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The Foundr Podcast with Nathan Chan
542: In Retrospect - How I Built Dropbox Into a $12B Unicorn | Drew Houston
00:34:20
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- [00:00]
Nathan Chandler
Hey, founder fam. Today we're jumping back into the archive to revisit our interview with Drew Houston, the co founder of Dropbox. From starting Dropbox on a bus ride after forgetting his thumb drive to building a multi, multi, multi billion dollar company with hundreds of millions of users, Drew's story is packed with learnings. Drew shares how he turned frustration into innovation, his approach to decision making as a leader, and the powerful lessons he's learned about focus, strategy, and scaling. A Drew's perspective on navigating the ups and downs of entrepreneurship and managing growth is something every founder can learn from. All right, let's jump in, hear the.
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Drew Houston
Stories, learn the proven methods, and accelerate your growth and future through entrepreneurship. Welcome to the Founder Podcast with Nathan Chandler.
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Interviewer
So the first question I ask everyone that comes on is, how did you get your job?
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Drew Houston
How did I get my job? On a bus ride. So I kept forgetting my thumb drive and the whole Dropbox founding story is I got really sick of having to carry my thumb drive everywhere. And, and if it wasn't a bus ride, I was always putting in the about to put in the washing machine, or I was always one step away from disaster. And then I was on a ride from Boston to New York, forgot my therm drive, couldn't get any work done, and started writing the first lines of code for what became Dropbox, even though I had no idea where that was going to go at the time.
- [01:34]
Interviewer
Billions of dollars in annual revenue, hundreds of millions of users. You've had incredible success. And, you know, some people would say that you, you know, the success that you've had, you're an anomaly. Do you think anyone can achieve what you've achieved in life and business?
- [01:50]
Drew Houston
I think, yeah. I think there's one thing that's been surprising about going through this process and meeting other people have gone through this process is when you're just in your room with an idea or if you're starting your first company, you wonder what's behind the curtain, right? And like, or like, who is this? What. Who are these people that are able to do all these things? And I've been pleasantly surprised that there's not anything that magical about it. And it's a lot of, I mean, there are a lot of factors that go into making something work out, that some of those are outside your control, like things we've, we benefited from timing with Dropbox and so on, but. And true, that odds are stacked against having a company that goes public or, you know, hits. So there's a confluence of luck and Skill and just not giving up is a big part of it too. So I don't think it's literally true that everyone should start a company or that every founder can roll the dice and have that kind of outcome. But I have been pleasantly surprised that it's achievable. And even if it's overall successful, there are a lot of ups and downs and it doesn't always look successful from the outside.
- [03:15]
Interviewer
Yeah. So one thing I'm curious around is from my own experience as well, is when it comes to kind of, I guess, you know, navigating and the ups and downs, essentially it's, it's making decisions. And you know, as a leader, a leader of this company, you have to make decisions every single day. You know, you talk, you see like people in the same out uniform. A lot of, you know, like founders, they don't even want to have that decision fatigue on what they're going to wear. So I'm curious, like, how do you go through the decision making process every single day? Challenges that you face, you know, ups, downs, fires you have to put out and you've got to make these decisions fast. What does that, like, what does that look like for you? How do you work out what the next move is? What's the right decision? Because you've obviously been, you've been right obviously 80% of the time. And I think that's a really critical thing.
