“What’s preventing Google from disrupting your success?”

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Drew Houston’s company may be valued at $10 billion, but here in GSB Faculty West 104 on the Stanford University campus he’s being grilled like a newbie on Shark Tank. The three dozen students in this class, called “Disruptive Innovation”, are relentless, even though he’s been invited as a guest. Another pupil brings up what he believes is another giant threat: “Amazon [Web Services] was this huge competitive advantage for you when you were first starting,” he says. “But now they have this competing Cloud Drive.” How do you make sure that you don’t become the big company that becomes rigid, brittle, and disrupted by the new guy? Houston is the epitome of Northern California cool. With his full beard, hair sticking straight up, and a silver hoop piercing the middle of his left earlobe, he leans back in his chair and placidly fields the queries, no matter how snippy. “Pretty much any big company, for any sufficient market, is gonna have some chips on the table,” Houston says, explaining why he thinks Amazon and Google now have services that compete with Dropbox. “That doesn’t mean it’s gonna work.” Dropbox CEO Drew Houston feels your tech pain–and wants to fix it. Photo: Ian Allen Houston, 32, finds himself in the dead center of one of the tech industry’s most fearsome turf wars. Dropbox has the distinction of being the only cloud service–and perhaps the only startup–ever to compete simultaneously against Apple ($748 billion market cap), Google ($369 billion), Microsoft ($357 billion), Amazon ($173 billion), and Tencent ($160 billion). The stakes are clear: whomever controls your stuff may control the digital future. Over the last few years, storing and sharing data in the cloud has become an almost ubiquitous habit. Conventional wisdom had been that cloud-based storage was a commodity business, a digital file cabinet. But a better metaphor for the potential of cloud-based storage might be a portable office. “Your whole computing environment ought to follow you around,” explains Houston. “Your financial records, your health information, your music playlist . . . anything that’s ‘mine.’ It’s a pretty long list.” Better yet, you should eventually be able to interact seamlessly with everything in that portable office: work on documents with colleagues, send email, chronicle inventory. About storage, he says, “that’s kind of the easy part. The more interesting part is, What can you do with it?” Unlike his amply financed competitors, which were all founded during the desktop computing era, Houston has been embedded in the cloud for eight years, ever since launching Dropbox in 2007. He’s not building smartphones, holographic lenses, or self-driving cars: his sole focus is solving the annoyances created by the invisible networked quilt that is modern computing. The cloud makes it possible to work from anywhere, anytime, but keeping everything safe and in sync is a massive software challenge. Our economy’s workforce is increasingly independent, mobile, and flexible, and the line between work and home continues to blur. The traditional design of business computing was not built for how we work today. “[Employees] are basically saying, ‘I need to get my job done,’” says Maureen Fleming, a VP at the analyst firm IDC. Those employees will gravitate to whichever service makes it easiest for them to do so. How do you create a place that stays innovative while it scales? No one yet dominates the new global network, but Dropbox just may be the most adroit cloud company in the world, the one that has solved more problems for its users than any other. That’s why Dropbox is not just surviving its onslaught of competition, but is thriving. The company says it has more than 300 million users and 4 million companies using the service. According to IDC, Dropbox owns 27% of the consumer market for file-syncing and sharing documents, more than Microsoft and Apple. It is also the most popular file-syncing and sharing service used by businesses. More than 100,000 organizations, including Hyatt, Under Armour, and Spotify, pay $15 per employee per month for Dropbox for Business, while a tiny fraction of its consumers pay $99 per year for the Pro service. Our conservative estimate of all those paying customers (assuming five employees in each business and 1% of consumers) puts Dropbox’s revenue at approximately $450 million annually, which is why the company is rumored to be going public before too long.

