Dropbox: Drew Houston

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Flites are fulfilled as flight certificates valid for Delta comfort or Delta main to select domestic destinations. Book 21 plus days in advance. Up to $80 per person in taxes and fees apply. Other restrictions apply. Hey, really quick before we start the show, the how I built this book is now a New York Times and Wall Street Journal bestseller. So thank you to all of you who ordered it and for your support of this show. If you haven't picked it up and you want to learn the secrets of how to develop an entrepreneurial mindset, how I built this the book is for you. It's now available wherever books are sold and in most countries around the world. Or by visiting how I built this dot com or guy Ross dot com and thanks. I'm trying to work these different leads on co-founders and then I met head met this kid Kyle and so Kyle's like hey you should talk to my friend Arash. And what do you know about Arash at that point? Virtually nothing. Just a recommendation from somebody else is 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 passionate out and that was what was so crazy. I was just like you got to 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 it's how I built this show about innovators entrepreneurs and dealists and stories behind the movements they built. I'm Guy Ross 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-talkies are sold in multiples. Yes in practice you could use just one I suppose maybe to scan the frequencies or e-strap 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 survey monkey you fill it out and send it back and by doing that you have seamlessly become a survey monkey user and the next time you want to create a survey you are likely to use survey monkey it's the same story for calendar when someone invites you to schedule a meeting you get an email from calendar inviting you to use the service as well slack works in a similar way if one person 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 2006 is what allowed Dropbox to scale into a multi billion dollar business in a few short years because Drew house to 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 time for it yet the company makes huge profits from the three to five percent 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 seven and a half billion dollar market cap Drew was not surprisingly the kind of kid who was obsessed with computers from a very early age he grew up in acting Massachusetts it's a cyber best set 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 in basic i dabbled in programming but then my dad would bring home computer games from work so these adventure games like kings quest and things like that so it was great yeah so i played a ton of computer games when i was little and then was also just interested in figuring out how they worked and making my own computer games and and i guess like at age 14 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'd 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 of release over i cq 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 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 14 by the way yeah and then i'm like yeah this is all well i'm like is it okay if my dad signs a paperwork and they were fine with me working remotely in 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 they were it's just like most basically smoke and dust right yeah but it was a great experience i mean it was awesome yeah i was like i was a game developer this is my dream i thought that's what i was gonna do my life all right 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 uh different startup those locals so there was this this startup called soft servo systems and what i did there was they had they were running everything on windows their eyes 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 like figuring out how to move all this stuff and these were just it was just kind of one interesting project after another so you um you finished high school and you went to MIT yeah and and your ambition from what i gathered from this conversation was 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 did because i was a literal game developer but then these other experiences with startups expanded my horizons 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 accolade this is why you were at MIT yeah it took a took a leave of absence in the middle of MIT and teamed up with a teacher at my high school who actually had his own his own little SAT prep business and that he's running out of his living room you know the SAT is changing because it went from 1600 points to 2,400 i'm like now all of those books like all that material now obsolete, 'cause 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 chiles and Westford and we're, you know, ashing out, trying to figure out how to incorporate a company and all these. And then that really began the entrepreneurial journey. So I basically took a leave of absence in 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 called BitNight, which, so anyway, I was working during the day at that start up and I was moonlining on my on-aclysm. - On-aclysm. - So this is important, 'cause you hear a lot of people say, oh, you know, this is my fifth start up or my sixth start up. And I think a lot of people have this idea that, oh, you know, all engines are go and you need to start up and you raise a lot of money and you come up with a product, but actually a start up can just be two people working on their computers and the business might be a file folder. And that might be the start up. And by the way, is the company still around? - It's not. - It's not, okay. So did the idea just kind of just kind of fizzle out? - Well, we had constraints, right? So he was not gonna leave his teaching job. And neither of us were really ready to kind of 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 it was a nice good kind of side income, but it's seasonal, right? So there's only a couple 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, Adam Smith, his, he started, he runs a company called Kite now. He started a company called Zobny, but he got into IC and it was just this amazing experience. And I actually-- - Because of the support and the resources of Y Comator. - Yeah. And it just felt like they were just getting to escape velocity a lot faster, just kind of 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? Because it doesn't sound like you really wanted to stay as a programmer or a tech