Dropbox is a seriously cool company. First of all, I know you have all used it, if you haven’t do so. It’s awesome. And so is Drew Houston (pronounced like the street in New York City, not the city in Texas) the mastermind behind Dropbox.
Dropbox got started when Houston had grand glorious to work on something during a bus trip, but low and behold, he forgot his flash drive. And I know we have all been there. So he spent that bus trip coming up with away to store that data in the cloud. Later he pitched the idea to Paul Graham of Y Combinator who told him he needed to find a cofounder. He found Arash Ferdowsi, who was studying computer science at MIT. He dropped out with six months left to go (such bravery!). As Houston describes it, “[the two] got married on their second date.” (What an accurate way of looking of looking at your cofounder and yours relationship.) Some time later the two grew the company to a $4 billion dollar company, looking to move from 40 employees to 200, that services some 50 million registered users. Let’s look at some of their stops on that road, because Dropbox has some interesting ones.
Like any company Dropbox was faced with the problem of how do we make money, and how do we tell people that they need this product. Their method for making money has been around since the 1980s, the “freemium model”. The “freemium model” works by having a service provided free of charge but there’s a fee associated with a premium version of the same service. For Dropbox this is done through storage space: 2 GB for free, 50 GB for $9.99/month or $99.00/year, or 100 GB for $19.99/month or $199.00/year. Seems simple, right? Here’s the powerful part: Houston has remarked that even if Dropbox doesn’t sign up a new user this year, their revenue will still double. This is because enough people will need to upgrade, probably most commonly, from the free 2 GB to a paid membership with 50 GB. Genius! But it doesn’t stop there, because of course Dropbox will have new people registering. Back when Dropbox was looking to more aggressively market themselves they came up with the idea of referrals. Basically if a registered user refers a new user to sign up for Dropbox, he or she will earn 250 free MB of additional storage. This made their already registered users their biggest recruiting effort and Houston says still today 25% of new registrations come trough a referral.
The last really cool story about Houston is his brief interaction with Steve Jobs. At one point, Houston managed to hack his logo onto the Dropbox folder on the Mac’s filesystem, and this caught the attention of Jobs. Sometime after this, Jobs invited Houston into his office and offered to make Dropbox part of the Apple team. This was shortly before iCloud, and hindsight being 20/20 it’s clear Jobs was looking at Houston’s market. However, knowing there was a chance of that, Houston turned Jobs down and claimed he was going to build his own billion dollar company. Talk about cocksure of yourself! And done that he has.