Sometimes these things have a way of working out: Drew Houston on turning his own disorganization into a $10bn company
Now that Dropbox is finally poised to go public there will be two storylines to watch.
The first will be about this era of runaway valuations. Taken together, the decacorns are worth more than $200 billion. These bets are only accelerating. In a single quarter last year, private market investors pumped a record $10 billion into “startups”... and 80% of that went to just four companies.
Snap was the first decacorn to go public. To its credit, it is still worth tens of billions of dollars-- it is trading just above its IPO price of some $21 billion in market cap. But it’s vulnerable. Instagram stories has proven a formidable adversary and its youth audience which it argued justified its price is in revolt over a redesign. Snap said it its S1 it would need to continually innovate to keep it’s fad-oriented audience engaged. It hasn’t. Spectacles were a dud. Those same users are the ones who hate the redesign. If a Tweet from Kylie can wipe away $1.3 billion in market cap, perhaps you shouldn’t have made a $20 billion bet on divining fads.
How will Dropbox fare against its four-year-old valuation of $10 billion?
That will captivate a lot of the national business press. But Silicon Valley investors aren’t so much watching that. Actual venture capitlists will make shit loads of money off any company exiting for billions dollars. Much beleaguered Twitter made entire funds. Uber’s dreadful 2017 wiped away one-third of its valuation. And yet, it’s put people on the Midas List and made funds last year when early investors were finally able to sell stocks. This is the beauty of investing early.
Dropbox’s IPO-- no matter the price will be a huge win for Y-Combinator and (another) huge win for Sequoia Capital. But it’s worth noting the partner who brought Dropbox into Sequoia, Sameer Ghandi, is no longer at the firm. And as for YC? Well, Dropbox struggled to get accepted, because it didn’t fit the arbitrary pattern recognition Paul Graham had laid out.
Silicon Valley loves revisionist history almost as much as it loves pattern recognition. While everyone gets ready to take credit for how brilliant they are, a reminder of how Drew Houston almost didn’t get into YC and how that Sequoia deal went down. (From our PandoMonthly archive)...
Sarah Lacy: There’s this whole iconic story about Dropbox being started because you were on the bus and you didn’t have your thumb drive. Is that true, or is that one of those made up eBay PEZ dispenser things?
Drew Houston: No, it’s actually true.
I get on the bus. I was living in Boston after school. I had just graduated and I was going to go visit a bunch of my friends in New York for the weekend. I did this elaborate mental justification, where like, “I’m going to hang out and have a good time in New York for this weekend, but it’s OK because I’m going to have these two four‑and‑a‑half‑hour bus rides where I’m going to get all this stuff done.”
I made this checklist of things I was going to do, and I felt better about it. It was fully rationalized, and I’m running late and I jump in the cab and get to the station. I sit down on the bus, and I open up my laptop, and I get this feeling in the pit of my stomach ‑‑ I’m sure many of you have experienced at one point or another ‑‑ something’s gone terribly wrong.
I knew what it was. I could vividly see in my mind’s eye my thumb drive sitting on my desk at home. The company I had started before, all our crown jewels were on that little thing. It was my little leash, and I’d forgotten it.
I did the TSA self‑pat‑down thing, like, “Maybe it’s in my bag. Maybe it’s in my back pocket,” because I put stuff in my back pocket never. What do you do in these situations? I’m like, “God, I’m such an idiot. I keep doing this. Why can’t I be more organized?” You’re never like, “I wish the technology were better.” You’re like, “I’m an idiot.”
It was really that. “How long are we going to live like this?” As we would later say to investors, “Look, Tom Cruise in ‘Minority Report’ is not logging into his Gmail to pick up the email he sent himself or carrying it on a little thumb drive, but that’s what everybody does.” I’m like, “This is crazy.” A lot of other experiences that led to that, but then I’m like, “God damn it, I’m going to fix this for myself,” but then it was clear this was something that a lot of other people could use.
Sarah: I love that had you been slightly more organized, you might not created a company worth $10 billion.
Drew: Sometimes these things have a way of working out.
Sarah: Storage is one of those interesting things, because there’s this sense that that problem was already solved.
Drew: It was solved in that people had found some kind of scheme that worked for them. When you look at your computer or you look at your phone you’re usually, “This is how this thing works.”
