Aug 16, 2016 · 6 minutes

Bloomberg reported yesterday that Dropbox has been meeting with financial advisors to test the waters of a 2017 IPO…. in particular, what valuation it might get.

This is a break from the Dropbox of just a few months ago. Sitting on stage at a Bloomberg event Drew Houston said there were no plans to go public. “We can do that on our own timeline,” saying the company didn’t “[need] to raise money.”

Well, yes and no.

Yes, in that it’s been two years since Dropbox raised money-- and, in that, the company differs from pretty much every other decacorn. Let’s put everything else aside and acknowledge: That’s impressive. And it reflects not only Dropbox’s growing revenues but recent cost cutting measures. It has killed product lines like Mailbox and Carousel which had millions of users, but “weren’t moving the needle” for Dropbox.

The once free-spending company has cut perks for employees too. Not just perks, but totally unnecessary spending. Like a $100,000 chrome Panda. From Business Insider in May:

The statue was made in recognition of the company's panda mascot. It was seen as a stamp of approval, signaling to the world that Dropbox belongs in Silicon Valley's elite club, where extravagant office decor has become the norm.

But next to the statue, which one source said was rumored to cost $100,000, was a little memo that offered an interesting footnote about the sculpture:

“Pandas have meant many things to Dropboxers over the years, and the idea here was to commemorate the original…it wasn’t the right call,” the note said. “When it comes to building a healthy and sustainable business, every dollar counts. And while it's okay for us to have nice things, it's important to remember to ask ourselves, 'would I spend my own money this way?'"

Dropbox has also pushed back the start time of office dinner, the number of guests employees can bring to that dinner, and several free shuttle services for employees. Employee perks, according to that post, were running some $25,000 a year per employee. That’s some $40 million per year. That’s nearly half a mega round.

Some of the press has heralded both about faces-- the cuts and the potential IPO-- as emblematic of broader market trends. But if you look at companies in the decacorn range, we don’t see either that level of discipline or talks of an impending IPO. Dropbox seems to be growing up quicker than most-- whether by necessity, discipline or good advice.

There are scant reports of cutting perks at Snapchat, Airbnb, or Uber, for instance. The lone sign of a change in spending has come from Uber cutting its losses in China. But it got a lot in return with a 20% stake in Didi Chuxing. And it’s still spending more than $1 billion a year propping up losing market positions in India and other markets. It’s hardly gone austere.

If you look at global decacorns, Didi is hardly stopping the spending. It threw Uber a $1 billion investment as part of their deal and turned around and invested in Southeast Asia’s Grab just after the Uber news broke.

Similarly, plenty of folks have surmised the Uber move could portend a 2017 IPO. Maybe. But it’s just as likely it wants to get in the position that Dropbox has been in for two years, not dependent on constantly raising new mega rounds, from new evil despots, at ever mounting valuations.

I’d be stunned if Snapchat’s ad business was in good enough shape to go public and support its valuation anytime soon. Its ad business is at some $350 million now, and the company is valued at a heady $19 billion. While fast growing, still… compare it to Twitter’s $10 billion valuation for a business that does double that per quarter. Jefferies for one has predicted Snapchat could double that to $1 billion next year. If true, they should do that first.

And Airbnb signaled last week that it was putting its eventual IPO off longer with its new mega round in progress.

Others like Pinterest certainly aren’t throwing cash around the same way, but they also aren’t talking about an imminent IPO.

Is it possible that the king of the Y-Combinator kids is the first decacorn CEO to grow up? To accept he’s raised more than $600 million in funding from investors and at some point it’s his job to give them a return. That he can no longer afford to buy $100,000 pandas. That he may have gotten out over his skis with past valuation, and if so, he’s going to have to take the hit at some point and keep moving forward.

He hinted as much at the Bloomberg event when he said this, according to TechCrunch:

“In these boom times you get really disconnected from the fundamentals,” he reflected, possibly acknowledging that Houston’s own company mismanaged their financials. And then “when the market corrects, you have a shift, where you go from a focus on growth at all costs.”

“You have to keep an eye on your costs,” he added. “Expenses that start small become big.”

A lot of people took the opportunity to mock Dropbox’s announcement on Twitter today, asking if he’d noticed Box’s performance of late. Box-- Dropbox’s smaller competitor-- went public in 2015 at a comparatively scant $1.7 billion valuation. That was nearly 30% less than it’s private round raised six months earlier. Yes, at $12.8- per share, Box’s shares are below it’s $14-per-share price. But not that much below.

But Box took the hit. It made it out. It’s investors and employees were able to sell shares, whether at the price they wanted or not. And with that distraction behind it, it’s grinding away to keep building since.

Dropbox is already dealing with the swings of somewhat arbitrary valuation declines via funds like Fidelity, and the impact on employee morale. It’s well aware of how much the productivity landscape has changed since it last raised money, with the rise of Slack alone. It’s shown every sign of trying to grow up as a company. Now it needs to move out of mom’s house and pay it’s own bills.

The highest market cap of any IPO this year was Line, which came in at $9.8 billion. And there’s a huge backlog of unicorns looking to get out. Dropbox has all but certainly seen Box’s stock chart. It’s likely as aware of anyone that it’s in a incredibly competitive space. And it’s no doubt aware that it’s product strategy can seem in disarray from the outside. Certainly IPOs have their downsides, but you know what might help its enterprise sales business and currency for acquisitions? A publicly traded stock.

But Dropbox is aware of all the jokes made on Twitter at its expense today, but it’s also aware it raised money from investors and hired employees on the promise an exit was in site. Is any of that changing in the next year? Then best to go ahead and take the hit.

If it exits for anything north of $1 billion but less than $10 billion it will be seen as a failure. But the failure wasn’t that it didn’t build a large and valuable business: It’s that -- as Houston said-- it “[got] really disconnected from the fundamentals.”

It sounds to me like Dropbox has spent the last six months or so doing its best to reconnect.