Dropbox: Drew Houston

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Guy Ross.com And thanks. I'm trying to work these different leads on co founders and then I met had met this kid Kyle, and so Kyle's like hey you should um talk to my friend Arrash. And what do you know about Irash at that point? Virtually nothing. just a recommendation from somebody else who's like, Hey this guy

He might be a good co-founder. Yeah. And he's still in school, right? So we get together in the student center. And just start hashing it out. And that was was what was so crazy. I was just like You gotta drop out of school to do this. Yeah. And I'm like, all right, I'm expecting to have to talk to the parents and like do all this stuff. And he just bounces.

A couple days later he had just dropped out of school. From NPR? How I built this. show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

I'm Guy Roz and on today's show. how Drew Houston came up with the idea for Dropbox on the day he forgot to bring his thumb drive for a weekend in New York. And how that idea grew into a multi-billion dollar business. I probably don't have to explain why walkie-talkie's are sold in multiples. Yes, in practice, you could use just one, I suppose, maybe to scan the frequencies or eavesdrop on other two-way radios. Or you could just talk into it and hope someone hears you, but that's no fun and not really what these things were designed to do. To get the most out of a walkie-talkie?

Ideally, you have someone else or even lots of other people talking on the same channel. And this idea is basically what venture capitalists and other investors call the network effect. And in the past few years, products that grow through networks Have become extremely attractive to these investors. And why? Because the network effect allows a product to grow on its own, without a whole lot of marketing. So here's an example. Someone sends you a survey to complete, and the survey was created using SurveyMonkey. You fill it out, And send it back. And by doing that, you have seamlessly become a SurveyMonkey user. And the next time you want to create a survey, You are likely to use SurveyMonkey. It's the same story for Calendly. When someone invites you to schedule a meeting, you get an email from Callendly inviting you to use the service as well.

Slack works in a similar way. If one person on our team uses it, the rest of the team will jump on as well. It's a concept called product led growth. If you use it, your friends have to use it to engage with you. And then you are all users and the product grows and grows and grows. And this early insight back in two thousand six. is what allowed Dropbox to scale into a multi-billion dollar business in a few short years.

Because Drew Houster knew that The product he was building Would grow organically and exponentially. All at the same time. Because when one person signs up for a Dropbox account

and wants to share a file or document with another person That second person also has to sign up for a Dropbox account. And most people do because it's free. The vast majority of Dropbox users don't pay a dime for it. Yet the company makes huge profits from the 3 to 5% of its customers who pay, mainly businesses.

Now if you don't already know, Dropbox is basically a hard drive in the cloud. and you can seamlessly access all of your data from any of your devices. And Drew came up with the idea when he took a weekend trip from Boston to New York. And forgot to bring his thumb drive. So after mulling over the idea for a few months, Drew decided to apply to the now legendary accelerator program, Y Combinator, or YC. But before that happened, before he grew Dropbox into a company with a$7.5 billion market cap.

Drew was, not, surprisingly, the kind of kid who was obsessed with computers from a very early age. He grew up in Acton, Massachusetts, it's a suburb outside of Boston. His mom was the school librarian, and his dad was an electrical engineer. And when Drew was just five years old, He wrote his first line of code. And basic. I dabbled in programming, but then I My dad would bring home.

Computer games from work, so these adventure games. Like King's Quest and things like that. King's Quest was great. Yeah. So I played a ton of computer games when I was little and then Interested in the

Figuring out how they worked and making my own computer games. And and I guess like at age fourteen you really Jumped into computers as a job, like a summer job to work for A gaming company? What what's the story?

Yeah, when I was in Eighth grade, I think. I signed up to Test this Online game. So

I started Poking around under the hood of the game. And I found all these security vulnerabilities. And I emailed the developer really is over ICQ. I'm like, hey You know, you guys need to

Tighten up a few of these things and They're like Okay. Got it. You're right. Uh, would you like to fix that for us? Hm.

It was a startup, so they're like, Well We can't really pay you a salary, but we can give you stock options. Did they know you were fourteen, by the way? Yeah, and then I'm like, Yeah, this is all uh well, I'm like, Is it okay if my dad signs the paperwork? And they were fine with me working remotely and part time and everything. Wow. So they gave you

Equity in the business. And by the way, did that ever uh I don't know, did it ever come anything? Absolutely not. No, okay, I got you. It's just like s m basically smoke and dust, right? Yeah. But it's a great experience. I mean it was awesome. I was like I was a game developer. This was my dream. I thought that's what I was gonna do with my life. You're working for this company. And you're in high school. Um and this has become like what you do throughout high school. Like you're not doing car washes, you're you're working for

this company or you go work for other companies doing similar things? Well, it was a really important stepping stone because You know, my resume before that was babysitting. So having a programming job became A way in to get

Another programming job at a different local st uh different startup that was local. So There was this the startup. Called Soft Servo Systems. And

What I did there was they had they were running everything on Windows The I was like, Hey if you If we can move this stuff over from Windows to Linux. Which is free, then you could save even more cost on the hardware. Um, so you know, I'm like figuring out how to move all this stuff.

