MasterInternetWasp26
Born in Massachusetts in 1983, Drew Houston took an early interest…
Born in Massachusetts in 1983, Drew Houston took an early interest in computers and technology. Interviews indicate that he started programming as early as aged 5, and as a teenager in the 1990s and early 2000s was often involved in working with start-ups, as well as being hired at 14 as a networking programmer for a video game company.
After finishing high school, Houston went on to study Computer Science at Massachusetts Institute of Technology (MIT). It was here that Houston was exposed to a number of experiences which, and individuals who, would play a crucial role in his future success. He was involved in a fraternity, and it was there that he met his Dropbox co-founder, Arash Ferdowsi. Always keen to learn, Houston also used this time to self-educate by reading widely on business-related topics. This time was used not only on academic and social pursuits; Houston’s strong pull towards entrepreneurship returned when he founded, as a 21-year-old undergraduate, he founded his first company. The business was an SAT test prep company, and Houston brought one of his former high school teachers on board to help make the venture a reality.
It was in 2007, when he forgot his USB memory stick on a bus ride from Boston to New York City, that Houston conceived the idea for Dropbox. He had planned on working on the trip, and without the memory stick he had nothing to work on. This inconvenience prompted Houston to develop a solution to synchronize files over the web. The eventual result was Dropbox.
Dropbox allows users to make a folder on each device, and any digital content placed in the folder is automatically synced across all devices. This solves the problem of not having access to a file on a different device. Additionally, files can be easily shared with others. Although Dropbox’s service is user-friendly, it was a challenging product to build and, initially, even to explain.
Within four months of starting Dropbox, Drew Houston applied to business accelerator ‘Y Combinator’. Despite having a compelling idea, Houston’s initial attempt to apply was rejected on the basis he did not have a co-founder, and Arash Ferdowsi was brought on board. When asked about the need for a co-founder, Houston shares the advice he was given by Y Combinator’s Paul Graham:
“You have a definitely higher chance of success if you have a team, for a variety of reasons. First of all, there’s so much to do, and so especially in the beginning, you’re competing against fully formed teams, and if you’re just doing everything by yourself, that’s massively limiting. And then second, I think a lot of what Paul raised in his arguments about why he wanted cofounders was because it’s kind of an emotional roller coaster, and so having a team or having a partner makes it so you can offset each other’s kind of ups and downs, which I’ve certainly found to be true.”2
Once accepted into Y Combinator, Houston and Ferdowsi were able to develop a minimum viable product. Although this went well, they faced a major issue; Dropbox was solving a problem that people were not even aware that they had. As a result, customer acquisition was somewhat challenging, as traditional approaches such as advertising using Google AdWords was not possible. This method of promotion would have relied on people seeking a solution, and if they were unaware the problem existed, they would not be looking to solve it.
Houston and Ferdowsi knew they had to think outside of the box and filmed two short videos demonstrating Dropbox and its features. These videos were shared on Hacker News, a website for people involved in tech. Almost overnight the number of people waiting to be allowed to Beta test Dropbox went from 5000 to 75 000. It was fair to say that although they had not initially realised they had the problem, consumers were now aware that there was a solution, and they wanted it.
Growth for Dropbox continued at a steady pace, however the company remained lean. While servicing over 200 000 customers, Dropbox still only had 9 employees. In 2011, the company was grossing more than three times the ‘profit per employee’ that Google had. Houston and Ferdowsi’s hires continued to focus almost exclusively on engineers, with little focus on a formal marketing department. Over time, however, this did change, and a more formal marketing plan was produced.
Dropbox is currently operating with a Freemium Business Model. Most users have ‘free’ accounts with ‘limited’ storage. Users can increase this storage in one of two ways; referring a friend or paying for the additional storage capacity. One grows Dropbox’s userbase, the other contributes directly to the bottom line. Paid users also have access to additional features including file recovery and advanced security options.
Dropbox’s appeal comes in several forms. Not only is it free for most users, but it is also incredibly easy to use. It does not tie itself to a single operating system or type of device. Synchronisation is live, and multiple users can collaborate easily on files through secure sharing. Changes made by one user are shared to all who have access to a file, allowing the most recent versions to be accessed without the problems associated with ‘version control’ and the confusion of emailing back and forth.
The company, which now boasts over 700 million users worldwide, has raised over US$1 billion over multiple rounds of funding and, at IPO in 2018, was valued at US$9.2 billion. Currently its value sits at US$7.14 billion.
Developed with information from:
‘Dropbox: Solving a Compelling Problem in a Smooth Manner’ by Bruce Barringer & R. Duane Ireland.
https://www.businessinsider.com/dropbox-founder-and-ceo-drew-houston-interview-2017-6
https://www.businessinsider.com/how-drew-houston-created-dropbox-2018-1#his-first-company-
was-an-sat-prep-company-he-started-while-in-college-2
https://aem.dropbox.com/cms/content/dam/dropbox/www/en-us/about/company-
info/DBX_FactSheet.pdf
Questions
Using the information above, as well as your own research, answer the following questions for Dropbox:
1. Describe the entrepreneurial resources of Dropbox and analyse the contributions of the entrepreneurial resources to the launch of growth of the company.
2. Analyse the key value propositions from Dropbox and the relevance of these value propositions to their customers. On this note, briefly describe their customers to support the relevance of the value propositions offered by Dropbox.
3. Identify at least three (3) revenue-related key elements AND at least three (3) cost- related elements that are currently featured in Dropbox’s business model.