You can even look at something like a thumb drive and be like, ‘This is a good idea.” It’s very easy to understand, because if I have this thing in my hand then I have my stuff with me and if I don’t then I don’t.
Even something like emailing yourself something, I often think about the physical analogy of this, where it’s like, “I’m going to plot an envelope. I can start writing in my own name and address and put the stamp on it.” Just the idea of hitting Compose and writing your own name and the “To.” It’s like, “What is the question for which this is the right answer?”
Usually people, especially when you got other stuff to do you’re like, “Alright. Just help me find something that works.” But no one was like, “God, I really want a cloud storage solution.” Well, maybe I did.
So I found a lot of companies when I was searching around to solve this problem for myself. The first thing I would do is I’d look at the front page. It would describe everything I wanted to do. It’s like, “This is great. It’ll keep everything backed up. It’ll sync things. It’ll make it available wherever.”
Then you click on the support forums, and it’s like walking into an infirmary. You start reading these posts from unhappy people. They’re like, “Hey guys. I put all my wedding photos in this drive and they’re gone. Could you help me get ’em back?” Some poor support rep’s like, “Oh yeah, we’ll get right on it. Can you please go into this folder in the bowels of your computer and upload this log file and we’ll get right back to you.”
You look at the time stamp on that and it was like nine weeks ago. You start reading 10, 20 more. This person’s losing their mind because all their stuff is gone. You just read that, you’re like, “Oh my God.” You hit the back button, you see 10 more of these things. You’re like, “There’s just no way I can trust my most important stuff to this thing if they don’t actually figure out the engineering.”
That was terrifying to me. Even if someone did something that did this on paper, it had to be really, really good. Whoever solves this problem better really understand how difficult a technical challenge this is.
I tried everything out there. All these things drove me nuts. They either did too little or they were just wildly unreliable or you couldn’t tell what they were doing. All of that led up to that day when I wrote the first lines of code.
Sarah: How did you meet your co‑founder, Arash Ferdowski, and at what point did this become not just a project for you?
Drew: I started prototyping it myself probably in November 2006. I worked on it. I’d started my previous company, which was online SAT prep, which is a whole other story. I had burned out on it.
I saw a bunch of my other friends ‑‑ a couple of my friends did Y-Combinator, out in Boston. [We knew] there was this place called California where they have wheelbarrows of millions of dollars and not enough 23‑year‑olds to take them and go build something. I was like, “My God, I got to get out there. I don’t even care what I do.” There was this whole co‑founder shuffle, where I applied to Y-Combinator as a single founder.
Paul Graham, the founder or one of the partners, had sent me this very grouchy email, like, “You need to get a co‑founder.” Which is like saying…imagine if your parents told you you need to get married in two weeks. But there was the application deadline and that wasn’t going to move.
Sarah: Was this about you or did he require them for everybody?
Drew: He’s pretty opinionated. He portrays it like it’s a strict requirement. It’s like applying to college. You don’t really want to rock the boat too much by actively disobeying what the dean of admissions is telling you.
I came out here back when a lot of the Y-Combinator companies were in this one apartment building called Crystal Towers. It’s up in North Beach. There were like 10 Y-Combinator companies there. I came out here for the weekend, and I just spent the whole time complaining to anybody who would listen that I needed a co‑founder. Also just being like, “By the way I’m working on this thing, Dropbox. Just give me feedback,” and I would show them the early demo.
It was crazy because I had a bunch of friends of mine at school who had quit their jobs at Google or who were ready for one reason or another to jump into a startup and were all applying into Y-Combinator. All the other people ended up joining a clump of people together, or they formed two other companies, and I was left still as the solo founder, mainly because…it was complicated.
Sarah: You were just left in the cold?
Drew: Sort of. What happened was, I was really excited about this one guy, Aaron, because I knew him from school. He’s like, “It’s already far along. I don’t know. It’s not really my idea, but go ask Paul Graham what he thinks about the idea.” I’m like, “Alright. I can do that.”
I get my Zipcar. Y-Combinator has these Tuesday dinners. I drive down to Mountain View. I show up a little bit before the dinner starts because I had heard that Paul and (his wife) Jessica are just chilling before all the founders show up.