And these were just it was just kinda one interesting project after another. So you um you finish high school. And you went to MIT. Yeah. And and your ambition from what I gather from this conversation is was to to

Go on and maybe. Start a gaming company or make games somehow. Was that is that right? Well, I had during high school as I had these di I'cause I was a literal Game developer. But then

These other experiences with Startups expanded my horizons a lot. And so I'm like, all right, in college, I'm like, I definitely want to do engineering, definitely want to be involved in startups. And my first company Was an SAT prep company. It's called Acolade. This is why you were at at MIT. Yeah, I took a I took a leave of absence.

In the middle of MIT and Teamed up with a teacher at my high school. His own. uh SAT prep business and that he's running out of his living room.

You know, the S A T's changing 'Cause it went from sixteen hundred points to twenty four hundred, I'm like Now all of those books Like all that material is now obsolete because the test is new. Yeah. And there's not really a great way to do this online.

So what if we teamed up and did that? And you know, we met in a Chili's and Westford and Or you know, hashing out, trying to figure out how do you incorporate a company and all these, and then that really began the entrepreneurial journey. So

I basically took a leave of absence my junior year. It was important that I come back and finish. my degree, so I did that. And then I got a job at a network security company. Um called Bit Nine, which um So so anyway, I was working during

the day at that startup and I was moonlighting on my On acclait. So this is th this is important because a lot'cause you know, you hear a lot of people say, Oh, you know, I this is my fifth startup or my sixth startup, and I think a lot of people have this idea that oh, you know, all engines are Go and and each startup and you raise a lot of money and you come up with a product, but actually A startup can just be two people working on their computers and and the business might be a file folder. And that might be the startup. Mm-hmm.

And by the way, is the company still around? It's not. It's not. Okay. So did the idea just kind of did it just kind of fizzle out? Well, we had constraints like

Right, so he was not gonna Leave his teaching job. And neither of us were really Ready to kinda throw in. Completely. And

We got it reasonably far along and We had customers, we had Income, we had at least the rudiments of a working product, but Um, I mean it's a nice Good.

kinda side income. But it's seasonal, right? So there's only a couple of months a year where you're really Going and then It's hard to Keep momentum.

And so I started getting really distracted and then Another one of my friends, uh, Adam Smith, has he started um He runs a company called Kite now. He w started a company called Zobney. But uh He got into Y C and it was just

This amazing experience. And I actually Because of the'cause of the support and the resources of Y Combinator. Yeah. And it just felt like they were just getting to escape velocity a lot faster. Hm. Just kinda doing it the right way. And

As the SAT prep idea kind of started to fizzle out. Were you Thinking about other things you could do is because it doesn't sound like you really want it to stay As a as a you know, a a programmer or a a tech

person an engineer for bit nine. Like it doesn't seem like that's really what you want to do. You were just kind of that you were biding your time earning a paycheck. Well I love the work and I was learning a lot. So What ended up happening was With accolade is I had to work across a bunch of different computers.

It was this huge pain to To move around. I'd use a thumb drive, but it was slow and I kept Almost putting it in the washing machine and

But I was really frustrated by that problem. Like why can't I just have my stuff everywhere? I I read th that around this time in two thousand six you were taking the bus a lot from Boston to New York. Yeah. Why were you doing that? I had a lot of Friends who had

moved to New York, every month or two I'd try to get out there and see them. So I would take the Feng Hua, the Chinatown bus that's now defunct. And so on one of those rides I was like I have a Few hours. Each way.

To get work done, so I'm like, Okay, so And I opened up my laptop as the bus had pulled out of the station, I realized I'd left my thumb drive. Back it. Hm. Hm. And I'm like, now I can't do any like all right, well I can't get any work done and then I'm like

Well now I I'm just sitting there being like I just never want to have this problem again. Yeah. And so I started coding.

You start coding where? On the bus. On the bus. Coding Code for what? I'm like I'm just gonna have this thing that like watches this folder and just keeps everything in sync. Didn't have a name.

Uh and by the way. Is that easy to do, like just for yourself? Is that take like Can you do that on a three hour bus ride? You certainly can't finish it, but you can certainly start. The programming is Relatively.

It's really easy to make something that kinda works. It's very, very hard to make something that works. In a bulletproof way. Yeah. And so I just became obsessed with this problem. Alright, so you are so this is late. I think it's like late two thousand six.

