Dropbox cofounder and CEO Drew Houston. Tristan Fewings/Getty Images

Dropbox's rise has been impressive: Since its launch in 2007, it has added 300 million new users across 200 countries. The company was reportedly valued at $10 billion in January 2014.

That growth, fueled by $1.1 billion in venture funding, makes Dropbox one of the greatest Silicon Valley startup stories of all time.

But Dropbox is also a company in the midst of a huge transition as it seeks to build its enterprise business in an increasingly competitive space and regain the momentum that led to its lofty valuation.

The company's annualized revenue run rate was over $400 million as of December, according to a person familiar with the company's finances, as well as a report in The Information. That's only about 1/25th its most recent reported valuation.

Even a growth rate of 50% a year would mean it is now at about a $500 million annualized run rate, or about 1/20th its latest reported valuation. (Dropbox declined to comment on these figures and on most other aspects of this story.)

That's probably not enough to go public at a $10 billion valuation. Box, which is Dropbox's closest competitor in the enterprise, set its IPO value at $1.67 billion, a little less than eight times its 2014 revenue of $216 million. The highest multiple for any public internet-software company is Xero's, at 15 times revenue.

Dropbox for Business is Dropbox's best chance to grow its paid user base. With DfB, businesses pay $15 per user per month, or $150 per user per year for unlimited storage and extra features such as better security and admin controls. Dropbox says DfB has already signed up more than 100,000 paying businesses, including company-wide deployments at Spotify, MIT, and National Geographic.

Dropbox COO Dennis Woodside has called it "the ultra-high growth of our business going forward.”

Can DfB get the company ready to go public as a $10 billion company? We spoke to several insiders who harbored doubts about the product and the company's pace of innovation as a whole — as well as a couple who think that although the entire market is in a tough place, Dropbox is in as good a position as anyone to win it.

Growing pains and slowing innovation

Dropbox operates in a brutally competitive business. Cloud storage in general is headed toward a so-called race to zero, where companies keep cutting their prices while increasing storage limits. Big companies with other strong businesses such as Microsoft, Amazon, and Google are not afraid of losing money up front to gain market share.

It was only a little over a year ago that Dropbox finally made DfB a priority, even though it was clear before then that it needed that extra push from business customers, according to a former employee.

In the last quarter of 2013, Dropbox hired almost 200 new people, with a heavy focus on DfB. Almost all of the company's resources in its overseas offices, which grew to 10 from three in the past 12 months, are purely allocated to DfB. It has also added a more structured sales process, which made sales quotas higher and the pressure heavier. "People are very focused on hitting their quotas now," this former employee said.

As a result, DfB has signed up some large enterprise customers, including Under Armour, News Corp, Hyatt, and Yahoo, and some of them have bought thousands of seats. Several people close to the company insist that DfB growth is "on plan" and that they're happy with its progress.

Dropbox founder Drew Houston Flickr/TechCrunch

But the former employee also said a larger, company-wide problem held Dropbox back for a while: not enough urgency.

After coming out of Y Combinator in 2007, Dropbox hit 100 million users by 2012 and 300 million by 2015. That rapid growth made some people feel as if they had already made it. "There wasn't that sense of, 'We haven't won yet,'" the former employee said.

This person also told us DfB growth was "not stellar" as of the middle of last year.

Another person who left Dropbox last year said the company had become noticeably slower as it grew. (Dropbox increased in size to 1,200 employees from 500 in the past 12 months.)

For example, a simple team-change request had to go through multiple HR managers, creating a culture of heavy "process," or bureaucracy, that many engineers dislike.

In fact, in one of the internal surveys that asked the engineers whether they felt empowered to perform at their full potential, almost half of respondents answered "No," according to this person.

Another former employee agrees that COO Dennis Woodside, who joined Dropbox about 18 months ago after leading Google's Motorola unit, has put a lot of new processes in place. But this person insists that the process, rather than slowing the company down, has actually led it to ship more new features every week.

Another person at the company criticized its product development, calling it a "s---show."

Product lead Ilya Fushman on Wednesday morning announced his departure from the company to take a role at Index Ventures. Our source said Dropbox had been looking for a product VP for years.

Fushman's transition has actually been under way for some time, and he has been working closely with the new product lead, Rob Baesman, for the past year, another source close to the company told us. Baesman worked at VMware for over a decade, including five years in product management, according to his LinkedIn profile, so he has more experience in that field than Fushman, who was in business development and venture capital before taking on the product role at Dropbox.