My flight was at 10 pm. I’m like, “Now is the time to do this.” I show up and I had met them before but they didn’t really know me. I’m furiously setting up my demo on the dinner table, then carry my laptop into Paul’s office. I’m like, “Hey Paul. Really sorry to bother you. Do you have a second? I just want to show you something.”
He’s like, “No, I’m busy.” It’s like, “Dude, you’re clearly just playing Snood or something.” That’s back in the day. I’m like, “Paul, I’m really sorry. I’m flying out tonight. It’ll just take a minute.” He’s like, “No, I’m sorry, I’m busy.” I’m like… How many times can you ask the same question over and over again without really pissing him off?
So, I’m like, “Alright, let me take another approach here.” I ask Jessica. “Jessica, here’s the situation. It’s actually kind of complicated. I’ve got a potential co‑founder whose decision in part is riding on Paul’s opinion of this thing I’m putting together. Do you think it’s OK if I just grab a minute of his time? He seemed like he was a little busy.” She’s like, “Oh, he’s not busy. Sure, yeah, go in there. Of course.”
Thrown to the wolves. God. I go back in. I’m like, “Look, Paul, I’m really sorry.”
He didn’t let me get a full sentence out. He’s like, “No, look. The whole reason we have an application process is so we don’t have all these random people showing up and pitching demos. I’m sorry. I can’t look at your thing.”
It really was like talking to the dean of admissions at the college you really, really want to go to and then you’re like, “Alright. They’ll spend like 10 seconds looking at your application. You might get 20 seconds of face time with them if you’re lucky.” Here I had 10 minutes of being that jackass who would not leave him alone.
It was a total nightmare. I do the drive of shame back up to San Francisco.
You just don’t really know what to expect. It was brutal. I was thinking, “What the hell am I going to say to Aaron?” I don’t even remember really the conversation, but I’m sure it didn’t have a happy ending. That was a rough plane ride back.
Actually, when I think about the whole emotional rollercoaster of this thing, I think that was probably one of the hardest moments, because everything was in place. I thought the idea was good. I had a prototype that worked, it was something that I was really passionate about.
I just didn’t have a co‑founder. It wasn’t any one thing, it was just all these little things had taken out a lot of the people that I otherwise would have worked with. A bunch of my fraternity brothers were good engineers. A bunch of other people who would have been really good and by circumstance they weren’t available or weren’t willing to make the jump.
Sarah: Do you think that it was unfair that there was an arbitrary rule? There were a lot of business that have not had co‑founders that have been very successful.
Drew: It doesn’t matter whether it’s fair or not, these are the rules. Sure I had all these elaborate rationalizations why I didn’t need a co‑founder, and I was going to do it myself. There’s probably a reason why he’s making such a big deal out of this. It’s actually a real lonely experience if you do this by yourself. Of all the areas where I might want to make a point or make a stand for something…being a single co‑founder is not really…you don’t get a merit badge for that.
Sarah: Did you think it was over on that plane ride?
Drew: I was running out of ideas. I’m like, “What the hell am I going to do? It’s two weeks before the deadline.” First he emailed me directly to tell me I needed a co‑founder, now he thinks I’m an asshole. The trajectory is not good here.
I submitted the application as a single founder. I really didn’t have a choice. I’m like, “I’m looking for one. Chill, it’s going to be alright.”
Sarah: I hope you wrote “chill” on the application.
Drew: I made this video in my apartment. All it was was this three minute thing where I’m narrating while showing the prototype. It’s still online somewhere. I’m like, “Here’s this thing Dropbox, it’s really easy. You get this folder on your computer, blah, blah. ” I put it on Hacker News.
What Paul was actually doing, when he was not listening to me, is he’s probably surfing Hacker News. So I put out this video on Hacker News and to my surprise, it hits the top. It stays up and number one on Hacker News for a couple days.
Sarah: What was so compelling about it? What were people saying?
Drew: They were saying, “I would use this.” Well, not in so many words. They would say, “This part of it sucks, this part of it sucks, this part of it sucks. You should do this, you should do this, you should do this.”
Sarah: That’s Hacker News speak for, “I would totally use this. This is great.”
Drew: Yeah. It’s like, “I actually care enough to troll you.” The worst thing that could happen is nothing. It was super encouraging because I got all this feedback.