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A potential IPO is just one of the many reasons 2015 is a critical year for Dropbox. Houston is already rolling out new features that enhance Dropbox’s utility, letting users do things such as save any file within an iPhone app to Dropbox with two taps, and edit Office documents without having to save them to a computer. These new additions will be a test: of Houston’s bet that Dropbox is a business and not merely a feature; of Dropbox’s ability to stay rigorously focused on solving customer problems at a time when it is growing madly; and of Houston’s ability to fend off his rivals’ cloud initiatives. Toward the end of the Stanford class, another future disrupter named Jordan bluntly asks Houston, “What made you the right person to start Dropbox in the first place?” In the jargon of Silicon Valley, he’s asking about what’s called founder-market fit. Why, Jordan wants to know, does Houston have more than a puncher’s chance against Amazon, Google, Microsoft, and the rest? The first time I interviewed Houston, roughly four years ago, he was a young, happy-go-lucky startup founder, recounting with charm and ebullience the story of the day Dropbox received its first major funding from Sequoia Capital, and how he had clicked “refresh” on his computer repeatedly so he could watch his bank account rise from $60 to $1 million. This time around he’s more guarded; some white hues are creeping up in his dark hair. We talk in a conference room decorated as if it’s situated in the cloud–cotton-ball-like material on two walls, sky blue chairs–at Dropbox’s headquarters in San Francisco’s China Basin, where he presides over 1,000 employees (double last year’s head count). On a dry-erase board, a chart compares the storage size and prices offered by Amazon, Google, and Microsoft. He checks his phone incessantly. It isn’t until we start talking product that Houston’s mood ticks up. Excited to learn that I am a Dropbox user, he wants to ensure that I also convert from the default Apple photo-management tools to Dropbox’s version, called Carousel. “Here, I’ll show you,” he says, and he practically leaps toward my side of the table to demo how it creates a timeline of backed-up photos, and can simply delete duplicates from a smartphone. As he starts flicking all the way back to 2001 to a picture of himself with his MIT Phi Delta Theta brothers, I’m reminded of the commencement speech he gave at his alma mater’s 2013 graduation ceremony, in which he professed his admiration for people who were “obsessed” with solving a problem, likening them to a dog chasing a tennis ball. “Every time we find ways to save you 15 minutes to an hour, times hundreds of millions of people,” he tells me, “it’s, like, we save lifetimes of pain, every day.” Houston’s drive to mitigate eons of technology-inspired angst has been the energy that’s fueled Dropbox since its inception. When he was just 23, Houston took a four-hour bus ride from Boston to New York, planning to use the time to work on a project. But he was stymied, because he forgot to bring the thumb-size hard drive that held his files. Deciding he’d been inconvenienced by this sort of thing for the last time, he wrote the very first lines of Dropbox code during the ride. It’s a very simple thing to describe, but an unbelievably hard thing to execute. “A lot of the startups we fund, they’re still trying to figure out what to build,” says Paul Graham, cofounder of the startup accelerator Y Combinator. “Drew knew.” In Houston’s application for YC’s summer 2007 session, he laid out his vision: “In the future, you won’t have to move your data around manually.” He explained that he’d created something that would make sure we’d have the same version of every file on all our computers. “It’s a very simple thing to describe,” says Graham, “but an unbelievably hard thing to execute.”

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From the start, Dropbox was almost magically simple: Install Dropbox’s folder on your desktop, and by simply dragging files into it you could suddenly access them from anywhere. The simplicity inspired an almost cultish following. Whenever he or cofounder and CTO Arash Ferdowsi would overhear someone talking about Dropbox and they’d ask that person about it, he or she would inevitably say, “I love Dropbox!” or “Dropbox changed my life!” Houston recalls. “We’d look at each other like, Well … great! Cloud synchronization, sweet!” Suddenly people had an easy way to share documents, including the kind of massive files that would trip up everything from Yahoo Mail to corporate Exchange accounts. That simplicity has driven Dropbox ever since. It is now integrated with more than 300,000 companies and services. Dropbox comes preinstalled on laptops, tablets, and Android smartphones made by Dell, HP, Sony, and Samsung. It’s a one-click service on Slack, Shutterstock, and Vimeo. While it doesn’t come preinstalled on Apple products, Apple has had such a struggle with its own cloud services that millions of its customers rely on Dropbox. This ubiquity helped Dropbox make a deal last December with perhaps its most significant competitor, Microsoft, whose CEO, Satya Nadella, is pursuing a “mobile first, cloud first” vision. Subscribers to Office 365, the cloud-based version of the world’s most popular productivity suite, can now open and edit, directly from Office, the more than 35 billion Word, PowerPoint, and Excel files they’ve stored in Dropbox. “We heard loud and clear in customer feedback that people wanted access to Dropbox,” says Kirk Koenigsbauer, VP of Microsoft Office. (Three months later, Microsoft opened up Office 365 to competing cloud drives.) Dropbox sure has come a long way since January 2013, when then–Microsoft CEO Steve Ballmer belittled the company as a “fine little startup.” Forget Google And Microsoft—These Are The Startups That Should Scare Dropbox The tech industry’s titans don’t think nearly as creatively as Dropbox when it comes to storage. But these startups do.