- [04:10]
Drew Houston
Well, I'd give one answer today, but I think there's also been a journey where that answer would have been different along the way. And so now at our scale, and I think most companies after a certain level of progress would be thinking about the same thing as most CEOs, which would be. Well, first question is, what decisions should I be making? Right. And being intentional about that because part of why you hire a team and you get great people in your companies so that you can divide and conquer on a lot of these decisions. Part of it is building judgment on. And some of that's formal. Like, okay, here are my formal. There's a document that says it's Drew's role and responsibilities that we thought about. And then there's a lot of stuff that comes at you and then developing the judgment and the instinct or spidey sense around this thing seems important, but it's actually not that big a deal. And this little thing that just was some offhand comment somewhere is actually a string I need to pull on. And I think some of that comes with time. And your 80% comment is important because no one gets all the decisions, right? When you look at what successful decision making looks like or sort of common failures in decision making, often one is just not making a decision or starting letting things happen to you. And so there's a whole bunch of. There are a whole bunch of things that are important about making good decisions in general. But then I think more important is like, how do you make good decisions? Or how do you put yourself in, or how do you train yourself to be good at that? Because a lot of what I have experience with now I didn't have experience with 10 years ago. So it's really more that how do you train yourself? Because no one does that training for you. And that training happens on the job. So first, that's important to know because it can be intimidating when you start, because especially every year or two in a lot of what you learn is that you don't even know what you don't know. Or as soon as you start to discover that, like, shine a light on that, you're like, oh, my God. There's so many different things that I need to. That my company and I need to be on top of. And it can be overwhelming. And so just realizing that that's normal. No one comes out of the womb as CEO. It's a learned role or learned job. It's not something that you're born knowing how to do. Or there's not this other super class of entrepreneurs that just have it all figured out. Everybody, by definition, is a CEO for the first time at some point. So I think going into that mindset is pretty important because otherwise you'll. You won't even try, or you'll get totally overwhelmed, which is not helpful. So then the question is like, well, how do you train yourself to do that? Like, what does that look like? How do you learn? And a big part of your job as a startup founder needs to be the way I think it is about is how do you keep your. Your learning curve or your growth curve out of the company's growth curve. A lot of your job throughout will be, there's going to be a lot of stuff that comes at you, and you have to be right and you have to be fast and write more often than wrong about a lot of different things. And so I found a few things valuable. First, just thinking about it that way, it's like, all right, well, how do. How do I make sure that I'm. What does that mean? How would I do that? One question I like to ask myself is, okay, a year from now, two years from now, Five years from now, what do I wish I had been learning today? Or what will I wish I had been learning today? And usually the answers will be pretty different on different timescales. So when you're. I Remember back in 11 years ago, we just raised a seed round, we had a prototype and we're about to raise our first round of funding. And that list of like, what, what do I need to do in one year, two year, five years would be very different. Right. So one year would be like, all right, we have a prototype but we have no users. We need to figure out how to get users right. You know, and then five years they're like, how to become a good executive, how to become a good manager, how do we become a good leader, how to become a good public speaker. There's a to do list that of like pretty heavy things that fortunately you have time before you really need to be great at them. And you can actually improve a lot in five years. You probably can't. It's sort of like learning an instrument. A lot of these skills first, most of them are trainable. You're probably not going to be great at guitar in three weeks, but you can probably make a lot of progress in three years. So thinking about trying to answer that question and then through me it's been reading, it's been having other founders in a community of folks who are one year, two years, five years ahead or at the same place, you'll learn different things from each and so developing a strategy for learning which we can talk more about.
- [09:12]
Interviewer
Yeah, because when I think about founders that I've seen that are really successful, a lot of the times they've just been able to out learn everyone, that sort of really comes down to, of course they've got an incredible team, great product, all those other things, but with the CEO leading the company, they've been able to out learn. So I'd really, yeah, I'd love to dive a little bit deeper on that. Like obviously, you know, being at Y Combinator and having that network has been incredible for, you know, meeting founders that are a few years ahead of you. Do you think that that is a must for being able to out learn or.
