Dropbox has filed confidentially to go public, setting in motion what could be one of the most closely-watched tech IPOs of the year.
The company valued by private investors at $10 billion has tapped Goldman Sachs and JPMorgan Chase to lead the listing process, a source with knowledge of the company has confirmed to Forbes. Dropbox declined to comment on the news, which was first reported by Bloomberg.
According to that report, Dropbox reportedly aims to list within the first half of 2018. That timeline is disputed by Forbes‘ source, who declined to provide an alternative target date.
One of tech’s youngest billionaires at 34-years-old, Dropbox CEO Drew Houston announced in January 2017 that the company had passed $1 billion in annual revenue run rate, meaning that its quarterly revenue at that time, if extrapolated across a one-year interval, would produce revenue of $1 billion. At the time, the company said it was the fastest software-as-a-service company to reach that milestone. Dropbox had about 500 million users and 200,000 paying business customers on its books a year ago.
In June 2016, Houston, who cofounded Dropbox with Arash Ferdowsi in 2007, told a tech conference in San Francisco that the company was cash flow positive. In April 2017, the company said it was profitable on an EBITDA basis, which would include its stock-based compensation.
In what may prove to have been anticipation of the IPO process, Dropbox announced in September 2017 that it was appointing Hewlett Packard Enterprise CEO Meg Whitman to its board of directors. Then in December, the company beefed up the board’s financial makeup by adding former Nike CFO Don Blair.
How Dropbox fares on the public markets will provide a prominent beacon for tech “unicorns” valued at $1 billion or more who have watched Blue Apron and Snap struggle with their public debuts in recent months and remained on the sidelines. Other high-profile companies that could follow Dropbox in upcoming months include Airbnb, WeWork and Uber, as well as companies without quite the same buzz but with the financials to go public, such as Qualtrics.
While Dropbox has faced concerns about its ability to grow new products and the struggles that have beset some of its closest peers, sources told Bloomberg in August that the company was growing its revenue at a healthy clip of about 30%. For comparison, Salesforce reported 32% annual growth for its fiscal 2015 on revenue of $5.37 billion.
In July 2017, Dropbox featured as No. 2 on the Forbes Cloud 100 list of top private cloud companies. Should it go public, its exit would dwarf cloud’s most recent biggest, AppDynamics’ acquisition for $3.7 billion in January 2017. A successful IPO would mean a windfall for early venture capital investors Sequoia Capital and Index Ventures as well as a slew of firms with smaller stakes in the longtime Silicon Valley favorite. – Written by ,
Investing In Memories, Not Material
Cézanne Britain is the founder and CEO of Britain Renecke, a 100% black, female-owned commercial law firm in South Africa. Her tips for a debt-free life and why she counts memories, not money.
With “Room2Run,” AfDB Launches Securitisation Market For Multilateral Development Bank Sector
➢ WITH “ROOM2RUN,” AfDB LAUNCHES SECURITIZATION MARKET FOR MULTILATERAL
DEVELOPMENT BANK SECTOR
➢ TRANSACTION IS IN DIRECT RESPONSE TO G20 ACTION PLAN FOR MDB BALANCE SHEET OPTIMIZATION
➢ AfDB COMMITS TO REINVEST FREED UP CAPITAL INTO NEW AFRICAN INFRASTRUCTURE
LENDING, MAKING ROOM2RUN ONE OF THE LARGEST IMPACT INVESTMENTS EVER
➢ TRANSACTION IS SUPPORTED BY NEW EUROPEAN UNION GUARANTEE TOOL (EUROPEAN FUND FOR SUSTAINABLE DEVELOPMENT)
OTTAWA, Canada, 18 September 2018 — The African Development Bank (AfDB), the European Commission, Mariner Investment Group, LLC (Mariner), Africa50, and Mizuho International plc today announce the pricing of Room2Run, a US $1 billion synthetic securitization corresponding to a portfolio of seasoned pan-African credit risk. Room2Run is the first-ever portfolio synthetic securitization between a Multi-Lateral Development Bank (MDB) and private sector investors, pioneering the use of securitization and credit risk transfer technology to a new and previously unexplored segment of the financial markets.
Structured as a synthetic securitization by Mizuho International, Room2Run transfers the mezzanine credit risk on a portfolio of approximately 50 loans from among the African Development Bank’s nonsovereign lending book, including power, transportation, financial sector, and manufacturing assets. The portfolio spans the African continent, with exposure to borrowers in North Africa, West Africa, Central Africa, East Africa, and Southern Africa. Mariner, the global alternative asset manager and a majority owned subsidiary of ORIX USA, is the lead investor in the transaction through its International Infrastructure Finance Company II fund (“IIFC II”). Africa50, the pan-African infrastructure investment platform, is investing alongside Mariner in the private sector tranche. Additional credit protection is being provided by the European Commission’s European Fund for Sustainable Development in the form of a senior mezzanine guarantee.
“Room2Run gives us fresh resources to invest in the projects Africans need most,” said Akinwumi Adesina, President of the African Development Bank Group. “Africa has the most promise, the greatest natural resources, and the world’s youngest population. But we also have the world’s most persistent infrastructure deficits. The African Development Bank has the strategy to address these infrastructure finance gaps—and Room2Run gives us the capacity to make it happen.”