person, a software engineer for Bit9. Like it doesn't sound like that's really what you wanted to do. You were just kind of, that you were biting 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 move around. I'd use a thumb drive, but it was slow and I kept almost putting it in the washing machine. - Yeah. - But I was really frustrated by that problem. Like, why can't I just have my stuff everywhere? - I read that around this time in 2006, 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 Thung Waw, 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. And I realized I'd left my thumb drive back at home. And I'm like, now I can't do any, all right, well, I can't get any work done. And then I'm like, well, now I'm just sitting there being like, I just never wanna have this problem again. - Yeah. - And so I started coding. - You started 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. - And by the way, is that easy to do? Like just for yourself, is that take like, can you do that on the three hour bus ride? - You certainly can't finish it, but you certainly start. The programming is relatively, it's really easy to make something that kind of 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. - All right, so you are. So this is late, I think it's late 2006. - Yep, it's around Thanksgiving. - Around Thanksgiving. - You start to tinker with this idea. But you're still working, you're still an employee of this cyber security 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 to take longer for you to get there. - Well, I could feel that sense of lift off in terms of my passion from what it was. Because I'm like, this is totally in my strike zone. I'd love to get into my combinator. The next application deadlines 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 in me, like great. - And do you, does it kind of consume you pretty quickly after like do you start to 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 BitNine and I'm like, hey, you know, I'm really gonna go for it and start a company and get into my combinator. But it was pretty clear early on that I'm like, yeah, this is gonna get going. And I just remember trying to think through the name. This was me, so that Christmas 2006. I'm just on I am with one of my high school buddies and we would have these land parties back in high school. Everybody bring their computers to someone's house and you play video games together on a local network. 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, we always just call it Dropbox and that was usually the IAM conversation where I settled on the name and I'm just like photoshopping the logo. - So the basically the logo for Dropbox today is what you kind of designed and like on your computer? - Yep, and since then are the pros have taken over and simplified it a lot. - Right, okay. So got a name and now it's 2007 and you've got a prototype that you kind of like created. - Yeah. - And you had this goal, which was to get into why combinator. - Yep. - All right, so what'd you do? - So I started working it. I had so many friends who had, well, Adam had shipped out to California at this point and so I'd gotten to know a lot of the other why combinator founder socially. So I'd go out and visit them in San Francisco or I went to like one of the social events at why 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 fund single founder. - They said to you, if you want us to consider you, you need a co-founder. - You need a co-founder. - And this is like Paul Graham's thing. Like Paul Graham is one of the co-founders and partners of the why combinator program. - Yes. - I'm like this is his, one of the main criteria for investing is co-founder. - Yeah. - Because as anyone who listens to the show knows that starting a business can be really tough, right? And there are moments where you want to give up and quit. But the thinking is that with a co-founder, you kind of increase your chances of not giving up because when you might be low, the co-founder might be at a different mental or emotional place. And so I'm assuming that's probably why they wanted you to find a co-founder. - Exactly. So then I'm trying to find a co-founder, if it's March, in the application deadlines like April Fool's Day, that's 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. So my friend, Aaron, he was a classmate of my MIT. Aaron's like, I love Dropbox. It seems really interesting. If Paul Graham is interested, then I'll do it. - But you needed him to be interested. - Yeah. - And you couldn't wait to be formally admitted to this thing. - No. So I'm like, well, I'm gonna drop by the YC office and see what I can do. You know, I show up in my laptop, and then I knew Jessica, who was one of the partners, and you knew her from where. I had attended a couple Y-Comulator dinners and just spent kind of in the mix. So I was like, hey, Jessica, hey, do you mind if I, is Paul busy? I just wanted to show him something. And she's like, oh, no, he's not busy. Yeah, going in. And so I kind of take a deep breath and like, go walk over and crack the door open a little bit of like, Paul, hey, you know, I'm really sorry to bother you. So just take a minute and he cuts me off. He's like, no, 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. 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, 25 maybe. - 20, yeah, 24. - Probably thinking I screwed this up. - Oh, I was a disaster. 'Cause I'm like, that failed. And now I've like torpedoed my chances of like getting YC funding at all. - So, so what happened next? Like, what did you do to like make up for that and eventually get into the program? - So I'm like, all right. Well, my application needs a hook. Like, I need some way of kind of standing up. And so, I thought about what might get Paul's attention, and I figured like, well, what is he doing in his office then? He was probably doing what I do every day, just like browsing hacker news and just keep hitting refresh on that. What's hacker news for people, I don't know? So hacker news is basically startup news that it's a startup news site, kind of like Reddit, 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 make a demo video 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 it looked like? It was called a screencast, so which is just to say like a video of your screen and then I'm narrating. Right. I'm like, here's Dropbox. If you have multiple computers, it's still on YouTube somewhere. 