When cloud storage company Dropbox Inc. went public this past March, its success surprised the market, with shares’ prices surging past the company’s private market valuation.
But that success didn’t happen overnight. The journey to San Francisco-based Dropbox’s initial public offering was a long one, led by the company’s vice president, corporate legal, Mary Anne Becking. She said two years of team building, careful planning, communicating with employees and utilizing new tech went into knocking the company’s IPO out of the park. “I think [the planning] had a lot to do with the success … hiring veteran talent far in advance is something I would really recommend companies do,” Becking said. “Not just legal talent, but people on the comms team, the finance team, accounting team. Giving those people time to get to know the business, get to know each other and develop trust.”
Though the IPO team at Dropbox grew over time, it started out very lean, with only five members.
At the head was Becking, a seasoned corporate lawyer, with more than a decade of experience in-house, who began planning for the IPO more than a year before the decision to go public was official.
In 2017, she enlisted recent Dropbox hire senior corporate counsel, M&A and securities, Cara Angelmar, who brought fresh IPO experience from her time as an associate at Simpson Thacher & Bartlett. A Dropbox junior paralegal, stock admin and project manager rounded out the initial team.
Becking said she was skeptical of the nonlegal help at first, but that bringing in a project manager and stock admin was invaluable, providing insight and structure the team would otherwise have lacked.
“I think as a lawyer you’re a project manager and you’re the person who helps solve substantive problems, but we figured we were going to have so much to do between me and Cara that it might be good to bring someone in,” she said. “It worked out really well. Better than we ever would have thought.” Outside counsel from Wilson Sonsini Goodrich & Rosati, who led Apple Inc. and Google’s IPOs, joined up in early 2017, said corporate partner Tony Jeffries. He and three other partners, Lisa Stimmell, Rezwan Pavri and Shannon Delahaye (who made partner mid-Dropbox project), were brought on, as well as two or three of the firm’s associates. Dropbox’s IPO team decided on Wilson Sonsini after a long bake-off process, during which, Becking said, the company was able to gather advice from firm lawyers on next steps. It was a helpful way to hear the perspectives of different outside counsel who had worked on a variety of IPOs.
She said Dropbox chose Wilson Sonsini because the firm had experience and was a “jack of all trades” for IPOs, and she wanted a one-stop shop.
“We wanted experts who had seen this a million times,” Becking said. “That said, we [also] wanted outside counsel we could dig in and spend late nights with, and spend a lot of time with.”
Wilson Sonsini was a good personality fit, she said, and Becking, Angelmar and Jeffries reminisced about the fun they had texting nonstop and exchanging GIFs in collaborative Dropbox Paper documents as they worked on the IPO. The Dropbox team noted the importance of having a strong relationship between in-house and outside counsel during a process as stressful as going public.
“Relationships and rapport matter, both internally and externally,” Angelmar said. “Spending time on building relationships with the people you’re going to be working with makes working through the thorny issues that much easier.”
There wasn’t a massive team involved in the IPO at first—especially within Dropbox—but that’s what Becking said the company wanted. The smaller the team, the less likely it was that confidential information would come out during the planning process. “We started really small and we wanted to keep it small, because the confidentiality was really important to us,” she said.
Confidentiality played a role in Dropbox’s IPO timing. Legally speaking, the company was only able to keep its IPO plans under wraps until December 2017, a few months before its March 22, 2018, IPO.
That’s when Dropbox hit the $1 billion revenue mark, a milestone the company had been creeping towards. Once that threshold was crossed, the company no longer had the “emerging company” status that leaves them eligible for the JOBS Act.
Under the JOBS Act, emerging companies are not obligated to disclose IPO plans, an effort to allow smaller companies to test the waters of an IPO without the fear of public backlash if the plans fall through.
Keeping plans confidential saves companies from having to disclose competitive information and can reduce the media buzz around initial stages of the process.
“We had to do a lot of our ‘testing the waters’ meetings before Dec. 31, while we still had that status,” Becking said. “So we spent a lot of time with outside counsel, figuring out what would happen if we were to go over a billion—would we still be able to test the waters?”
Eventually, even the best-kept secret IPOs have to come out of the bag. As the offering drew nearer, Becking’s Dropbox team began to grow, getting other departments involved to help ease the transition into life as a public company.
The IPO and What Came After
Jeffries, who has seen many companies through the IPO process, said Becking and Angelmar’s ability to work with the Dropbox communications team was impressive. They were able to deliver confusing information related to the IPO, such as the company’s decision to perform a reverse stock split, in a way that helped employees make sense of the changes ahead.
Through their work with comms, the IPO team was able to make going public a smooth and comprehensible change for Dropbox employees.
Becking and Angelmar credited this inter-team success in part to the use of Dropbox’s collaborative document-editing service Paper. When working with comms, or even outside counsel, the team noted the importance of having one document everyone can share, rather than a series of emails with different drafts.
“Having now gone through it this way, I can’t imagine going through it the old way of emailing Microsoft Word docs back and forth,” Angelmar said.
The team’s use of technology to keep everything in one place helped maintain communication and strengthen bonds within what could have been a large, unwieldy team.
Jeffries said that Dropbox’s in-house team wasn’t just preparing for the communication necessities of the present. He said that, unlike some companies that stay more focused on the IPO than life after, Becking was planning for how Dropbox would handle actually being a public company.
That’s a strategy that’s helpful for long-term success, he said. Post-IPO celebrations, companies and their legal leaders need to be able to get various filings in on time and gather and communicate information that wasn’t required in their private days.
“The company had already been thinking about what its disclosures would look like [as] a public company a year before it even did its IPO. It was preparing to be public, long before it actually was public,” Jeffries said.
“And that’s a worthwhile distinction, because companies will often think about preparing for the IPO and doing the advanced work for it, but the mindset Dropbox had is, ‘We’re not just preparing to do the IPO, we’re preparing to be a public company,’” he added.
It’s an adjustment process Becking was able to manage smoothly, with the help of tech, time and a strong team.
Dropbox’s team was able to plan ahead with financial statements, a financial team in place and strong outside and in-house counsel. But Angelmar noted that no company can plan for every contingency, especially when it comes to such an important transition.
“You can’t plan for everything at the beginning,” Angelmar said. “A lot of it is being flexible and being able to apply past experiences to completely new situations. The challenges are the surprises and the unknowns and being able to address things as they come up.”