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Drew Houston
I think it helps a lot because there's, there's, there's a part of the learning that, that you have to do yourself and it's, and it's a set of actions that you take. And then second is the environment you put yourself in. And so, and I think you have to, you have to take care of both. So for Me, the environment was really important. So going back even to college, a lot of the first employees that worked at Dropbox were some of our fellow students at mit. And you know, Arash, my co founder and I, he hadn't. He dropped out of school to do this, which is a whole other story. But he was about to be a senior. But I met him through another friend of mine who I met in the entrepreneurs club at mit. And if I hadn't had that relationship, things would obviously have been very different. And so there's that network of people that have similar goals as you, who inspire you, kind of friendly competition. A lot of what got me interested in Y Combinator is one of my best friends, who is another classmate at mit, got into Y Combinator and I had been rejected a couple years before. I was accepted the second time around, but the first letter from them was a rejection letter. So. But that kind of environment of choosing your peers, like being intentional about it, not just letting, not just having to be the random people around you and then certainly moving to Silicon Valley, being in Y Combinator, it gives you a community of founders who are going through similar things. And then if you're in some kind of hub for startups and there's. You have role models and people that especially as you make progress on your business and if you do, if you do interesting things, then you get access to interesting people, which is helpful in a bunch of ways. But I think being thoughtful about designing your environment is as important as a lot of the skills of how do I learn. But those skills are important too.
- [11:47]
Interviewer
Interesting. So I'd like to switch gears and talk about yesterday's announcement. So, yeah, for those that are not familiar with the new vision and mission, I'd love to hear kind of what the kind of switch is.
- [12:02]
Drew Houston
Yeah, well, yesterday we introduced Dropbox Spaces. And Spaces is part of a bigger evolution we've been on that really started with our customers and realizing that the experience of using technology at work has become incredibly fragmented and distracting. And a lot of the tools we're using that you think would be helping us focus have unintentionally made it impossible to focus. And that's a problem if you need to use your brain at work, because your brain works best when you can focus. Um, and so that was the higher level problem. But then with Spaces, what we wanted to do is like, well, if, how do we fix this environment? How, how do we make it less fragmented, how do we make it less distracting? Um, you know, how do we take people out of a Hundred different tabs and all these things blinking at you all day and all these different apps that don't work together. And how do we evolve Dropbox into the app that makes all your other apps work better together? Because certainly we saw our customers having this problem, but we're all living this right, because it's very different from 20 years ago when we got five emails a day, not 500. Maybe you're just using Office and that was fine, but now you're using Office, Angie Suite and Slack and Zoom and Dropbox and all kinds of stuff. So what we saw people doing with Dropbox was not just. They didn't see it just as a place for your stuff or just a folder on your desktop. It's the place you're going to work. And so when we thought about it that way, we realized we would have designed, made a bunch of different decisions and realized that Dropbox actually really well positioned to help people focus at work. So what does Spaces do? Well, it's a more organized. It's an evolution of the shared folder and moves it beyond being a folder full of files to an intelligent team workspace for any kind of cloud content. And so two big advantages. One is moving beyond files. So certainly a lot of teams need to collaborate around files, but all of us need to. We use a lot of other things too, right? We're using Google Docs, airtables, Figma Docs, Dropbox Paper, all kinds of stuff. There's never really been a great way to organize all that in one place because you can go to Dropbox or you can go to Google Docs, but then you have two search boxes or 10 search boxes. And we saw a big opportunity to pull out it all together. So you can still have your PowerPoints and PDFs, but they can be next to your Google Docs and Be and Trello Boards and whatever else you have. Give you one space, not 10. The second is turning it in, turning Dropbox into more of a workspace. So when we watch, when you look at how people, how Dropbox has worked since the beginning on your computer, the interface is the operating system. And that's in many ways what people love about it. It's just in the background, just works. And so there's a seamlessness that's really good. But then there are a lot of limitations because if you look at the experience of the finder or just your operating system in general, that user experience hasn't really changed since or basically looks the same as the early 80s when it was first introduced on the original Mac, Right. And it's a list of files and folders, stuff starting with a. There. It's the single player static experience that was perfect for when our whole life fit on a couple of floppy disks and computers weren't networked. Like, that's where that experience was born, and it hasn't kept up. So when we looked at that, we're like, if you were to redesign this for 2019, you'd make a bunch of obvious changes. You would certainly. You want to be able to have the content, and you'd want to have files and any kind of cloud content, but then you'd want to have people, and you want to have activity, and you want to be able to comment on things and see what's been happening. You want to organize by all the projects you're working on. You want to be able to see your calendar and slack you from the app, or start a zoom meeting with you from the app. These are all things you can do with Dropbox Spaces. So that in conjunction with a new foreground desktop app, what we call the new Dropbox, which we announced in June, is version one of building this Smarter Workspace. Because a lot of that environment right now is really. And there's a lot of room for improvement.