I knew that this thing was not fully baked yet, I didn’t want a bunch of wedding photo problem users, but I could at least get the idea out there. It worked really well. Then Arash saw the video. One of the people that I complained to about not having a co‑founder was Kyle Vogt [Arash’s friend who also co-founded Twitch and Cruise, both of which sold for north of $1 billion].
Kyle’s like, “You should talk to Arash.” Arash emailed me, I still have the email somewhere. He’s like, “I saw the video, we should talk.” We go to the MIT student center, we hang out for two hours.
Sarah: Did it feel like a weird first date? You had this pressure on you, you had to find a co‑founder. He knew that was what was going on.
Drew: Yeah. It was sort of.
Sarah: Were you nervous?
Drew: At that point, I was too fried to be nervous.
Sarah: You had a lot of false starts certainly.
Drew: Yeah. I was working on different people, but yeah Arash and I met and he’s super quiet. Or at least, he was back then. He seemed obviously smart. We hung out for a couple of hours and everything he said seemed reasonable.
I wish I could say I was really being a discerning judge of character and identified these 19 things about him that are really great. One thing that was great was he was just like, “Yeah, totally. I’ll just drop out of school. This is fine, I’m bored.”
He then drops out of school. It was like getting married on the first date.
Sarah: It was like, “He has a pulse. He’s interested in storage. He’s agreed to join me.”
Drew: Do you want to live in squalor for the next three months and join me on this mall sushi fueled coding binge? He’s like, “Yeah, OK.”
Sarah: Did you guys get into YC?
Drew: We did. Then we flew out here. I was rejected once from Y-Combinator the SAT prep company so my batting average wasn’t very good. Then we came out here and even then we were still on the margin. Invariably the first thing that anybody said was, “Dude, there’s a hundred of these things. Seriously, you don’t have any better ideas than that?”
I’m like, “No, but it’s broken for all these reasons.” Just because there’s a lot of people working on something, doesn’t mean that the problem is solved.
There’s never a grand plan like, “We’re going to start here and we’re going to get this valuation here and get this money from these investors and we’re going to do this, this and this.” I was just really excited about building this.
Things like the Hacker News post were all we really needed to be reassured that this is a worthwhile thing to do.
Sarah: Why was Y-Combinator so important for you? You’d been rejected once, you invested a lot of time. You put a lot of faith in the thing you had to do in order to get in there. Silicon Valley is not particularly a hard place to find other mentors. You had encouragement on the ideas, why did you feel like you needed it?
Drew: For so many of the people that I knew, this was the fast lane. Or not even the fast lane, this was the on‑ramp. You got to realize most of the world does not live in Silicon Valley and does not grow up there and is not immersed in all of this. You’re on the outside.
We didn’t have any connections or know anyone other than the people that have already gone through Y-Combinator. I saw in three months how much faster the progress was, how much more momentum they had. I’m like, “Oh my God, we’ve got to do this.”
It was, particularly at the time, the ideal way for someone who’s not from the Valley to get plugged‑in. How it works is really straight forward. They have this sequence of dinners every week and they get investors and past entrepreneurs and all these people…the whole cast of characters you encounter in the ecosystem.
There was this treasure map of, “Here’s all the stuff where you have no context.” Sure listening to a two hour talk from a patent lawyer doesn’t make you a patent lawyer, but you can at least know there’s the stuff around patents that’s important and here’s the things you need to know.
Hearing these stories from these entrepreneurs who have been through this you get a little bit clearer idea of what the whole process is like. The demystifying of the whole process was the most valuable thing.
Then there were other things that are…the emotional support, the espirit d’corps from having 20 other companies going through the exact same thing. Every week everybody shows up and is building, building, building, and you’re all rooting each other on.
It wasn’t any one thing. The most striking thing was Paul’s ability to distill down these techy, obscure or arcane concepts into things a normal person can understand. It’s just uncanny how he can do that.
Sarah: Were you excited by the time you were graduating? Were you nervous to be pushed out into the real world?
Drew: It’s crazy…it culminates in demo day, which you’re furiously trying to wrap‑up your prototype and get your presentation ready. You don’t have time to think or do anything, you’re just trying to get through that day.
It was really exciting. We were in the process of trying to raise an angel round. We were for sure going to move to San Francisco, had our apartment lined up and everything. We were talking to all of these investors. It was awesome.
Sarah: Back then, was it like it is now where as soon as you’ve gone through Y-Combinator you’re pretty much going to get money or did you have to hustle to raise money?