Yep, it's around Thanksgiving. Thanksgiving and you start to tinker with this idea. But you're still working, you're still an employee at this. cybersecurity company. Yeah. And I wanna get a sense of where your head was, where you like

This is it. This is the thing. that I am gonna do. Or did that was a slow burn? Did it take longer for you to get there? Well I could feel that sense of lift off in terms of

My passion was because I'm like this is totally in my strike zone. I'd love to get into Y Combinator. The next application deadline's in April. But I'm like, you know, this is doable. Like I could probably find At least. Make it exist and then maybe it's a business, maybe not.

But I wasn't really thinking about that. I'm like, I just wanna build this thing and I need it. And if I could just like not have to carry my thumb drive around and I have one customer, me, like great. And do you does it kind of consume you pretty quickly Spend nights and weekends just like Trying to

Build this thing for yourself. Oh yeah. Totally obsessed. And it came together really quickly. If that was kind of around Thanksgiving, then I had a conversation in January with my boss at

Pit nine and I'm like, Hey. Yeah, I'm really gonna Go for it and start a company and get into Y Combinator and Um

But I it was pretty clear early on that I'm like, Yeah, this is gonna get going. Um and I just remember Trying to think through the name. This was me. Christmas two thousand six. Uh I'm just On I am with one of my high school buddies.

And We would have these land parties Back in high school, yeah, everybody bring their computers to someone's house and you play video games together on a local network. Um But anyway, so one thing we would always do is everybody would set up a shared folder called a Dropbox. on their computer. So I'm like, maybe I should just call a Dropbox. And that was it's really that I am conversation where

Where I settled on the name and I'm just like photoshopping the logo. So so the basically the the logo for Dropbox today is what what you kinda designed and Yeah. Like on your computer. Yep. And since then our the pros have taken over and simplified it a lot. Right. Okay. So got a name.

And now it's two thousand seven and you've got a prototype that you kinda like created. Yeah. And you had this goal, which was to get into Y combinator. Yep. Alright, so

What'd you do? So I started working it. I had so many friends who had what Adam had shipped out to California at this point. And so Uh I gotten to know a lot of the other Y Combinator founders socially.

Um, so I go out and visit them in San Francisco. Or I went to like one of the Social events at Y Combinator. And I'm literally like walking around this

party with my Laptop like trying to demo Dropbox to anyone who will Pay attention, but one thing that was very clear from the Why combinator guidelines is that

You need a co founder. They don't just Fun single founder. If you wanted If you want us to consider you, you need a co founder.

You need a co founder. And and this is like uh Paul Graham's thing. Like Paul Graham is is one of the the co founders and and partners of the the Y Combinator program. Yes. I'm like this is his one of his main criteria for investing is is as a co-founder, because uh because as a anyone who listens to the show knows that um that starting a business can be really tough, right? And and there are moments where you want to give up and quit. But w but the the thinking is that with a co founder, you kind of increase your chances of of not giving up because when you might be low

uh the co founder might be at a different mental or emotional place and and So I'm assuming that's probably why they wanted you to find a partner. Exactly. Uh so the why then I'm trying to find a co founder. You know if it's March.

In the application deadlines like April Fool's Day. Yeah, they've got like a few weeks to get married to someone and I'm not even dating. So I started shaking the trees, but my search hadn't really turned up. Anyone yet. Um

So my friend Aaron, he was a classmate of mine at MIT. Aaron's like I this I love Dropbox, it seems really interesting. If you're going to be able to do it. Then I'll do it. But you needed him to be interested.

Yeah. And you couldn't wait to be uh formally admitted to this thing. Yeah. So I'm like, Well, I'm gonna drop a The Y C office and see what I can do.

You know I'd show up on my laptop. And then I knew Jessica. Who was one of the partners and You knew her from where? I I had attended a couple Y Combinator dinners.

and just been kinda in the mix. So I was like, Hey Jessica, hey, do you mind if I It's part. Busy, I just wanna show'em something. And she's like Oh no, he's he's not busy. Yeah, go on in.

And so I kinda take a deep breath and like go walk over and crack the door open a little bit, like Paul, hey, you know, I'm I'm really sorry to bother you, so just take a minute and he cuts me off. He's like, No And I do not want to see your demo. The whole reason we have an application process is so we don't have like random people coming by and pitching us on stuff. Um, so absolutely not.

Yeah, and I'm like Oh my god. 'Cause I'm just like total failure. Well, and you probably I mean,'cause you were pretty young at the time. Twenty five, maybe.

