Drew Houston of Dropbox: Y Combinator made us into Valley insiders

By Erin Griffith , written on February 21, 2013

From The News Desk

Even though Airbnb and Dropbox make up around 75 percent of the value in Y Combinator's portfolio, each of the program's two runaway successes were accepted by the skin of their teeth. And both started out as outsiders to Silicon Valley.

As Airbnb's CEO Brian Chesky described at PandoMonthly last month, the company had flubbed its interview with Y Combinator head Paul Graham. They knew it was over, but then co-founder Joe Gebbla showed Paul Graham a box of "Obama O's" cereal, which the company had used as a promotional tactic to stay in business during the 2008 election. Airbnb was like a cockroach, Graham observed. They just wouldn't die.

Dropbox had an equally difficult time woo-ing Graham, Y Combinator's "dean of admissions," according to Dropbox CEO Drew Houston.

Graham's first email to Houston was to tell him to get a co-founder, a well-known recommendation at Y Combinator. "It was kinda like, imagine your parents telling you that you need to find someone and marry them in two weeks,” Houston said.

The search proved to be tricky. Houston made an awkward attempt to meet with Graham in person to get around the requirement. Houston approached it all wrong, acting like "that creepy guy" at Graham's office, he explained at a PandoMonthly event in San Francisco. In the nick of time, he was introduced to and went on a "founder date" with Arash Ferdowsi, who readily dropped out of school to co-found Dropbox.

Each startup has a different experience with accelerator programs, but for Dropbox, it was all about context. A Boston kid, Houston grew up thinking that California's tech scene was a magical place where "they have wheelbarrows of money and pay 23-year-olds to push them around."

The biggest take-away from Y Combinator was that it demystified Silicon Valley. "It was the way for someone who is not from the Valley get context for what you need to know," he said. "Most of the world did not grow up in Silicon Valley ... so you’re kind of on the outside.”

Y Combinator, he said, served as a kind of treasure map for the Valley.

The contrast between the coasts was even more stark at graduation time: Dropbox demoed its product in both Boston and the Valley. "In Boston, you get all these reasons why it won't work, and in Mountain View, they get out their checkbooks," he said.

But even at Y Combinator in Mountain View, the money wasn't necessarily growing on trees. This was 2007 -- before incubators proliferated around the country, ironically, because of the success of YC companies like Dropbox and Airbnb. But in YC's early days, the funds weren't automatic, as it seems to be for many of the program's grads today. "They put you in a room with investors and wave you like a piece of steak and that's helpful," he joked, "but you were doing well if you got any kind of interest (from investors)."

Through a bizarre chain of events, Dropbox met with Pejman Nozad, who Houston called the Dropbox "pimp," because he connected the company to Sequoia Capital. Nezad and Sequoia backed the company's $1.2 million seed round. The rest is Dropbox history.