Drew: The brand didn’t really have the cache that it does now. While they put you in a room, they still put you in a room with 40 investors and waive you like a piece of steak.
It’s helpful, through this bizarre chain of events we got introduced to Sequoia.
We did our demo day presentation once in Boston and once in Mountain View, the Boston one you hear of all these reasons why it won’t work. In Mountain View they actually get out a checkbook.
We wrap‑up our presentation and then this guy comes running up to Arash. Arash is staring at his computer fixing something, and he starts speaking Farsi to Arash. This guy Pejman [Nozad] is Iranian and Arash is, too.
Pejman came up and like, “I’d love to talk more with you guys. You guys should come down to Palo Alto, we’d love to talk about investing.”
At the time we were pretty far along with one of the early stage guys, a seed round firm. But he’s super persistent. Finally we’re like, “Fine, we’ll go down to Palo Alto where do you want to meet?” He’s like, “In the Medallion Rug Shop.” I’m like, “OK.”
We’re like, maybe it’s the upstairs or something. We show up on University and we go in and we’re like, “This is actually a rug shop and there is nothing else here. There are rugs.” There’s a nice receptionist, and we’re like, “We’re here to see Pejman.”
They have this secret batcave thing where they have a boardroom and a TV and a projector. It’s clearly not the first time they had done this. I’m like, “Good God, what the hell is going on here?” We had no idea what to expect, this was another universe.
He was really nice. He’s like, “I really like you guys. I want to introduce you to these people at Google and Microsoft and investors at Sequoia.” We’re like “No, no, no, no, no. We’re not ready for that.”
We just didn’t think we were ready. We do not have any kind of reasonable business plan. The product is still a prototype. He’s like, “No, no, no, no, you should take the meeting.” I’m like, “No.” He’s getting on the phone, I’m getting all excited like, “Pejman, dude.”
Of course he gets [us] in, we’re like, “Fine we’ll go. We’ll build the relationship.” Then the next thing we know, we’re in Sequoia’s offices and you look around it’s like the original S1 from Cisco’s IPO and then there’s a picture of Steve Jobs and a picture of the Google guys.
It was super intimidating.
Sarah: You’re longing for the rugs again.
Drew: Pejman came with us. I made the mistake of saying the word pimp in a “Forbes” interview.
I don’t know why I’m going on this tangent or saying it again. I was describing this in an interview. I’m like, “Well, he’s kinda like our pimp. We showed up, and we do our thing. Afterwards, we leave the room. He stays there, he’s whispering in the investors ear.”
The article comes out and I read it. I was reading this and it was like, “Pejman was basically our pimp.” I’m like, “Oh, fuck.” I’m like, “A lot of people are going to see this.” I’m calling. What am I going to say to him? I’m procrastinating on making the phone call. “Maybe he hasn’t seen it yet. I should think about what to say.”
In the middle of the afternoon my phone buzzes. It’s a text from Pejman. I’m like, “Oh, shit.” I open it.
It’s like, “Dropbox pimp! Yeah!” He’s like, “I want a t‑shirt.”
Sarah: Technically, you’re the hooker in that situation, which is worse.
Drew: I also learned not to carry these analogies any further.
Sarah: He was apparently an effective pimp.
Drew: Yes. Highly effective.
Sarah: What was Sequoia’s feedback in the meeting? Did they have the same, “This is a dumb idea. Everyone’s doing this. Why are you doing this?”
Drew: Sameer Gandhi, who was at Sequoia at the time and was our partner on the deal, he had gone to MIT. He had studied computer science. We built some early rapport that way and he liked us.
So I get the phone call from Sameer that night. He’s like, “Look, I like you guys. Why don’t you come to the partner’s meeting on Monday?” I’m like, “That sounds good.” He’s like, “But there’s one problem. Mike isn’t going to be there, but he wants to see you, can he come by tomorrow morning?”
I’m like, “Mike, Mike, Mike, oh Mike Moritz, OK.” There’s only one answer to this question because he was one of the preeminent venture investors out there. I’m like, “Yeah, sure, of course. We’re in North Beach, there’s a lot of great coffee shops around here.”
I was sort of joking, I’m like, “Or you could come to Dropbox World HQ.” He’s like, “That sounds great, we’ll see you at your apartment at 10:00.”