Twenty Yeah, twenty four. Probably thinking I screwed this up. Oh, t I was a disaster'cause I'm like that failed and now I've like torpedoed my chances of like getting Y C funding at all. So So what happened next? Like what did you do to

To like make up for that and and and Eventually get into the program. So I'm like All right. Well My application needs a hook. Like I need some way of kinda

Standing out. So I thought about What Might get Paul's attention. Um, and I figure like well what is he

Doing in his office then? Doing what I do every day, just like browsing Hacker news and just keep hitting refresh on that. What's Hacker News? For people who don't know. So Hacker News is basically startup news that it's a startup news site kinda like Reddit. Um

But focused on technology and startups for the most part. So I'm like, I wonder how I could get something on Hacker news that could draw some attention. I'll I'll make a demo video of of what I'm doing. And it wasn't just for Paul, it was really just to see if this is a viable concept.

And what was the video? What'd it look like? It was a s it was called a screencast. So which is just to say like a it's a video of your screen and then I'm narrating. Right. And like here's Dropbox, if you have multiple computers, da da da da da and it's very kind of It's still on YouTube somewhere. Right. But I make this two, three minute video.

Stay up all night doing it, you know, the night before the application deadline. Finish the application. I'm like, Yeah, I don't have a co founder working on it. We'll hopefully get there before Yeah. And then I posted my demo video to Hacker News.

And it hit the top of Hacker News for like two days. What was so um I'm just curious. What was the thing about it that was such a big deal among that community? Was it'cause there were ways to Save information and data in the Cloud at that point.

Not not great stuff. But what was the thing? Why did why w why was there so much interest in this video? I think it was just kind of G getting your files on multiple computers is kind of a niche. problem. Like most people had one computer, right? You didn't have a a smartphone. But this audience, very technical audience, like they're the early adopters. Virtually all of those people were carrying around a thumb drive. The title of my post I think was like Throw Away you know, Dropbox, throw away your thumb drive. Yeah. What goes into a clickbaity title and That's a good title. Throw away your thumb drive. You know? Yeah. Yeah.

And so I think it th it just it made sense. It was just simple. It was in like a lot of the the community had struggled with the same problem. Yeah. Alright, so you make this video, you get attention on hacker news. You Put your application in.

But you still needed the co founder. Yep. And I get a one-line email from Paul Graham. Yeah.

Saying they like the idea, certainly liked your software, but you need a co founder. I'm like Thanks, Paul. Right. Okay. That's good. That's a good sign. And so uh Then I'm trying to work these different leads on co-founders and then I met had met this kid Kyle, who had been in the entrepreneurs club.

with me at MIT and so Kyle's like hey you should um Talk to my friend Arash. A Raj sent me an email saying, Hey, I saw your screencast on Hacker News. Looks pretty interesting. And he's in still in school, right? So we get together in the student center.

And just start hashing it out. An MIT. And what do you know about Irash at that point? Virtually nothing. Just a recommendation from somebody else is like hey this guy He might be a good co founder.

Yeah. Like he's smart, he's a good engineer. And he had been the director of the computer science programming competition. M I T. Had been one of the finalists and I had done that too.

So I'm like, Okay, that's a pretty good filter. That's a starting filter. And We just Hit it off. I mean, as a practical matter, I'm like, yeah, I need a co founder. You know, usually these co founder stories start with like hey, we played we're on the same T ball team

But Definitely not here. And We kinda just went for it. That w was was what was so crazy. I was just like

You gotta drop out of school to do this. And he's like Yeah. Wait, this was based on one conversation. No, it was a series of conversation. Yeah. But but not a lot. You know, it's like a the equivalent of a few days. Few days.

Okay. If you're You know, a few coffee dates basically. And I'm like, all right, I'm expecting to have to talk to the parents and like do all this stuff. And he just Bounces. A couple of days later he had just dropped out of school.

He just says, All right, I'm good, I'm out. Yeah. And I'm like Respect. Okay. Alright, so he joins you.

And Y Combinator gives you the green light. There you're you're in. Yeah. And that comes with a lot of support and and introductions, but also fifteen thousand dollars, which I imagine was not nothing. In two thousand seven. Which got you what, what did fifteen thousand dollars get you?

Uh, some desktops, some Ikea furniture, a couple of months of rent. Right. So we get into Y C you know April, May, and then the summer program for Y C is in Boston. Mm-hmm. So we we spent the summer together. He was living in his dorm. You know, we'd just be

In the trenches, like we'd wake up at noon, I'd pick him up from his dorm, we'd code till four five in the morning. Pizza and stuff like that. Yeah, I mean it's kind of very Yeah. Unhealthy. Yeah. Dorm kind of experience. The prototypical start experience. We were just like co working every day coding. But yeah, when it w uh Boston doing my combinator is like we really found our element. There are other like fifty other founders roughly, twenty companies.

really got put on the rails and then we move out to California. together into this, you know, two splitting this two bedroom A kind of corporate like furnished apartment. Anyway, we finish uh every company gets, I think we got seven minutes, they're a lot shorter now. You know, they put they take a room of investors, they take the companies in. Uh seven minutes for our demo. O Y C ends with demo day and then all the investor conversations kinda pick up where that leads off.