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, I don't have a co-founder working on it, we'll hopefully get there before interviews. And then I posted my demo video to hacker news and it hit the top of hacker news for like two days. Well, so I'm just curious, what was the thing about it that was such a big deal among that community? Because there were ways to save information and data and the cloud at that point. Not great stuff. But what was the thing? Yeah. Why was there so much interest in this video? I think it was just kind of getting your files on multiple computers is kind of a niche problem. Most people had one computer, right? You didn't have 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, drop box, throw away your thumb drive. Yeah. What goes into a click baity title? That's a good title. Throw away your thumb drive, you know? Yeah. Yeah. And so I think it just, it made sense. It was simple. It was in like a lot of the community had struggled with the same problem. All right. So you make this video, you get attention on hacker news. You put your application in, but you still need the co-founder. Yep. And I get a one line email from Paul Graham, saying they like the idea, certainly like your software, but you need a co-founder. Right. Okay. That's good. That's a good sign. That's a good sign. It's a progress. Yep. And so 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 talk to my friend Arash. Arash sent me an email saying, hey, I saw your screencast on hacker news. Looks pretty interesting. And he's still in school, right? So we get together in the student center and just start asking it out at MIT. At MIT. 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 good engineer. And then he had been the director of the computer science program and competition at MIT. 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 kind of just went for it. That was what was so crazy. I was just like, you got to 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 conversations, you know, but not a lot. You know, it was like a equivalent of a few days. Okay. 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. Right. And he just bounces a couple days later, he had just dropped out of school. He just says, all right, I'm good. I'm out. And I'm like, respect. Okay. All right. So he joins you. And why combinator gives you the green light that you're in. Yep. And that comes with a lot of support and introductions, but also $15,000, which I imagine was not nothing in 2007, which got you what, what did $15,000 get you? Some desktops, some IKEA furniture, a couple months of rent. Right. And then the summer program for YC is in Boston. So 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 pick him up from his dorm, we'd code till four, five in the morning, pizza and stuff like that. Do it again. Yeah. I mean, it was kind of very unhealthy, but yeah, the dorm kind of experienced the prototypical start of experience, we were just like, working every day, coding. But yeah, Boston doing my combinator is like, we really found our element. There were like 50 other founders, roughly 20 companies, we really got put on the rails and then we move out to California together into this, you know, to splitting this to bedroom, and kind of corporate like furnished apartment. Anyway, we finish every company gets, I think we got seven minutes, they're a lot shorter now. But they take a room of investors, they take the companies, yeah, but seven minutes for our demo, YCN's with Demo Day and then all the investor conversations kind of pick up where that leaves off. So we had to go start raising money. When we come back, just a moment, how Drew and Arash's little business started to attract big attention from some of the biggest tech entrepreneurs in the valley, and how that attention turned Drew into an enemy of none other than Steve Jobs. Stay with us. I'm Kyraz, and you're listening to How I Built This from NPR. And one more thing, the New York Times best-selling 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 Kyraz. So it's mid-2007 and Drew and his co-founder Arash finish up at YCN. They're living in San Francisco and gearing up to raise money and trying to figure out how to convince investors that 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, you name it, was going to do this in Eater Lunch. And that's what people would say, they'd say, "Look, these big companies are going to do this." You know, it's just going to make what you're doing irrelevant or obsolete. Hi, it's Phoebe Judge, host of Criminal. I'm going on tour. If you like hearing me tell stories about people, well, I've decided to tell stories about my life and the people I love. A letter was left carelessly around, so I've sort of caught red-handed. It's a show about secrets and forgiveness, I hope you'll come see it. Send $1 toward AIDS and get tickets at ThisIsCriminal.com/live. And I totally agreed. I was like, yeah, obviously. So how did you get beyond that feeling of agreeing with the doubters? Well, the factor 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. So by the time we got 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 in a simple way, but let's try it. Sure. 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 a smartphone revolution is going to start about to begin, 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. 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 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 engineering problem. So same, for a lot of the same kinds of reasons that, you know, a Google search, it's like your type words and do a text box and you get links to web pages, how hard can it possibly be? It's actually pretty hard. So is that kind of problem? And then there's a designer. element of 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 that was up and running? By the fall of 2007 we started opening up the beta a little bit. And so it's around this time where you start to attract potential investors and you get the attention of Sequoia, which is a huge deal. And Michael Moritz, I guess, who's a big deal. He's one of senior partners. 