Read More >> Houston has always been a fierce competitor, never cowed by the technology establishment. In his YC application, he predicted that Microsoft was too conflicted to ever achieve the universality it desired. In Dropbox’s first video demos, he taunts Google, which was rumored to be working on a cloud service, code named “Platypus,” a product now known as Google Drive. Houston opens a photo of a platypus, marks it with a big X, and syncs it across devices. Most famously, Houston rebuffed Steve Jobs in 2009, when Apple’s CEO offered to buy Dropbox. Once rejected, Jobs, according to Houston, retorted that Dropbox was merely a “feature” that Apple would kill with its own storage service. The Dropbox team did “freak out” over the release of iCloud, says CTO Ferdowsi. But Houston assuaged everyone’s fears. “He was really good at calming the team down,” Ferdowsi says. “He was more like, ‘This is a sign that we’re onto something.’” ICloud pushed the cofounders to create even more features for consumers, including automatic camera uploads, an immediate hit. “We felt like, Hey, we want to go beyond just syncing files,” says Ferdowsi. Houston is still translating his competitive fire into products. When I visit in January, the team is putting the finishing touches on its new “Open” button, a way for users to read and edit files without even downloading them. They’re also working on the Dropbox badge, a collaboration system to save teams from “Frankenfiles,” shared documents that contain multiple, disjointed edits. It’s a notoriously complicated problem, one that has frustrated many a user of Google Drive. “All of this seems like a little thing,” Houston says, “but every day you have afternoons being ruined because you open an Excel spreadsheet to finish it up, and someone 30 feet away from you has been editing the same thing. It’s horrible.” He says this with the emotional conviction of someone whose heart has been broken. “Our dream is that, with Dropbox, this should be the first day in a long time that you go home early.”

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Houston is the driving force of Dropbox, but he has also shown the maturity to surround himself with an impressive network of mentors and advisers, most of whom have been counted out when faced with competition from established rivals. That list includes close friend and Facebook CEO Mark Zuckerberg, who is known to pop into Dropbox HQ from time to time; Salesforce CEO Marc Benioff, a pioneer of cloud-based services; Dennis Woodside, a former Google executive who served as CEO of Motorola during the search company’s brief ownership, and who joined Dropbox as COO in April 2014; and Travis Kalanick, the CEO of Uber. ­Kalanick and Houston meet regularly for dinner and drinks to share notes on managing through an intensely competitive landscape. “In an engineering- and product-oriented organization, there are complexities when you get to several hundred or several thousand employees,” ­Kalanick explains. “How do you create a place that stays innovative while it scales?” The question gnaws at Houston: how can he ensure that every new employee is as passionate about ridding the world of digital inconveniences as he is? “The big challenge will be growing the company in a way that allows people coming in to quickly get up to speed and contribute,” says Woodside. It’s particularly hard for someone as obsessive as Houston. Described as an extremely hands-on “engineer’s engineer,” Houston participates every year in the company’s Hack Week, in which developers work on individual projects that often get fast-tracked to product status. He’s positioned his desk right next to the other engineers in Dropbox’s open office. The day I visit, multiple half-full water jugs have been abandoned behind three vertically positioned monitors while an open can of sour-cream-and-onion Pringles sits in front. “He’s gotten a lot better at it,” VP of engineering Aditya Agarwal tells me. “Being able to frame problems and then relying on other people to come back with solutions.” During a product review I observe, Houston cuts through a boilerplate recital of statistics about Dropbox badge’s early trials with questions that repeatedly steer the discussion back to the user. “Are there people who dislike it?” “Have users come up with any new requests?” “What other feedback do we have?” In the middle of a brainstorming session about new features, he tries to rev things up by rattling off suggestions from customers he met at the Consumer Electronics Show. He can’t relax until a loud, almost indecipherable clamor of ideas erupts. “You should just be able to just like, ping the file, or ‘Yo’ it,” he jokes, sending the room into uproarious laughter with his nod to the briefly hot notification app. “I want to leave a lot of blanks for other people to fill in, both because it’s less work for me,” he later tells me with a smile, “and because it’s something for people to debate.” Houston is also working hard to ensure that Dropbox feels like a collection of peers, at all levels of the company. It’s a philosophy that appeals to many Dropbox employees. On a chilly night in San Francisco’s Financial District, Ilya Fushman, head of business and mobile products, and Agarwal join Houston and me for dinner at the Battery, an exclusive restaurant and private club. Despite the posh surroundings, Fushman and Agarwal wax poetic about the egalitarian culture Houston and Ferdowsi have created. “It’s really hard to pull off creating an environment of peers,” says Agarwal, a former engineering director at Facebook who oversaw the development of its News Feed. “We hold ourselves accountable to expectations, and at a bunch of companies, that ends up being centralized. Drew’s my boss, but I prefer to think of him as a peer and friend.” One way Dropbox encourages a distributed sense of responsibility is by giving new hires hefty tasks. This is particularly true of the small engineering teams brought in by acquiring startups. Houston, Agarwal, and Fushman, who winkingly refer to themselves as “Deal Team 6,” have overseen more than 20 such acquisitions in the past three years, and Houston notes that nearly all of these acqui-hires still work at the company. “They end up with a much bigger playground than they had before,” Houston says. For example, Gentry Underwood, cofounder of the popular Mailbox email app that Dropbox acquired in 2013, is now head of design. It’s a strategy that comes directly out of the Mark Zuckerberg playbook. Dropbox badge, which is expected to launch this month, is a product of exactly this mindset. The idea was originally suggested by Max ­Belanger, an intern. “I’m like, ‘Dude, it’s not possible. No, don’t do that,’” Houston says, laughing. Belanger stuck with his obsession and proved its feasibility anyway. He’s now a full-time engineer.