Literally our boxes weren’t even unpacked. We’re furiously trying to clean the place up. Ten minutes before he shows up, I’m like, “Shit, we don’t even have any drinks in the fridge.” I’m sprinting down to the Columbus Cafe.
I’m like, “I don’t know what he wants. I can’t get coffee. There’s water, do I get him an Odwalla?” Then I was like, “What flavor?” I’m carrying this bag of stuff back up to the room five minutes before he’s supposed to show up. Then I get the call to go downstairs and go grab them, and I’m like, “Yeah, it’s actually him.” We go up to our apartment and I’m like, “You anything to drink?” He’s like, “No, I’m good.”
Sarah: Did you have furniture?
Drew: Yes, thank God. Two distinguishing qualities of this place: It was month‑to‑month, but it was fully furnished which is ideal for our little Ellis Island of start‑ups.
It was pretty straight forward, I’m showing him…we had our IKEA furniture and my computer. Instead of a TV or a coffee table, we had all these LCD monitors and the cheapest chairs and desks that we could get. Ran through the pitch. He asked a couple of questions about Google. He’s got a little bit of a poker face.
He has this little half‑smirk the whole time. Then he’s like, “Alright, cool,” then he left. We’re like, “OK,” and then you wait.
Sarah: How long was the meeting?
Drew: It was an hour.
Sarah: He smirked, and left, and didn’t drink any of your Odwalla?
Drew: Yeah, Odwalla‑free meeting.
Sarah: Did you think you’d blown it?
Drew: You don’t know what to think. We thought the words that came out of our mouths were reasonable, but you don’t really get a lot of immediate feedback.
We hoped for the best. My dad and my aunt were in town, so we went out and did some stuff in San Francisco while we waited. Then we got invited to the partners meeting on Monday, also an intimidating trial by fire crucible, but made it through that.
I thought we did a pretty good job. We later talked to Sameer, and he’s like, “You know, that really wasn’t your best morning. You guys didn’t really do that great, but it was good enough.”
Arash and I were both wearing our one nice sport coat. It was clear this was not something we did every day. They were like, “OK, this is a half a million dollar seed round. Whatever, go for it.” We had a handshake deal. It was a one‑business‑day turnaround, which was pretty amazing.
We’re running around TechCrunch 40 at the time, telling the other investors we weren’t going to be moving forward with them, and then talking to my lawyer, trying to get all the details hammered out. I’m like, “I have no idea what any of those words mean.” There’s all these concepts you have to learn in a really short period of time, which I did.
You’re in disbelief the whole time. You’re like, “OK, something is going to explode and go wrong.” We finalize the documents, and sign them. They sign them, too. I was pretty happy.
They’re like, “Great.” Everybody’s all celebrating, then I get an email from the financial people there, and they’re like, “Send us your wiring instructions.” I’m like, “The only exposure I’ve had to this is ‘GoldenEye,’ or something.” James Bond movies.
I’m like, “OK.” We went down to the North Beach Bank of America. We go in there. There’s the tellers, and then there’s the leather seat people. We’re like, “This is a leather seat problem.”
Sarah: Were you wearing the sport coats?
Drew: No, we wearing hoodies, and shorts, and flip‑flops. We sat down. You have to pull out your blue debit card, instead of the red one. We hand it over. She’s pulling it up, and there’s, conspicuously, $60 in this thing. She’s like, “Well, how can I help you?” I’m like. “Well, is there a limit to how much a bank account can hold?”
She’s like, “No, why?”
I’m like, “Well, can it hold a million dollars?”
She’s like, “Yeah.”
I’m like, “No further questions.”
We got whatever numbers you’re supposed to get, and then the routing number, and all that. I don’t know if they were pressing the drug dealer alert button.
Then the real fun begins. For a 24‑year‑old, it’s like a kid on Christmas morning, waking up, hitting the Refresh button on the account. I still have a screenshot of it going from $60 to $1.2 million. It was a good day.
Sarah: Fundraising is such a funny thing, because even in the best of circumstances it’s such a pain in the ass, and there’s so many logistics and things you haven’t thought about. Then you get it done, and you’re like, “Oh, the money’s in the bank. I’ve got to build a company.”