So we had to go start raising money. And we come back in just a moment. Now Drew and Arasha's little business started to attract big attention from some of the biggest tech entrepreneurs. Valley. And how that attention turned Drew

an enemy of none other? Steve Jobs. Stay with us, I'm Guy Raz, and you're listening to How I Built This. PR. One more thing, the New York Times bestselling book, How I Built This, is now available.

It's a great read and a great gift for anyone looking for ideas, inspiration, wisdom, and encouragement. to have the courage to put out an idea into the world. It's filled with tons of stories you haven't heard. About how some of the greatest entrepreneurs you know and respect Started out at the very bottom.

Check out how I built this the book. Available wherever you buy your books. Hey, welcome back to how I built this from NPR. I'm Guy Raz.

So it's mid two thousand seven and Drew and his co founder Irash finish up at Y Combinator. They're living in San Francisco and gearing up to raise money. And trying to figure out how to convince investors. But their idea? Is a risk worth betting on.

When I first talked to investors, particularly in Boston. They were like, no one's early ever made this work before. This is a commodity Google, Microsoft, uh you name it, was gonna Do this and eat our lunch. And that's what people would say. They'd say look, these big companies are gonna do this.

Yeah, it's it's just gonna make what you're doing. Irrelevant or obsolete. Yeah. And I totally agree.

I was like, Yeah, obviously. So w how did you get beyond that feeling of agreeing with the the doubters. Well The fact remained though that

No one had really done this properly. And at this point I hadn't You only need one or two investors to really be into it. And so w By the time We got to through demo day we had

Come up with a pretty Compelling pitch. Can you explain something to me? What was I mean I don't know if it's possible to explain this. Um

The idea here was to enable people to Share Files seamlessly across different their computer, their laptop, and this is when iPhones just started to come out and smartphone revolution is gonna about to begin. Wha what was so complicated about it? Why was this so hard?

Well People had bitten off little pieces of the problem. But we were trying to do something bigger. And

What was really challenging was how do you Basically build a hard drive large enough to be everybody's hard drive. So there's a whole server and infrastructure component of it that's very complicated. Um There's A

Algorithmic component. Which is hard. Meaning How do you make it so that you can verify the correctness of the system? So how do you how do you design something that doesn't Stomp on people's

baby photos or you know tax returns. Getting under the hood that's a pretty hard uh engineering problem. So same for a lot of the same kinds of reasons that You know, a Google search, it's like you type words into a text box and you get links to web pages. How hard can it possibly be? It's actually pretty hard. So it's that kind of problem. And then there's a design element.

Uh How do you make this really simple and accessible? For normal people. And then we want it to work with all platforms. And when did you have a beta version ready to go? Like w that was up and running?

By the fall of two thousand seven we started opening up the beta a little bit. And so It's around this time where you start to Attract potential. Investors and um You get the attention of Sequoia.

Yeah. Uh, which is a huge deal. And Michael Moritz, I guess who's a you know big deal. From what I understand, he comes to your apartment in San Francisco. A couple days after you meet him.

basically wanting to make a deal. Do you remember Do you remember him arriving in your apartment? Yeah, it was a whirlwind'cause we had just had our first meeting with Sequoia. On a Friday. And I wasn't super familiar with how these things

Work. Yeah, Mike, we we do the pitch and then On Saturday morning, yeah, Mike Morse shows up at our little apartment. Dropbox World HQ And we walk'em through it. Doesn't say a lot, has a couple questions about competition and Google, but then leaves with little fanfare.

Um He's like Come by on Monday to pitch the whole partnership. Which is kinda like the final boss. Um and during that pitch meeting W were the were the partners throwing like tough, sceptical questions, or did it seem like they really wanted to do this?

I I'd say it was all they all had kind of a poker face. I think they were interested. But Yeah. Do your pitch, you leave, don't get a lot of feedback initially, and then get a happy phone call or a sad phone call. And we got a happy phone call saying, Hey, come to dinner. We wanna hammer this out. Wow.

And we had a handshake deal that night, so one business day turnaround. Wow. Which We were not expecting. And uh all of a sudden you guys have a million bucks in the bank. Yeah.