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 him arriving at your apartment? Yeah, it was a whirlwind because we had just said our first meeting with Sequoia on a Friday and I wasn't super familiar with how these things work. But yeah, Mike, we do the pitch and then on Saturday morning, Mike Moritz shows up at our little apartment, Drop Box World HQ. And we walk him through it, doesn't say a lot, has a couple questions about competition in Google, but then leaves with little fanfare. He's like, come by on Monday to pitch the whole partnership, which is kind of like the final boss. During that pitch meeting, were the partners throwing tough, skeptical questions or did it seem like they really wanted to do this? I'd say they all had kind of a poker face. I think they were interested, but you 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 want to hammer this out. Wow. And we had a handshake deal that night. So one business day turned around, wow, which we were not expecting. And all of a sudden, you guys have a million bucks in the bank to work with. Yeah. What were some of the things you did at that point? Like did you start to hire other engineers? Did you get off a space or did you just continue you in a rush, working out of your apartment with that million dollars? So there's a lot to do. 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 MIT as engineers. And so we would do these recruiting trips out there. Aras and I would go meet people in their dorms and pitch our first few engineers that way. So you start to build it out. And what does that mean? I mean, are you guys, because you and Aras should 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 because at every point, you just have this expanding circle of things you need to take care of because 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 another one that was a little more oriented around a broader audience that we put on Reddit and dig in March 2008. And so we were placing bets on how many people were going to get on here. And I think the high watermark was maybe 10,000 people. So one of the things that 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 moved from San Francisco to launching it. Why did it take so long? Why couldn't you just put something out there in January of 2008 that was good enough? We knew early on that we would not have a lot of margin for error. And so move fast and break things was not going to work for us. Because 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. So you can't kind of bait. It's hard to bait a test of pacemaker. And 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. And so the other thing is this only became an mainstream need after the iPhone. Because most people had one computer home, but then suddenly with a smartphone, everybody's got to. And for the first time, you need to get stuff back and forth very easily. And the only way to do that is to the cloud. Suddenly this went from a problem that the propeller had said to a problem that every mainstream iPhone user. And how did people find out about it? Well, I had read this book Crossing the Chasm, which talks about how technologies adopted starts with early adopters and then moves to kind of an early mainstream 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 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 their. And then it was viral because sharing is a really important part of the Dropbox experience. And then if I share something with you, you have to become a Dropbox user if it's a share folder. And so the virality was a critical part of our distribution strategy because, and we'd study that because things like Facebook and Facebook platform were exploding and growing super fast. And it's pretty hard to build a big consumer service without having some kind of viral growth element. I think, you know, within two years or something, you had like 15, 20 million users. There's a huge number of people. Clearly this is resonating. I mean, clearly this was something that was working. I mean, it's kind of crazy. Within two and a half years your valuation went up to four billion dollars. Yeah. It was like, we were very careful to get the product right through the beta and then a public launch. We turned on the paid version. And we sort of became accidentally cash flow positive after that because it was just growing so quickly. I mean, this is what's amazing to me is I think by 2011, you had 50 million users. Yeah. And your revenue was like almost a quarter of a billion dollars, but only 4% of users were paying you the rest of the 96% were using the free version, which only gave you two gigabytes or whatever of a storage space. But so all that money was just coming from 4% of the users, paying like 10 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. And there was this new business model that had been popularized around then called freemium. Yeah. Where you know, you start with a free version and then there's a premium version if you need, if you need that. By the way, I should mention I read that Mark Zuckerberg, like sent you a Facebook message in like 2009 saying, hey, I'm interested in learning more about your company. And you thought it was like a prank. It was wild. I mean, we got on his radar because we were recruiting some of his alumni. Right. And you know, do you have Facebook open in a tab all day at work and in something like, wait, what? So, but was he interested in maybe acquiring you or just wanted to meet? He was interested potentially in acquiring Dropbox. We were still building. So we weren't really interested in that. And then we stayed in touch. And then we became friends. And, and I guess also that year in 2009, I read that Apple was interested in Dropbox too. Yeah. And that you even 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. There was, I was meeting with one of the VPs who reported to Steve and he's like, Steve would like to meet you. And so I was pretty intimidated because then I started talking to my friends and the stories about Steve meetings were very scary. Yeah. Yeah. This guy said Steve wants to meet with you not today, but at a future time. Yeah. He's like, well, we'll get something set up. Okay. I'm like, I guess I'm not going to say no. Yeah. Sure. You can't say no. Yeah. Steve Jobs. Yeah. So get there. We're like, we're here to see Steve Jobs. They're 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 kind of get our demo ritual ready. So we're furiously trying to set that on. And a few minutes later, Steve comes in. And I think the first thing he's had 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 was basically saying like, you know, you should really throw in with us because 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 going to happen? He was going to make an offer to buy you out probably. I was hoping he wouldn't get into numbers, right? Yeah. Um, and I thought about goals for the meeting before that. Oh, I was like, what am I trying to accomplish here? I think the primary goal from that, from my meeting with him was just don't piss him off. Yeah. So 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 really consider this thing to 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 want to build this company and think it has a bright future. And that's what we're focused on like I'm in one estate. 