Structured as an impact investment, Room2Run is designed to enable the African Development Bank to increase lending in support of its mission to spur sustainable economic development and social progress. In connection with Room2Run, AfDB has committed to redeploy the freed-up capital into renewable energy projects in Sub-Saharan Africa, including projects in low income and fragile countries.
“On the Impact scale, Room2Run is off the charts,” said Dr. Andrew Hohns, Lead Portfolio Manager and head of the Mariner Infrastructure Investment Management team. “Room2Run answers the call of the G20 for private sector participants to step in and facilitate development finance, providing a template for attracting significant private sector capital into urgently needed projects in developing economies.”
Raza Hasnani, Head of Infrastructure Investment at Africa50 commented, “Room2Run provides an innovative and commercially viable solution to the African Development Bank’s risk management and lending objectives, while paving the way for commercial investors to support and benefit from the growth of infrastructure on the continent. Africa50 is very pleased to participate in this landmark transaction, which is in line with our mandate to drive increased investment in infrastructure in Africa, and to create pathways for long-term institutional capital to flow into this space.”
Room2Run enjoys the support and participation of the European Commission with an investment from the European Fund for Sustainable Development, in the form of a senior mezzanine guarantee. “Only a few days after announcing our renewed Alliance with Africa for sustainable investments and jobs, I am very happy to announce that we are, together with the African Development Bank, launching Room2Run,” commented Neven Mimica, the European Commissioner for International Cooperation and Development. “This initiative is a perfect example of what we are doing to support investments in African low income and fragile countries through the External Investment Plan. Through Room2Run we provide
an additional protection to investments in the field of renewable energy. Through our Guarantee, investments under Room2Run will translate into extending supply to many people currently without electricity whilst creating much-needed new jobs.”
Room2Run also directly responds to calls by the G20 that MDBs use their existing resources to full capacity, as articulated in the 2015 G20 MDB Action Plan to Optimize Balance Sheets, as well as calls for greater MDB efforts to crowd-in private investment. The G20 has called on MDBs to share risk in their non-sovereign operations with private investors, including through structured finance, mezzanine financing, credit guarantee programs, and hedging structures.
The Government of Canada has been a global leader in advocating for MDBs to use their existing resources more efficiently and to mobilize private capital for global development. The goal of the G20 MDB Action Plan to Optimize Balance Sheets is to catalyze significant new development financing from the MDBs throughout the real economy in key development regions. “Attracting more private capital into global development efforts is critical to building economies that work for more and more people around the world,” said Bill Morneau, Canada’s Minister of Finance, “that’s why Canada and our G20 partners have been calling on multilateral development banks to use their existing resources as efficiently as possible, and to look for new ways to attract more private capital. We are pleased to see the African Development Bank come forward with a transaction that directly responds to both of these objectives. Room2Run is an innovative solution to a long-standing challenge.”
Juan Carlos Martorell, Co-Head of Structured Solutions at Mizuho International, adds, “Compared to other synthetic securitizations, a major achievement of Room2Run has been to ensure that ratings agencies, and in particular S&P, reflect the merits of the risk transfer into their rating assessments for multilateral development banks. AfDB’s leadership through this transaction has now set the stage for broader adoption of the instrument throughout the MDB community.”
Investment Marketplace Coming To Africa
From November 7-9, Africa Inc. will convene in South Africa’s Gauteng Province, the continent’s seventh largest economy, for the inaugural Africa Investment Forum (AIF).
An initiative of the African Development Bank (AfDB), it was announced in May in Johannesburg by AfDB President Akinwumi Adesina with Gauteng premier David Makhura.
“It will be the continent’s first-ever investment market place,” said Adesina, formerly Nigeria’s minister of agriculture.
“South Africa is open for business again, and as Gauteng, we are ready to host the forum on behalf of not only South Africa, but for Africa,” said Makhura, calling the forum “the Davos of Africa”.
A platform to close the investment gap, Adesina called it a game-changing initiative.
“It cannot be business as usual, it must be business unusual,” he said.
With Africa’s population set to be two billion by 2050, its development needs will require an estimated $600-$700 billion per annum. So accelerated development will be the forum’s focus.
“The forum will be 100% transactional. There will be no political speeches. The only thing allowed will be transactions, transactions and transactions,” said Adesina. In attendance in November will also be African heads of state who will be present as the CEOs of their countries.
In a sit-down interview with FORBES AFRICA, the AfDB president shared more about new investments, and the bread baskets and Silicon Valleys of Africa:
How will AIF take Afro-optimism and the African growth story further?
African economies have been growing relatively well in a very difficult global environment. Despite the global economic downturn, in 2016, they grew at roughly 2.2%; in 2017, they grew at 3.6%. In 2018, they are projected to grow at 4.1%. And that’s still above the global average.
So Africa’s head is above the water. But it’s more than about keeping your head above the water that matters, it is about how fast you can swim. I think Africa needs to swim fast and needs a lot of oxygen to do that. And that means a lot of firepower in terms of capital to close the infrastructure gap. To be able to drive millions of people out of poverty, Africa should be growing at double digits.