What were some of the things you did at that point? Like did you start to hire other engineers? Did you get office space or did you just continue you in a rash? Working out of your apartment. With that million dollars. So There's a lot to do. Yeah, once you have

A deal coming, you need a lawyer. Then you have money in the bank, you need an accountant. Then you have money, you need employees. So we started recruiting the smartest people. We knew from M. I T. as engineers.

And so We would do these recruiting trips out there, Rosh and I would go meet people in their dorms and pitched our first few engineers that way. So you start to build it out. And what does that mean? I mean, are you guys'cause you've you and Irash had already been pulling all nighters for like months and months and months to get to this

Phase. Now does it slow down a little bit or does it actually accelerate? It accelerates'cause At every point you just have this expanding circle of things you need to take care of'cause you have From a product standpoint, you have this prototype, but then you need it to get it ready for prime time. You need users.

And so we kept Doing all of these unconventional things to try to get attention based on what had already worked before. So The same kind of video that I put together to put on Hacker News, we did a another one that was A little more

oriented around A broader audience, um That we put on Reddit and Dig. In March. Two thousand eight. And so

We were placing bets on how many People are gonna get on here. I think the high water mark was maybe ten thousand people. So One of the things I I I guess you've said is that

Dropbox actually took longer to launch than other startups at the time. Like it took you almost a year from the time You move from San Francisco to launching it. Why why did it take so long. Why couldn't you just put something out there in like January of two thousand eight that was good enough? We knew

early on that it we would not have a lot of margin for error. And so You know, move fast and break things was not gonna work for us. Right. Um Because

If you once you lose people's trust. It's very hard to get it back. It didn't have to be perfect, but it had to be very good, right? So you can't kind of bet it's hard to beta test a pacemaker. And we knew that if there's a spectrum from like little website you can kind of throw up in a day. to pacemaker, like we were much closer to that end of the continuum. Right. And so

The other thing is This only became a mainstream Need After the iPhone. Because most people had one computer at home, but then suddenly with a smartphone everybody's got two.

And s for the first time you need to get stuff back and forth. Very easily. And the only way to do that is through the cloud. Suddenly this went up from a problem that The propeller had to a problem that

Every mainstream iPhone user has people find out about it? Well, I had read this book, Crossing the Chasm, which talks about how technology is adopted, starts with early adopters and then moves to kind of an early mainstream and and so on. And so this is technology adoption life cycle, and we're like we started with the early adopters intentionally. We're like, who are the people that are like actively looking for something like this? They're they tend to be the kinds of people that hang out on the Y Combinator startup news site or Reddit or sites like that. So we seeded the audience with there. And then it was viral. Because sharing is really important part of the Dropbox experience and then if I share something with you

You have to become a Dropbox user. Uh if it's a shared folder. So the the virality Was a critical part of our distribution strategi because And we'd study that'cause things like Facebook and Facebook platform were exploding and growing super fast and and it's pretty hard to build a big consumer service without

Having some kind of viral growth element. Hm. Um I think You know, within two years or something, you had like fifteen, twenty million users and a huge number of people. Clearly this is resonating. I mean, clearly this was something that was

working. I mean w it's kinda crazy within Yeah, it was like We were very careful to get The product right through the beta and then at public launch we turned on the paid version and we sort of became accidentally cash flow positive.

After that. Um it was just growing so quickly. I mean this is what's amazing to me is I think by two thousand eleven you had fifty million users. Yeah. Um and your revenue was like almost a quarter of a billion dollars. But Only four percent of users The rest of the ninety six percent were using the free version, which

only gave you two gigabytes or whatever of of of storage space. But so all that money was just coming from four percent of The users. Yeah. Um paying like ten bucks a month or something. Yeah.

And was that had you modeled that out? Did you know that that's all you needed? You just needed like a tiny percentage of people to pay? Yeah. There is this New business model. that had been popularized around then called Freemium. Where you know, you start with a free version and then there's a premium version if you need um

I if you need that. By the way. I should mention I read that Mark Zuckerberg. Like sent you a Facebook message in like two thousand nine saying, Hey

Yeah. I'm interested in learning more about your company and and you thought it was like a a prank. It was wild. I mean We got on his radar because we were recruiting some of his alumni. Right. And You know, you to have Facebook opening a tab.

All day at work and and suddenly you're like, Wait, what? So but was he interested in maybe acquiring you or just wanted to to meet? He was interested potentially in ac in acquiring Dropbox. Um We were still building, so we weren't really interested in that. And then we

Stayed in touch, um, and then we became friends. And I guess Also that year in in two thousand nine, um I read that

Apple was interested in Dropbox too. Yeah. And that you even Uh had a m had a meeting with Steve Jobs. Is that Is that right? What's what's the story? Well it was surreal. We weren't expecting that. And it was it was there was

I was meeting with one of the VPs. Who reported to Steve in He's like Steve would like to meet. And so

I was pretty intimidated'cause then I started talking To my friends and like this Stories about Steve meetings were Very Scary.