Whatever the reason, it does appear that the core product hasn't changed much since the company's inception.

One former employee who was unhappy with the pace of innovation pointed us to this early Dropbox pitch video from Dropbox CEO Drew Houston, which was uploaded to YouTube in 2008. (It seems to be an updated version of the video Houston first uploaded to the Y Combinator message board Hacker News in 2007 — it has now been removed.)

Dropbox in 2007 looks and feels almost the same as the product does in 2015. Though Dropbox added 75 features in the fourth quarter of 2014 alone, they are not showing up as big, obvious improvements.

In fact, Ralf Rottmann, a German entrepreneur, wrote in a Medium post that his company was leaving Dropbox exactly because of that: "there's no innovation at its core."

One of the former employees disputed this characterization of slow innovation, saying that the last couple of years had been spent building infrastructure features, which aren't as visible to the outside world.

Bottom-up versus top-down: Which approach is better?

The slow pace of innovation and relatively late start on the business side mean DfB is still catching up with core features competitors have, and that enterprises demand.

We spoke to one CIO, Gerry Moore of St. James Hospital, who had some doubts when he looked at DfB last year. He immediately realized how popular Dropbox was — most employees were already using it and loved its simple interface.

But he held off on signing up right away, saying DfB didn't have the granular controls and security measures typically required of enterprise software. Only after he found Sookasa, an additional layer of security software that can go on top of DfB, did he feel comfortable enough to deploy DfB.

"In my opinion, heavily regulated industries like healthcare and finance will not use Dropbox alone but will add at least a second layer of security," Moore told us. "Dropbox has made the business solution easier to administer, but it still lacks the features regulated industries require."

From Dropbox's perspective, this is all part of its user-first philosophy. Dropbox is taking a bottom-up approach with a lighter product, acquiring individual and small-teams users first before moving up to larger organizations in regulated industries.

The company told us: "In under two years we’ve transformed Dropbox into a business-ready juggernaut that is reshaping the way entire industries work ... With more than 300 million consumers and 100,000 businesses, we're building a global company with two different and fast-growing revenue streams."

A former employee also talked about the dual revenue streams — consumer and business — and said Dropbox's goal was to get to a 50-50 split. It is growing the business side fast to get there, this person said.

To point out its advantages over its more enterprise-focused competitors, Dropbox has launched what it calls the Home for Life strategy, in which Dropbox serves as the platform for other daily productivity apps. For example, Dropbox has made some moves in the collaboration space, launching new features that allow users to chat and update simultaneously within a document. It also released Carousel, a photo-organizing app.

But its consumer initiatives have also had mixed results. Carousel, for example, hovers around 600th place in overall sales in Apple's AppStore, according to App Annie, while some of the company's acquisitions, such as the note-taking app HackPad, haven't materialized to any meaningful products.

Don't count them out yet

A sign at Dropbox's headquarters. Karyne Levy/Business Insider

Investors seem to agree DfB is still getting off the ground, but they say the potential is huge.

One investor with a long history in cloud computing told us: "The business product is materially behind schedule from what I can tell. I've heard they are missing some key enterprise features, and so companies just aren't adopting it." (This investor has no stake in Dropbox or its competitors but asked us not to use his name.)

Jason Lemkin of Storm Ventures agreed: "My sense is that the initial Dropbox enterprise strategy of converting 'rogue' users into true enterprise customers may perhaps have proven harder than anticipated."

That is because CIOs who have the final call on which software to use don't always pick the more popular product. "They care more about things like enterprise security and permissions than an average end user does, even if the whole company is already using it," Lemkin added.

At the same time, Lemkin pointed out it was too early to count out a company as big as Dropbox. Its footprint in the consumer file-sync and -sharing market is simply too big to ignore, and the enterprise market is still in its very early innings.

"Don't bet against Dropbox in the enterprise," he added. "They have an incredibly strong team working on selling to bigger businesses. In the grand scheme of things, enterprise content collaboration is just beginning its full move to the cloud. The war is around 2020, not 2015."

Dropbox isn't doomed. It still has incredible reach and continues to grow at a steady pace. It has one of the most recognizable online brands of the past decade.

But Dropbox can't slow down. The company is getting squeezed from both the enterprise and consumer sides, and it's going through a difficult transition from scrappy startup to a bigger company with more bureaucracy. Its window of opportunity to become one of the next great Silicon Valley tech companies may close sooner than later.

"The company got a little bit complacent and missed the big wave; now it may have to settle for a small wave," a person who worked there warned.

The clock is ticking.