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From startup to $12 billion: 7 lessons from Dropbox


Drew Houston co-founded Dropbox in June 2007, one year after graduating from MIT, in response to the frustration of losing thumb drives. In the 11 years since, Dropbox has grown from a cloud storage company based in a small apartment to a provider of business collaboration software with close to 2,000 employees — along with a March 23 initial public offering that has valued the company at more than $12 billion.

Houston returned to campus April 18 to talk with students about his experience. Here’s what he had to say.

Don’t wait for the optimal moment

Houston said he can understand that software engineers have a tendency to try to over-optimize things. However, he added, this “anti-pattern of getting massively ready” will only get in the way of starting a company.

If you try to set a path — say, work at a small company, then a medium-sized company, and then a large company, and get a master’s degree and PhD in between, and then start your own company — you will be retired when the right time comes, Houston said.

“It may not be ideal to go directly from school to starting a company, but don’t obsess over the optimal circumstances,” Houston said. “Don’t stress so much about trying to get ready. The best training for being a founder or CEO is being a founder or CEO.”

The best way to learn is to read

To learn how to run a business, Houston initially set out to meet as many successful entrepreneurs as he could. He said he quickly realized that there was only so much that they could cover in a 15-minute coffee meeting — and that, after a while, it all started to sound the same.

Instead, Houston took to reading. To learn about sales, he bought the three highest-rated books on Amazon about the sales process.

“This doesn’t make you great, but it helps you learn what to look for next,” he said.

Being so systematic about learning also helps you approach topics or tasks that are unlikely to be enjoyable at first, Houston said. In his case, as an engineer, it was public speaking and management. “It’s like learning to ride a bike,” he said. “You can’t be discouraged and stop when you get scraped up — and then it becomes super easy later on.”

Find mentors who are one step ahead of you

As Dropbox started to grow, Houston said some of his most helpful mentors came from startups that were anywhere from six months to two years ahead of Dropbox in the process, companies that had hit the $1 million mark in funding or had hired more employees than could fit in a single conference room.

These mentors matter because you can ask them pointed and tactical questions about running a startup, Houston said. For example, if you have questions about a term sheet from a potential investor, you can ask a mentor who recently went through the process to look it over with you.

In addition, Houston said, following the experiences of these mentors can help you understand what topics you will need to learn in the next year or the next two years — when to focus on fundraising, adding users, recruiting administrative staff, and so on. “You don’t have to have the perfect list, but you should have a map of stuff you need to start learning,” he said.

Balance internal and external expertise

As a startup grows, and especially if it grows quickly, its early hires can find themselves in the biggest roles they have ever had, Houston said. At this point, it may be helpful to bring in outside hires who are “not 100 percent learning things the first time,” he said. “You want talented people who have grown up with the company working with experienced people who can help you with the learning curve.”

In 2014, Dropbox hired Dennis Woodside. Now the company’s chief operating officer, he had run a $17 billion business at Google. “We weren’t there yet,” Houston said, “but wanted to be there someday.”

Last year, the company hired Quentin Clark as its senior vice president of engineering, product and design. In previous roles at Microsoft and SAP, Clark has managed engineering teams larger than Dropbox as a whole. (Clark joined Houston for the MIT conversation.)

“Having folks who have been there can help you get better faster,” Houston said. However, he added, too many “organ transplants” could lead to a culture clash within your organization.

Create things that are hard to copy

There are plenty of companies that offer document storage in the cloud. Some have been in business longer than Dropbox, while others are much larger and offer many more products. “You can complain about it, or you can look at how other companies have navigated this,” Houston said.

The Dropbox strategy for staying ahead of competitors was to create a product that is hard for others to copy. Dropbox Paper is a document collaboration product, but the emphasis is on connecting the people working on those documents, not on formatting those documents, Houston said.

“We’re not in a realm where the most important thing is to print something out,” he said. For other word processing programs to make a similar shift, he added, competitors would have to make many changes: “They would have to start taking things away that people are using.”

Make your company evolve with the world

Dropbox Paper reflects a shift in the company’s mission from storing files in the cloud to helping businesses work creatively and improve productivity. “The problems we are solving today are not the problems we were solving 10 years ago,” Houston said.

The concept for Paper began to emerge about three years ago. Dropbox was succeeding, but Houston was spending his days going from meeting to meeting. He soon learned that he was not alone; in many companies managers spend up to 60 percent of their time coordinating people, leaving little time for creative work.

“We never called timeout and thought of what work should look like. The way we organize ourselves is dated, descended from the industrial era,” Houston said. “People go to work in an office, but more and more they go to work in a screen. We need to apply that same level of design and thoughtfulness and care to that virtual environment.”

Remain calm

Houston said there have been many intense moments at Dropbox when he thought “the treadmill will be going faster than I can run” and it would be time to step back from his leadership role.

After several cycles of this thought process, though, Houston has realized that he prefers to take the good with the bad and just keep going. As the CEO of a company that just went public, things happen that he cannot control, but Houston can control how he responds.

“The basics of self-awareness and mindfulness and equanimity are pretty helpful,” he said. “[Being a CEO is] the most rewarding experience I’ve ever had, and it’s the most painful experience I’ve ever had.”

For more info Zach Church Editorial & Digital Media Director (617) 324-0804