Cloud storage startup Box.net scores $48 million in funding

February 24, 2011: 12:19 PM ET

Andreessen Horowitz and others send a big signal that web-based enterprise software startups are gaining clout with their latest investment.

Back in 2005, Aaron Levie and Dylan Smith were college dropouts with a collective $11,000 and a not-so-sexy startup idea for an online storage and collaboration service. Today, the entrepreneurial duo announced that their company, Box.net, has closed a whopping $48 million series D funding round.

The large investment is the latest sign that web-based enterprise software startups are gaining clout. Box, a file storage and collaboration company, says it has over five million users, including enterprise customers like Cisco Systems (CSCO), Dell (DELL) and DreamWorks Animation SKG (DWA). The basic version of Box's service, which lets people store and share files online, is available for free. The company charges customers $15 a month for extra features like more storage or security enhancements.

Palo Alto, Calif.-based Box has raised a total $77.5 million to date. Its latest round was led by venture capital firm Meritech Capital Partners with Andreessen Horowitz and Emergence Capital Partners joining in.

So what will the startup do with all that new cash? (In an interview with Levie, the 26-year-old co-founder and CEO of Box joked that he's finally going to buy a yacht). According to a press release the company issued Thursday morning, the funds will go towards doubling its team of 140 employees within the next 18 months. It will also enable Box to pour more resources into its mobile platform, increase international presence and built out its enterprise sales force.

Box has enjoyed viral growth among everyday consumers looking to store photos and documents online. But to go up against the likes of so-called "legacy" enterprise software companies like Microsoft (MSFT), IBM (IBM) and EMC (EMC), it needs a larger, more traditional and global enterprise sales team. It also needs to prove that's it's financially stable and here to stay. Even the uber-optimistic Levie admits that services like a web-based version of Microsoft's SharePoint software could provide some "meaningful competition" for Box. And he's got smaller competitors to tackle as well, including San Francisco-based Dropbox, which also lets users store and share files online.

Levie likes to talk about the "revolution" that's taking place in enterprise software and how social tools like Facebook, Twitter and YouTube have changed the way we think about technology in and out of the workplace.

"This is a revolution that is democratizing enterprise software – the cloud has dramatically leveled the playing field for the delivery of services, and for the first time, technology adoption in the enterprise is being driven by the bottom-up," Levie wrote in a blog post published Thursday morning.

It's true that the enterprise IT space is undergoing a transformation. But changes happen slowly in the IT world. And while Box boasts that 73% of the Fortune 500 use Box to share, access and collaborate on business content online, the vast majority of its current users are not paying customers. If Box executes correctly though, its new $48 million round of funding could definitely help it snag more paying, corporate customers.

Already, Box has made some impressive leaps and bounds since its early days in Levie's uncle's garage.

"Box's beginnings were modest," Levie wrote in his recent blog post. "...We must invest aggressively to continue this success. We are no longer a small startup, but a 140-person strong organization that must do everything in its power to bring better technology to the enterprise."

--With additional reporting by Jessi Hempel

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About This Author
Michal Lev-Ram
Michal Lev-Ram
Writer, Fortune

Based in Silicon Valley, Michal Lev-Ram covers enterprise and mobile technologies for FORTUNE. Prior to joining FORTUNE, she wrote for CNNMoney, Fast Company, Popular Science and other business and technology publications. She was also a staff writer at Business 2.0 and holds a B.A. in journalism from San Francisco State University.

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