Yeah. Yeah. The this guy said Steve wants to meet with you, not today, but at a future time. Yeah. He's like we'll get something set up. Okay.

I'm like Uh guess I'm not gonna say no. Yeah, sure. You can't say no. Yeah, it's Steve Jobs. Yeah. So Get there. We're like

Uh, we're here to see Steve. Jobs. Yeah. They're like, Okay, have a seat. And then

Arash and I are like Oh man, maybe he hasn't seen the product. We have to do our kinda get our demo ritual ready, so we're furiously trying to set that up. And Few minutes later, Steve comes in. And I think the first thing he said is, You guys have built a great product. So, you know, on my little bucket list under the table, I'm like, Okay, check, good. I guess we might be getting a happy Steve story, not an angry Steve story, but

We'll see. And he um was basically saying like, you know, you should really throw in with us'cause we're like a startup with infinite resources and um Were you was it clear to you when you were going to meet him that this is what was gonna happen, he was gonna make an offer? To buy you out? Probably. I was hoping he wouldn't get into

Numbers. Right. Um I mean I thought about goals for the meeting before that. I was like what am I g trying to accomplish here? I think the primary goal. From that from my meeting with him was just don't piss him off. Yeah.

Did did he so he he's telling you all the great things about being part of Apple and Yeah. And then does he does he throw out a number? No. He's like, We'd love for you to To really consider this. It's thinking be great. And then you know, sort of like

I'm like well look we admire everything You and Apple. Do and have done. Love to find a way to work more closely together, for sure, but We wanna build this company and

think it has a bright future and that's what we're focused on. Like I'm And and want to stay independent, like I'm sure you understand. And he said, Of course I do. I was an entrepreneur myself, fair enough. Sort of. He Was like, all right, well In so many ways. He's like you all you guys are a feature, not a product.

You know, we're gonna have to build our competitor and I guess we'll have to get to work on You know, in so many words, killing you guys. Yeah. Hey, if you're not gonna work with me, then we're just gonna crush you. We're gonna build our own thing and we're just gonna take you down.

Yeah. And here are your problems, you don't have the operating system, you need like partnerships for distribution, like all these things. And so 'Cause I was like in my head disagreeing with a bunch of what he was saying. But you know, and I'm Just like again, don't piss'em off. So I'm just like, all right, agree to disagree.

But yeah, I mean the You know, that part of the conversation was over pretty quickly. And He just kinda stuck around. He's like so you know, where where are you guys Where you guys from and

Yeah, he started just talking about the The history of Of sort of the second coming of Apple and so I think we were lucky in that we got Kind of a happy Steve. meeting. But uh yeah, you stuck around for another, you know, thirty, forty minutes. Um

But that was the last time we talked. Wow. I mean well he passed away in twenty eleven Um But before he passed away, he did make good on his promise.

I think it was his last Keynote where he unveiled iCloud. Yeah. And and he he name checks Drop off. Yeah. And you probably saw that keynote. Oh yeah.

And so did my entire team. And was your heart? Pounding watching that keynote? Yeah. It was. Um

But before that it was clear that There is definitely kind of a winter is coming. Reckoning. That was gonna happen at some point. Yeah.

And and I would say that that from the moment we founded the company, we were kind of always living in the shadow of whatever Google's thing would be, or Apple's thing or You know, and then we'd hear a rumor and it would the tremors of that would kinda reverberate through our psyche. You knew that there were a lot of big businesses In

that went down. Right. Yeah. Netscape. My space.

A party you must have been thinking. Or next. Well we'd show those like tombstones very literally. Yeah. You know, on a slide in front of the company.

Employees. Because hey, we need to focus, we need to execute. There are a lot of Dead companies that were once great. It wasn't so much about Apple as much as it's the whole kind of

constellation of competing products. So Th we use those moments as a galvanizing force to get us to really Focus and execute quickly. And motivate the team. And and how would you do that? I mean I mean I guess one of the ways to make sure that you you wouldn't be buried

Would be to Build. Very quickly build partnerships. Like be everywhere. Be the the go to, right? Yeah.

But it was clear that we were gonna be moving into a new At some point we there would be A new act. So we were spreading our wings. We Started building new products.

We acquired a company called Mailbox. built a photo sharing product called Carousel. And I think we were You know, all that is to say this was sort of Th these are the years where I kinda had to shift from being like a founder to really being a CEO. And getting good at the game.