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Behind The Scenes At Dropbox Black Ops “Black Ops” lead Jon Ying works hard to keep the same spirit Dropbox had with 10 employees as it does with more than 1,000.

Read More >> Maintaining a peer-oriented, obsessively focused company is about to become more challenging than ever. The cloud is now the hottest, most competitive sector of technology innovation. Amazon has rebranded its cloud service, giving it the more consumer-friendly label “WorkDocs” and adding email management, the ability to store and share files up to 5 TB, and mobile apps for both Android and iOS. In February, Apple launched a slicker, cloud-focused replacement for iPhoto on OS X. And perhaps most menacing of all, Microsoft’s mobile and cloud-based productivity mandate is starting to pay off. The company is set to garner about $5.5 billion in annual sales of its cloud-based services. In just two months, Nadella spent $300 million to acquire Acompli, an app that anchors Microsoft’s rejuvenated Outlook app, and Sunrise, a popular calendar app. Even Houston’s buddy Zuck may prove to be a rival–his company is testing Facebook for Work. With the increased competition comes a new kind of glare. The antisurveillance crowd inveighs against popular cloud-based services; most recently, Edward Snowden warned the public to “get rid of” services like Dropbox and Google Drive, claiming that they didn’t offer enough privacy features for users or advocate on their behalf. (Dropbox’s addition of former Secretary of State Condoleezza Rice to its board last year did little to quell fears.) The attention ramps up the pressure to get every detail right. “Dropbox just can’t ever screw up,” Ferdowsi admits. “If we ship out a version of Dropbox that deletes data erroneously, at scale, it’s kind of the end of the company.” Dropbox’s offices feature a blue neon sign that glows–it just works. It’s both a goal and a constant reminder to be ever vigilant. Houston acknowledges a certain level of pressure. Two years ago, he started taking what he calls “think days”–secluded, long weekends in a hotel in nearby Palo Alto or as far away as Maui–to escape and meditate on Dropbox’s position. He often returns with long manifestos. A student of tech history, Houston puts the dilemma he’s obsessing about in context. “A while ago, people might have put an MP3 in their Dropbox, but why would you do that now, with Spotify and Pandora?” He cites Craigslist as an example of what could happen to his company if it falls behind. “You used to see Craigslist used for everything. And then Match.com takes away some, StubHub, and then Airbnb comes along. It gets unbundled. And we’re like, ‘Maybe this is gonna happen to us.’ So we should do that to ourselves instead of letting someone else do that to us.”

This is Houston’s biggest concern–not Amazon, Apple, Google, Microsoft, or Tencent. He’s worried about the next twentysomething who wedges her way into his user base and peels off Dropbox’s features before he can build more of them. His paranoia is not without cause: one of his former engineers, fellow MIT alum Michael Grinich, is already gunning for Dropbox’s Mailbox with his new email startup, Nilas. This gets to the heart of those discussions Houston regularly engages in with Kalanick: “How do you make sure,” explains the Uber CEO, “that you don’t become the big company that becomes rigid, brittle, and disrupted by the new guy?” Like the many purchases made by his friend Zuckerberg, Houston’s acquisition spree may be as much about neutralizing potential threats as it is adding to Dropbox’s talent and tools. While Microsoft pursued its splashy deals, “Deal Team 6” quietly added crews that build tools to let users create collaborative documents and assign to-do lists; that let designers share and work on CAD files; and that even have created a cloud-based word processor that Dropbox’s customers could use instead of Microsoft Word. Each feature could have chipped away at Dropbox’s utility. Now they will be integrated into Dropbox and rolled out later this year. Houston tells me that one of the first things he shows to new hires is a slide show that includes the logos of Netscape, Myspace, RIM, Lotus, and Friendster. It almost seems absurd to me that a startup not even a decade old is already worried about being upended and becoming a cautionary tale. “What do these companies have in common?” Houston asks his new acolytes. “No one wears their T-shirts anymore, except maybe as a Halloween costume.” There’s a stack of free Dropbox T-shirts when you enter the offices. Houston is hell-bent on making sure that they don’t become ironic garb for some Stanford business-school student with his head in the cloud.

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Cloud Atlas How the tech giants competing to control your stuff compare