- [16:23]
Interviewer
Yeah, no, it's. It's super cool. I was really excited to see, you know, what you guys are doing, but I was. I'd love to dig into the strategy there because, you know, you guys are one of the category kings in, you know, storage and files. Right. And in some cases, you would think, okay, well, you know, you guys do acquisitions, like HelloSign, it's another tool that we use. We pay for, like, 100 different SaaS tools, right? So many different tools. There's too many tools. And I agree with you. But I'm curious why the. Like, I think it's really interesting how you guys have decided instead of, you know, maybe building your own tools, just bolting them on. Like, you've got this incredible brand and hundreds of millions of users. Why not just bolt on these different tools, like a project management tool, like a messaging tool. Sure. But you guys have gone the other way, and you're integrating them all, so it's all seamless. And I'm curious, like, yeah, why did you choose that strategy? Because, yeah, you would think if you've got this brand, you would try and just bolt on another tool and try and become a category king and say, yeah, let's not use Slack. Let's use our tool. Right.
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Drew Houston
Well, it starts with the Customer. It's like, what problems do they need solved? And because a lot of these other problems are either solved or are in the process of solving themselves. And we learned this lesson the hard way in some ways early on, because in the beginning, Dropbox was a place for your stuff, and that's how a lot of people used it. But then a few years ago, we found that people were using it for photo sharing, using it to back up their phone, using it to collaborate at work. And these are very different customers, very different use cases, and really needed very different products. And so we found ourselves spread pretty thin, and we realized that our market was evolving, so our products needed to evolve. And you need to be thoughtful about how you do that. And you need to figure out, where is your company really going to contribute and have an advantage. Because we had a ton of advantages in the beginning because we were the first to scale with this market of cloud storage. But then that evolved, and then the most valuable part of that became an even bigger part of. Became an even bigger market than cloud storage, which was FileSync and share, where the ability to collaborate around files. And we realized that if we just tried to stay a cloud storage company, that was going to be a bad place to be because of fairly obvious things like, are we going to compete with the iPhone to back up your iPhone? Like, how's that going to go?
- [18:53]
Interviewer
Right?
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Drew Houston
And then in photo sharing, a bunch of companies working on that. But we saw three, four, five years ago, the problems that really weren't solving themselves were a lot of the stuff we've been talking about, which is the tools that you'd think would be designed to help knowledge workers use their brains, are inadvertently creating all this busy work and friction, making it impossible to focus. I found that personally just fascinating. I experienced it myself, and I'm like, there's a big opportunity here. So the strategy has been to think about, all right, yeah, we could bolt on a bunch of stuff. A lot of tech companies do that. That bundling strategy makes it is often very successful. But in our case, we didn't want to just duplicate, just build another thing that was like everybody else's thing when there were all these other obvious problems like the one that we've been talking about, which is like, all right, now I've got this new problem that didn't exist 20 years ago, which is, how do I organize my working life across all these different ecosystems and tools? Because I'm not going to make the tools go away, because they're great. The tools themselves are great. But they're just missing a connective tissue. They're not part of a smart system. The problem isn't the tool, it's the workspace. Our workspace is. No one's designing it, it's just sort of happening. So that element of focus on just getting back to fundamentals. Who's our customer? What do they need? Who else is trying to solve this problem? Why are we better getting really. As your company scales, you have to get really explicit about those things when you could kind of wing it before. And that's like, those are really important questions to get right.
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Interviewer
Interesting. Because. Yeah. As your company grows, you want to expand the business model and try and have that S curve. Right. And because products come and go. Right. And you want to be able to ride that. So sometimes it can be too late and you can get left behind or sometimes, which often is the case, founders get, I guess they experience entrepreneurial add and I want to create something new because it's fun. How do you know? Like, like, because we talk about focus and this is the kind of the theme. How do you know when it's time to kind of launch a new product or a new service or another way you can help your users?