Drew: That’s the thing. It always sounds so glamorous. The first few board meetings are like an exercise in paranoia and insecurity, because they’re like, “Well, what’s the contribution margin on this?” I’m like, “Well, I don’t know what contribution is. I kind of know what margin is.”
The learning curve is really high in the early days.
Sarah: At what point do you guys go from this point to really being on fire, and being this hot startup, and starting to get these ridiculous offers, at ridiculous valuations, and scaling to a ton of people?
Drew: These all happened one little mini‑milestone at a time. For me, I look back at the first video on Hacker News. That probably made me about as happy as any point in the whole process.
Then you’re like, “OK, this is clearly something that’s worth doing, so I’m going to do it,” then you get funding, and then you’re like, “OK, we need to raise money.” You keep passing these different things, no single one of which is that significant, but then you’re like, “OK, we have hit this goal. Now it’s onto the next one.”
Probably the one that stands out the most was we were like, “Hey, this video thing worked pretty well. I have an idea, let’s do it again.” I made another video that was very similar format, but this was targeted at the Digg and Reddit audience. This was the height of Digg, this huge driver of traffic.
In high school I would read Slashdot and these other communities that resemble places like Reddit. They’re a very peculiar community. They have all these memes.
I put all these Easter eggs in the video. I’m totally deadpan, narrating, “Here’s Dropbox. Here’s how it works,” all this stuff, but then a reference to Tom Cruise and Scientology, or a picture of Keira Knightley, or all this stuff that’s flying around the background.
Even if people didn’t like Dropbox, they’re like, “Wait, that’s the HD DVD decryption key. What the hell is this? What’s going on here?”
Then we have total link bait title for the thing. This was all very carefully crafted. It was like, “Google Drive Killer Coming from MIT Startup.” That was, word for word, the headline we used.
Designed the video, and then after the video’s done playing, we would point you at this waiting list. We were doing this internal straw poll, like, “OK, we have 5,000 people on the waiting list today. How many is it going to be a day after the beta launch?” It was still private at this point. The high‑water mark was 15,000, which would have been tripling, which would have been a pretty good haul.
We put the video on Digg, and then we told our forums, which were not very well trafficked, so it wasn’t a big spike, or gaming the system, or anything. To our surprise, it made it onto the front page.
If any of you guys remember Digg back in the day, getting on the front page was a big deal, and then hitting the Top 10 was a really, really big deal. I remember that afternoon, scampering between the other Y Combinator founders in my apartment, and looking at this thing, and hitting refresh on Digg.
It made it to 10, then 9, 8, 7. It made it all the way to the top. By the time the thing was done, that was the first feeling, “OK, this thing has taken on a life of its own,” where it got 12,000 Diggs. Hundreds of people were signing up per minute.
We’re refreshing the database query, and every time, no matter how fast we do it, the number would keep growing. I was like, “Oh my god.” It was this out of body experience. By the next day 75,000 people had signed up. “OK, there’s our critical mass problem.”
We launched, probably six months later, at TechCrunch50, which was actually a total train wreck.
Drew: It was horrible.
Sarah: The whole event, or just your part of it?
Drew: No, our part. The event was wonderful. We did our best to try to bring it down. That Digg thing was really good. Our launch at TechCrunch50 was really bad. It’s like demo day times 10.
For the first year and a half of the company we were all working every day. It wasn’t just me and Arash. There were 10 of us by now. It’s totally inhumane to be having everybody work this hard.
We’re all furiously getting everything ready for launch, because not only do I have to launch, and get up on stage, and present, but we have 100,000 people on the waiting list that were going to open up the floodgates and this thing has to work.
We’re spending most of the time making sure the service works because we’re going to have to hit scale that we’d never had before, by an order of magnitude. We’re bracing ourselves.
Sarah: Were you doing it mainly for publicity? Because you had venture capital. You had big investors by this point.
Drew: We don’t really have a good understanding of how that stuff works. You’re like, “OK, well, every startup’s supposed to do some cool launch,” and then you’re supposed to do other stuff after that, like get a PR firm, or get someone who does marketing, or whatever. You’ll deal with that later, but you definitely know that every startup has a cool launch.
Everyone at TechCrunch50, they’re a thousand companies that applied for 50 spots, and we got in. We’re really excited about that.
