From a Cold Email to 82% of the Fortune500 as Customers
Aaron Levie, Founder and CEO at Box.com
Box.com CEO and Founder Aaron Levie, who has been named as one of the "Top 30 Entrepreneurs Under 30" by Inc. Magazine, was one of the most energetic and enthusiastic speakers we’ve had, cracking jokes and talking really, really fast. It was almost hard to keep up with him! Aaron really knew how to entertain the crowd.
Aaron not only kept us entertained, he also gave us some good insights into the early start of Box and the Cloud storage industry, particularly why Google’s GDrive scared the crap out of him. He told us how Mark Cuban, entrepreneur and investor who owns the Dallas Mavericks, came to invest in Box and why he later split from the company. He also talked about why Box focused on its Enterprise customers.
Feel free to listen to the podcast below as you read through some of the highlights of the event below.
Early Days and Mark Cuban
In 2004, when he was just 20 years old, Aaron built a simple product in his dorm room to let people store files online. He saw an opportunity to fill a space that had been left void by the Dot Com Bust. In the late 1990s, there were more companies tinkering with online storage, but many of them had vanished in the post-apocalyptic days after the bust. Those that survived, said Aaron, had limited storage space, horrible UIs and out-of-date business models.
When Aaron and Box’s co-founder Dylan Smith started to pitch the idea to VCs in Seattle, they turned them down because they didn’t want another Dot Com Bust failure on their hands. But the duo eventually got funding and that’s when Aaron cold-emailed Mark Cuban.
Mark Cuban is awesome, but he’s really, really eccentric.
But Cuban is a straight-forward businessman, said Aaron. He likes a very "here’s your cost, here’s your revenue" business model. However, there would come a point where Cuban and Aaron wouldn’t see eye-to-eye, all because of Google.
The GDrive Scare and Going Freemium
As early as 2005, rumors were rampant that Google was gearing up for a Cloud service of their own, called GDrive. It was a scary time for Box and Aaron.
I definitely have post-traumatic stress from the GDrive. You have to understand when you’re a small, little startup of five, ten people, and everyday the Wall Street Journal has a headline that says, "GDrive is going to crush the Internet and take every human alive into its fold," you’re like, "oh, god … that’s me."
With rumors flying, Box decided that it needed to dramatically open up its funnel. That’s when the company came up with the novel idea of giving away a free gigabyte of space online. But Cuban didn’t like the freemium business model, because it would mean that Box would have to take on more VC funding to subsidize the cost.
He liked this neat and tidey linear, understandable business model. So what ended up happening is he basically said, "If you guys are going to do this freemium then I don’t want to invest in the company anymore."
So Box found investors to buy Cuban out and they went their separate ways. At first, Aaron said, it was like a bitter divorce.
He wanted to go a different path and we decided we had to go for scale and do it our way.
Freemium turned out to be a boon for Box. It was number one on DIGG the day it launched, getting tens of thousands of sign-ups. In the first month, Box had a couple hundred thousand sign-ups.
Turns out when you get free things online that normally cost money, it’s a relatively easy growth strategy. You just have to be able to fund it.
Staying One Step Ahead of the Competition
With the ever-present threat of GDrive and other potential competitors, Box started looking for ways to stay ahead. At first, the company only looked at the competition from consumer-based Cloud services, but soon turned its attention on their Enterprise customers. Here’s why as Aaron put it:
We saw the world as we are constantly going to be in this back-and-forth, leaping frogging on price and storage amounts and all these things for a market that consumers will relatively not value the differences between these services. If one is cheaper, they will always flock to the cheaper service.
As Box edged into the Enterprise arena, they started looking at the competition, such as Sharepoint, seeing what it needed to avoid so it didn’t look like a carbon-copy. So Box hired, what Aaron called, “the best designer in the world” to help make its UI simpler than the competition.
Things that are really deep-end Enterprise functionality that we could then expose as a very, very clean UI that was not going to expose that complexity to the end user. But extract that and focus more of that on the Enterprise administrator. Long story short, that’s our design philosophy.
In 2007, Box decided to focus 100% on the Enterprise Cloud service market and build a different kind of Enterprise software company.
One that is faster, more innovative. That relies on end-user distribution and acquisition of the product. That relies on a new way of selling. That relies on openness and simplicity, and all these kinds of things. And that’s sorta where we are today.
Don’t Want Sound Like A Winklevoss
When competitor Dropbox was mentioned, Aaron was very tongue-in-cheek.
That name sounds really familiar. I wonder how they came up with the word box? OK, I don’t want to sound like a Winklevoss guy over here. "If you would’ve invented Dropbox, you would’ve invented Dropbox!"
Aaron’s joke got a roar of laughter from the audience. All kidding aside, Aaron said what Dropbox has done is amazing and how what it did had his company rethinking its centralized data storage model.
Dropbox and other services came along and said, "OK, while that’s cool, we can also make a really easy way to synchronize your data across your own devices and to the Cloud." And we took note of that and our customers really responded very, very enthusiastically to that kind of model. So we’ve had a synchronization team since 2008 that’s been focused on that proposition.
Our chat with Aaron continued as he talked about how there has been a shift in the industry as more and more companies stray away from Microsoft, using more Macs and looking for the best possible solution by mix-and-matching services and products. We’d like to thank Aaron for dropping by our offices and giving us insight into the Cloud storage service industry.