To be able to do that we have to deal with the problem of lack of electricity, make sure there is a lot more investment to allow trade to happen. Africa could contribute a lot more be it is rail, ports, national highways or aviation. It has to change lives on the ground and quiet honestly when people ask if I am an Afro-optimist, I am a very proud African. Africa is a beautiful place and has tremendous potential so we shouldn’t always just talk about the potential because nobody eats potential. We have to unlock that potential. So that is what the Africa Investment Forum is all about. Be it oil, gas, minerals or agricultural commodities, Africa is awash with rich resources.
The question is how to turn them into real dividends with significant amounts of revenue that allows a better quality of life for the people. For that, you need to deal with the infrastructure deficit. We used to say it is about $15 billion. But that has changed. The AfDB recently released the African Economic Outlook report and the deficit is anywhere between $67 billion to $107 billion every year, so which means we must do a faster job pulling capital together because the rest of the world is not waiting.
How long will it take to close that gap?
I think within the next decade. But it’s going to take a lot of work…
What about the youth dividend; what are the future industries?
Africa is at the very top in fintech and mobile money… but as we look at new types of industries, we have to look at them in the context of the fourth industrial revolution… I get excited when I see the youth in Africa well-educated, they are all on social media, know how to use apps, which means they already have a leg up. So the key is how to re-tool them to operate in that kind of a new economy. The AfDB is doing that in three ways already. First is we signed up a joint program with Google and Microsoft to help develop young talented Africans in computer technology. We as a bank are already investing in technology parks in Cape Verde, Angola, Kenya, Senegal, Rwanda. These are technology parks where you can have the ICT industries emerge; almost like trying to create the Silicon Valleys of Africa.
When it comes to the new economy, you have to start early. We have a program trying to create 250 coding centers in Africa where you get people with computational knowledge to do coding services that can help in this new world we are moving towards. We are also investing in universities for science and technology across Africa to create this new scientific human capital…We need to give African youth the skills they need for the jobs of the future, not for the jobs of yesterday.
What then are the new wealth generators?
If you look at where the money is going in Africa, it’s not actually going into oil, gas and natural resources. Most of the foreign direct investment (FDI) is going into the service industry, at least 64%, and also the financial services sector; maybe about 27% goes into the manufacturing sector. So these are the big sectors where you see a lot of FDI. But there are two sectors very important for me.
One is ICT, because this is going to be the driver of the economy. It’s very important for countries to invest heavily in the ICT industry to give their countries the platforms they need in the knowledge economy.
The second is the food and agriculture industry. Africa has a lot of oil and gas, but nobody drinks oil, nobody smokes the gas. Food is the future. The size of the food and agriculture industry in Africa is going to be $1 trillion by 2030 in Africa. This is where the wealth is supposed to come from. Unfortunately, in Africa, we always walk past gold. Just imagine you are seeing gold, and you see it as dirt and don’t recognize it. That’s the power agriculture has… The food business is the biggest business. Agriculture is not a development sector, it’s not a social sector, it’s a wealth-creating sector. Agriculture is a business and Africa needs to fully unlock that potential. If you look at the amount of arable land left to feed nine billion people in the world by 2050, it is not in Europe, Latin America, Asia, or the US, it’s in Africa – 65% is right here. What Africa does with agriculture will determine the future of food for the world.
How will Africa’s billionaires and capitalists help achieve these goals?
If you look at the high-networth-individuals in Africa, the majority of them make their money on this continent, and that’s already a strong signal. Aliko Dangote makes his money in Africa.
So we are going to get them involved on the Africa Investment Forum because it is trying to send a message to the world that we have African businesses that are viable businesses making money and doing well on the continent; so putting capital to help them expand can help them become global multi-national companies…
And investing in African entrepreneurs?
The issue for entrepreneurs is finding them, nurturing them and then putting the financial backing behind them to thrive. Africa has a lot of young people. Every day, I wake up I read about a young person doing so well. So the best investment that Africa can make is to put its capital at risk on behalf of its young people. Because when you see a young person walk into a financial institution, all you see is risk, risk, risk. We have to change that and try and see creativity, innovation and entrepreneurship. So that way we can put your money at risk to make them more creative, more innovative and unleash their entrepreneurship capacity. That is why at AfDB, we have a program helping to invest in the early-stage businesses of young people. Mark Zuckerberg and Bill Gates didn’t just get there, somebody had to believe in them.
We have a program set up with the European Union called Boost Africa to invest in young people. The other thing we are doing is helping unleash entrepreneurship in the food and agriculture industry. The bank has a program targeted at getting young graduates, medical doctors, engineers… who are all going to agriculture as a business. Last year, AfDB invested over $860 million in that program for about eight countries. Going forward, we expect to invest $1.5 billion dollars every year in that program for the next 10 years.
I really think unless we change the mindset, the labor composition of the agricultural sector and create a new dynamic group of entrepreneurs in the food industry, we only will have old people left. Every university in Africa has to make entrepreneurship compulsory.
– By Karen Mwendera and Methil Renuka
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