It was a confluence of all these things. First we’re getting the site ready, we’re actually going to make this thing publicly available. We’d been rehearsing the presentation for a really long time. Everybody’s moms ‑‑ not just me and Arash’s, but the whole team ‑‑ everybody in our sphere was all eyes on this thing. Let alone the thousands of people that were actually in the conference.
Our service is really technically complicated under the hood, so there were a million things that we had to prepare. There’s a lot of moving parts.
It’s one of those things where the last little percent takes so much more time, and we’re jamming all of that into this ridiculously short period, to the point where we’re like, “Oh shit, we’re getting on stage in 20 minutes. We’re not at the convention center. We should probably get a cab and go.”
We go flying in, and we’re on two hours of sleep. Get down to 8th and Townsend, or wherever it is, and go in the Design Center, or wherever they had it. We’re running backstage. We’re sprinting, then we’re getting mic’d up and everything, and it’s on.
I get out there. I’m like, “Wow, this is happening. It’s on.” I go into autopilot, “Here’s this startup company. It’s called Dropbox. Blah, blah, blah, blah, blah.”
I start going into our demo. I’m like, “And what happens when you install Dropbox? You get a folder on your computer called Your Dropbox, and when you put stuff in there, it saves it forever.”
Arash has his computer. I’m holding a MacBook Air on stage, because we’re going to do all these cute things. I’d done this a hundred times. I’m like, “And as you can see, when we drop in this photo into your Dropbox folder, that immediately appears over here.”
I look over there, and it didn’t appear over there. I’m trying to come up with filler words. “It saves to our servers, and then in a minute you’re going to see it show up on Arash’s computer. I just put it in on my computer.”
Because I’m saying these things, but then now I’m running through this extremely technical checklist of, “All right, something is wrong. Is it the Internet connection? Are our servers down? Is it the file? Was it something that we did 10 minutes before running on stage?”
I’m having this very active inner monologue about, one the one hand, “Here is a technical diagnosis of what could be happening,” and the other one is, “Oh fuck, oh fuck, oh fuck, oh fuck, oh fuck, oh fuck.”
Another one’s like, “This is funny. I’m dreaming. I’m going to wake up. Ha ha.” Then I’m still standing there, and I’m like, “OK.” Nothing is happening. A lot of nothing is happening.
Sarah: It must have felt like forever.
Drew: I look out there. I take a breath. All you could hear is these little clicks, the little shutter clicks, because there’s this whole army of photographers in the front row capturing every moment, of every angle, of every permutation of everything of this total meltdown on stage.
It was brutal. What happened was the WiFi cut out. It was clear the WiFi had cut out because the Internet was not working. I’m like, “And now, here are 10 more things that are not going to work in my demo.”
Plus, I didn’t have a lot of public speaking experience. I was super nervous in general. Somehow it got back on autopilot. I’m like, “We have this thing called Shared Folders, and then da, da, da,” and then, “By the way, we’re launching the Linux version. Here, it’s going to cost this much.” Stagger over the finish line.
Then they do this Q&A with the three investors, and answer the questions. Get off stage. I’m usually a pretty even‑keeled guy. I was so happy I’d taken off my mic before telling everybody what I thought.
It was rough. You’re sitting there backstage, and you’re trying to think about, “That was a total fucking train wreck. What happens now? This was supposed to be our celebration.” I’m looking at Arash. Arash is silent. I’m like, “Dude, do we know what happened?” Then my phone starts ringing. I’m like, “Fuck, it’s mom.”
Sarah: She called you right after?
Drew: Yeah, she’s like, “Is everything OK? It’s all going to be OK. It’s all going to be OK.” I’m like, “Mom, look, it’s not going to just be OK, seriously.”
That took years off my life, probably. The guy who edited the video, it was so extreme that I got this email from one of the production guys, like, “Hey, by the way, I edited out 30 seconds of that whole video.” I’m like, “I love you, Tyler.”
To this day, Tyler, thank you. That was hard. We didn’t have much else to do there, so we’re like, “OK, we’ll go back to the office, because we actually have a business to run, or we used to.”
I’m thinking back to advice. One of my friends was like, “Look, everybody’s going to key off of you to figure out how to react to this, because nobody actually knows what is happening. If you’re totally cool, people will be totally cool. They’ll be upset, but they will be cool, but if you are losing your shit, then everyone will lose your shit.”
So I acted cool.