Yeah. So I remember going home. For Fourth of July. And I re read

The book Only the Paranoid Survive. And so The book talks about this concept of a strategic inflection point where sort of it the business is doing well, but things seem off. And everybody has this moment where they they recognize that things have really changed.

So for us what that meant was We have to really understand what are we what's the value are we that we're providing to our customers and our happiest and most profitable customers were using Dropbox at work. And so we decide to go all in on for all intents and purposes getting out of the consumer business. Being focused on business. Clients. Yeah, being focused on business clients. And just use addressing the y the work use cases. It did mean that

Pretty embarrassing. moment where I'm like, Oh my God, all the stuff that you know I was on stage seeing is the future of the company like carousel and mailbox and all these other things. Like we're just gonna have to shoot I'm gonna have to shoot all of them.

You're just gonna shut these things down to focus on. And like so many things that I had proclaimed were the future of the company were like Not gonna be the future of the company. I mean it it is amazing that your

Product was kind of made for these times. Yeah. I mean it's designed for people to share and collaborate and they don't you have to be there in person. So I have to imagine you're you're one of these strange positions where covet The pandemic's actually been good for your business.

Yeah, I mean folks have been Turning to Dropbox for distributed work since the beginning and in fact that was I built it not to back up my photos, I built it to be able to work from anywhere. So Yeah, there's a through line from the beginning.

Yeah, but we're thinking about okay, now we're painting on a much bigger canvas. Um For example The big one of the big problems we all have is that our stuff is everywhere. Yeah. Right, a lot of our work happens in cloud tools of of various forms and our content is scattered and

fifteen different places and We live in a world where It's easier to search all of human knowledge than my company's knowledge. Right. So there are these big opportunities hidden in plain sight.

That for Reasons that are very similar to like why the problem for Dropbox in the first place was unsolved. Like there are huge Challenges that are right in front of us. Landscape is always shifting and so

Um there's always new opportunity. Well let me let me shift and ask you a a more personal question. Your your company is now The market cap's about eight billion dollars. Yeah. And You are on in not just on paper, but in reality.

Um a billionaire. W what does that mean to you? I mean, does it d like. Not what I had in mind when you know, when I was at any point in my life. Well that's the thing. Most of the people on the show don't set out to become billionaires. They set out to solve a problem. They know they're gonna If they're if it works out, they'll make money. The problem you want to solve is how to

But you weren't thinking, Oh, you know. I'm gonna live in a gilded palace and sit in a A vault full of gold coins and throw them up in the air all day.

Yeah, I was always I I just remember Early on. The idea of like scaling a company was so scary. That

On the money front, I was just like, look, as soon as the company's worth A million dollars. That would be unbelievable. then we started getting venture money and things like that. Like, okay, if I got a hundred million dollars after taxes, like Then I'm good. I'm done. Beach. Yep. Well happily ever after.

And then In the process of talking to some of our angel investors, you know, one of'em had a really successful exit and he's like The day I sold the company Was like

One of the unhappiest days of my life. Mm. And so getting back in touch with like Why

You do what you do is a really Challenging and important. conversation to have with yourself. And for me it was like I love reverse engineering things. I love building things. I love I will never get tired of seeing like A Dropbox icon over someone's shoulder.

In a coffee shop. Yeah. I know I'll always look. Yeah. You know? I never get tired of that. And so That sense of purpose is really important.

When you think about um your story and and your success, do you think that it has to do with um How hard you worked and and your skill and your intelligence, or do you do you put more of it in luck or? How do you What drop box folders do you put all those things into? I think you need

You need both. So I think about it, um Like surfing, like that waves will come. Um And In our case, like we had we caught this tidal wave.

You know, we're just sort of sitting there on our board and then oh my god, you know, suddenly we're fifty feet off the ground. But inevitably that wave like slows down and then it's like about catching another one. Another one So I think there's luck in terms of when And how any given wave shows up.

And where you are on your board, but then there's a lot of skill and staying on and And finding the right ways. That matters a lot. That's Drew Houston, co founder and CEO. Dropbox.

And by the way, remember how in the early days of Dropbox, Drew got a Facebook message from Mark Zuckerberg, who was potentially interested in Well, while that didn't happen. Drew was invited to become a member of Facebook's board.

Thanks so much for listening to the show this week. subscribe wherever you get your podcasts. You can also write to us. H I B T at NPR.org and if you want to send a tweet. It's at how I built this or at Guy Ross and my Instagram.

And I. Our show was produced this week by Casey Herman with music composed by Ramteen Arablui. Thanks also to Julia Carney, Candice Lim, Neva Grant, Sarah Sarison, and Jeff Rogers. Our intern is Farah Safari. I'm Guy Raz, and you've been listening.

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