Box's Aaron Levie shares a warning about Wall Street for Snap

Ahead of Snap's IPO, the Box co-founder and CEO takes note of what he's learned two years after taking his company public.

Snap Inc, the parent company of the messaging app Snapchat, is set to debut on the New York Stock Exchange Thursday amid big questions about the company's growth strategy. To settle those questions, Snap's leaders should be prepared to explain their vision with the help of some hard numbers, warns Aaron Levie, co-founder and CEO of the cloud content management company Box.

"Wall Street is going to measure you on a quarterly basis, and every time they measure you, they're not paying attention to your strategy or what you said," Levie told ZDNet. "They're going to measure you on those numbers. You have to make sure you're clear about what those numbers are on a path toward."

Levie learned this the hard way: Box went public just over two years ago, and Levie forecast that the company would achieve positive free cash flow by early 2017. The company announced Wednesday in its Q4 2017 results that it reached that goal. However, Levie said, "for the first part of when we were public, the market didn't see how that was going to happen."

After hitting $23 on its first day on the public market, Box's shares were on a downward trajectory for most of 2015 and fell below $10 early last year. Since then, however, as Box continued to beat its Wall Street guidance, shares have climbed back up.

"We've had to be very clear we're going after a massive market," Levie said. "Even though we were communicating a ton, it takes a lot of time. Fortunately, Wall Street has picked up on that."

With that in mind, he continued, "What Snap is going to have to do is really communicate as clearly as possible how they're going to get on a strong path for revenue generation and lowering their costs, and then drive as much predictability as possible into their business. Public investors value predictability almost above all else."

Box said Wednesday that achieving positive free cash flow demonstrates the strength of its own business model. Levie said the company is well positioned to serve as a replacement for traditional enterprise content management (ECM) products as more and more companies move to the cloud.

"The traditional market in this space never really invested in cloud-first approach... so you have billions that are being spent on on-premise technologies or hybrid technologies that we don't think are going to scale, or be able to solve the modern problems in this market," Levie said.

"When you imagine what the future of work looks like, how much faster we want to work, how much more collaborative we're going to be, the need to have intelligence in all of our software, the need to have security baked into our technologies... We think cloud content management is going to be the only way to deliver on those use cases."

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