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 wait he was saying to you 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 yep and here are your problems you don't have the operating system you need like partnerships for distribution like all these things and so because 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 them off so I'm just like I created disagree but yeah I mean the you know that part of the conversation was over pretty quickly and he just kind of stuck around he's like so you know where you guys where you guys from and you know I started just talking about the the history 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 yeah you stuck around for another you know 30 40 minutes but that was last time we talked wow I mean well he passed away in 2011 but before he passed away he did make good on his promise but I think it was his last keynote where he unveiled iCloud yeah and and he named checks drop-off 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 but before that it was clear that there was definitely kind of a winter is coming reckoning that was gonna happen at some for Dropbox yeah and and I would say 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 rumor and the tremors of that would kind of reverberate through our psyche you knew that there were a lot of big businesses in the Bay Area that that went down right yeah yep that's gate my state a party must have been thinking we're next well we'd show those like tombstones very literally you know on a slide in front of the company you you communicated this idea to your own employees yeah because hey we need a 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 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 going to 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 these are the years where I kind of 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 4th 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 are happiest and most profitable customers were using Dropbox at work and so we decided to go all in on on for all intensive purposes getting out of the consumer business being focused on business clients yet being focused on business clients and just use addressing the the work use cases it did mean that it's pretty embarrassing moment where I'm like oh my god all the stuff that you know I was on stage saying is the future of the company like carousel mailbox and all these other things like we're just gonna shoot I'm gonna have to shoot all you're just gonna shut these things down to focus on just shut them yeah and like so many things that I had proclaimed to the future of the company were like not gonna be the future of the company I mean 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 COVID the pandemic's actually been good for your business yeah I mean folks have been turning to Dropbox for distributive works 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 here but we're thinking about okay now we're painting on a much bigger canvas for example the big one of the problems we all have is just our stuff is everywhere right a lot of our work happens in cloud tools of various forms and our content is scattered in 15 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 the landscape is always shifting and so there's always new opportunity but let me let me shift and ask you a more personal question your company is now the market caps about 8 billion dollars yeah and you are on not just on paper but in reality a billionaire what does that mean to you I mean does it like it's kind of yeah it's definitely not what I had in mind when you know when I was at any point in my life well that's a thing most the people in the show don't set out to become billionaires they set up to solve a problem they know they're gonna if they're if it works out they'll make money but the problem you want to solve was had a seamlessly integrate vials and from one pressure the next 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 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 okay if I got a hundred million dollars after taxes like then I'm good I'm done beach yep that'll happily ever after and then in the process of talking to some of our angel investors you know one of them 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 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 is like I love reverse engineering things I love building things I love I will never get tired of seeing like a drop-ox icon over someone shoulder in a coffee shop yeah I know I always look yeah you know I never get tired of that and so that sense of purpose is really important when you think about your story and your success do you think that it has to do with how hard you work and your skill and your intelligence or do you do put more of it in lot or how do you what drop box folders do you put all those things into well I think you need you need both so I think about it like surfing like that waves will come and in our case like we had we caught this title wave you know we're just sort of sitting there on our board and then oh my god you know suddenly we're 50 feet off the ground but inevitably that wave like slows down and then it's like about catching another one another one another one so I think there's a lot in terms of when and how any given wave shows up and where you are in your board but then there's a lot of skill in staying on and in finding the right wave that matters a lot that's true housed in co-founder and CEO of drop box and by the way remember how in the early days of drop box true got a Facebook message from Mark Zuckerberg who was potentially interested in acquiring the company well while that didn't happen the two stayed friends and earlier this year drew was invited to become a member of Facebook's board hey thanks so much for listening to the show this week you can subscribe wherever you get your podcast you can also write to us at [email protected] and if you want to tweet it's at how I built this or at gyros and my instagram is at gyros our show was produced this week by Casey Herman with music composed by Ramteen Erublui thanks also to Julia Carney Candace Lim Neva Grant Sarah Sarasan and Jeff Rogers our intern is Ferro Safari I'm gyros and you've been listening to how I built this this is NPR