM (#52076471)

    Employers' perks and work environments vary greatly. Even some established employers lavish perks on their employees, with the intention of keeping them working longer. Some places are just crappy to work for perks-wise, but the reality is that IT and development people are treated pretty well all things considered. If you don't get perks, at least you get a reasonable salary (for now.) I'm not trying to say "be thankful for what you've got" but comparing an established product-selling, cost-managing big boy company to an Internet startup isn't a fair comparison.

    Everyone values perks differently. My current employer offers very little beyond free coffee in the non-monetary department. But it works for me -- I have an office, I'm not on call 24/7, I have a short commute, I get to travel once in a while, the pay is decent and the company pays a very generous match into our 401(k) accounts, a concession for them killing pensions. Compare that to two other examples:

    1. I have lots of friends who work in the state university system. Free food and laundry style perks don't exist, and the salary is below average. The trade-off comes with non-tangible benefits though; you have to try extremely hard to be fired or laid off, health coverage costs a lot less, retirement is 100% covered and guaranteed, union representation means you'll always get salary increases, and you get to work with generally smarter people. I've considered this for a time in my life when I don't need a big salary anymore, but the pay is just too low for me to take given current expenses. "Stability" is a perk, though it may not be to someone who doesn't need it. Give 20-somethings a few years and a couple of kids; stability will suddenly jump to the top of the priority list.

    2. I also know a bunch of people who work for "all-inclusive" employers, some for Microsoft or SAS and some for SV tech companies. Especially the ones that offer free dinner are basically trying to continue the college dorm lifestyle. It makes sense, if you're 24 and have no commitments, why not take advantage of it? Even the Microsoft guys say that Microsoft tries to do everything they can to keep you working longer -- "frictionless" is a word I've heard mentioned, and I saw it on a visit to their HQ lately. Established employers do tend to age however, and it becomes less important keeping the kids on campus 18 hours a day.

    I've been working in a diverse set of environments over the last 20+ years, and it's interesting to see the dotcom bubble being replayed in Silicon Valley/San Francisco in almost identical fashion. Once the unlimited VC punch bowl gets put away, startups start having to act more like real companies. The surprising thing from the article was that these cost-cutting startups are worried about retention! As if it was normal to have 3 free meals a day, shuttle service from Hipster Central to the office, free laundry service, etc...

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