Drew Houston on Growing Dropbox

Sure. So we, the team — I'm thinking back to the up 7 million, we were probably fewer than under 50 people. And so I think one of the things is probably a few things that have been long misunderstood or not clearly understood about our space. First of all, Dropbox — part of the reason why we had so little competition for a while was that Dropbox looks easy but it's actually really hard to do. I knew this because I wanted to just use the other products; if any of them had worked, I wouldn't be here. But it's actually technically hard. That said, there were a lot of competitors who built things that probably were reasonably functional, but they didn't get distribution right and they didn't get virality right. I had been paying attention when 2008, 2007 was kind of when the Facebook platform started to take off, and in a lot of the gaming, you had these companies which had gone from zero to 100 in like records, so new land speed records were set all the time, and a lot of that was true virality. So there's a great — Dave McClure had a great model called Startup Metrics for Pirates: AARRR. I won't go too long about it, basically acquisition, activation, revenue, retention, and referral. That became how we managed the company. Users come in — oh my god, very few of the folks who signed up, like four out of five who sign up don't put a file in the Dropbox, don't install the client. What is going on? We actually brought people in off of Craigslist and watched them install the product. We had a video and showed it in real time to the whole team — one room with the person and a PM, the rest of the team in the other room. We said, 'Hey, just to know, here's Dropbox, go from here to sharing a file.' Zero of the five people succeeded. Zero. If I didn't come close, but really paying attention to all the activations — just one example — but all the steps and the viral engine, tuning that as much as possible, coming up with things like the referral program which had this two-sided incentive where if I tell you about Dropbox, you get free space. That drove like 30% of our signups for a while. Shared folders, inherently viral, another 20%. So half of our signups were viral. And that was something that wasn't well understood before that time, and it was inspired by some of the stuff I saw in the late 90s like PayPal — PayPal had an incentive referral bonus. I had the idea for the Digg and Reddit video based on a book called 'Guerrilla Marketing,' which is like how do you do marketing and get users when you have no money. So a lot of these things came together at that time. A lot of the dots were connected from things that I had read over the last several years. I guess if you were less than 50 people, you didn't spend too much of your time managing and thinking about the organization. When you're like 20 people, you can just sort of manage by intuition; it's manageable because everybody can fit in a room, everybody knows what everyone else is doing. But that transition to 30, 40, 50 people was very difficult.

Well, I think there's nothing magical about it. It's primarily a financing decision. So it really depends on: do you need capital? Your employees and investors need liquidity. There are some other benefits around branding or currency for acquisitions, and so on. What's happened over the last five, ten years is the private markets have found ways to solve most of those problems. Going public is a way to solve all of them. However, operationally it's tough for a couple reasons. One is there's a lot of overhead with compliance and regulatory stuff that really means a lot of people in your company spending time on things that don't really have anything to do with your customers or your products. So there really is overhead. There are other elements of discipline and so on that are good, but it is a lot of overhead. The stock market tends to be manic-depressive, so they're either way more enthusiastic than they should be about your company or way less, which creates a lot of impact on morale. But I think it's okay. Most tech companies are public, and that's the path we're charting.