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Drew Houston
We talk about learning first is having a good understanding about markets work and realizing that whatever your particular business situation is, it's very unlikely that you're the first company to ever experience it. And sometimes, especially in Silicon Valley, there can be this exceptionalism. It's all different this time or my. We're a tech company, so rules don't apply to us anymore. And sometimes there are ways in which that's true. But more often, what you. What you're experiencing is pretty. Has been seen many times in business, or at least rhymes with many. If it's not the exact situation, you can draw a lot of analogies. And so studying business, business history, studying markets has been really helpful to me. And one of the things that caused me to get clear on strategy was not actually reading about tech. I was reading this book, Playing to Win by AG Lafley and Roger Martin. And what was interesting about it to me is it's a strategy book, but it's about Procter and Gamble. I thought it was interesting because I'm like, well, if we think what people say, Dropbox is getting commoditized or whatever. And I think there are important ways that were wrong about that, but they're right about parts of our business. But anyway, if we think we're dealing with commodity elements of business, try selling paper towels Right, Yeah. How does that work? And the way it works is getting really specific about what I just said about getting really specific about who's your customer, where are you going to play? Like, what markets can you be number one in? How you going to win, how's your playbook different from your competitors? A lot of that came from that book and books like it and connecting the dots between about how strategy works in general. So that was kind of the learning progression for us. Like we sort of built this product. We knew we were solving an important problem and our timing was great because the public cloud came along literally a year before we founded the company. The iPhone launched the year we founded the company. Suddenly this went from a very like file syncing and cloud storage went from this very niche thing to something that everybody needed almost overnight. And that wasn't up to us. So, and, and, and you think about and so understanding the strategic questions, understanding those S curve, that kind of S curve thinking. And in our case, our S curve, our initial S curve was cloud storage.
- [23:55]
Nathan Chandler
Yep.
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Drew Houston
Then we sort of rode that wave. And now to get on another wave which is filing and share. And as that that market is reaching relative maturity, although there still ton of opportunity there, we're like, actually this is all going to be part of this smart workspace, which is going to be an even bigger opportunity than that, which is similar. You imagine Apple, right. They start with the ipod, then the ipod gets kind of subsumed in the iPhone or the office suites, the word processor, spreadsheet, presentation software. Those used to be separate categories. Then they came together in the office suite. That was a new category. So understanding categories now they evolve is really important. And then you're like, well, how do you know how much to spread your wings or focus? Like, that's a huge challenge for any founder at any scale. You have to have a portfolio. Once you're at a certain point in the beginning, you have to have one idea, you focus, do one thing. But when you need to, after your, if your existing category is starting to mature, then you need to start thinking about a portfolio approach where most of your investment is going to be in the core business because that's going to deliver the results that's going to fund all the other stuff. And so you need to, especially as CEO, one of your jobs has to be is, how do I allocate resources between planting and harvesting yield in the future, like future versus yield in the present. Because if you're all harvest, no plant, you have one problem. If you're all plant, no Harvest, you have another problem. And if you have to pick one, you have to pick. You have to drive the core business. Cause otherwise you won't. You can't fund anything else. So there's a long answer, but that's an important series of questions. So you have to have some investments in the core business. You have to some things that are smaller scale that you want, that will be part of tomorrow's core business. And then you have a bunch of speculative bets. And so to use an analogy, you have your trees, saplings and seeds, and it's not that one is better than the other. You just need all of them. And you're going to proportionally put more of your investment in the core, but make sure that each thing is graduating to the next stage.
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Interviewer
Yeah, makes sense. Yeah. And I think it's really smart, like what you guys are doing and the strategy with spaces, and it all makes sense. So, look, we have to work towards wrapping up. Right, Sorry. I really enjoy this conversation. So, one last question, and I'm just curious with all. Everything that you've accomplished. I guess as founders, we always tell ourselves, like, if we can get to this, it'll be amazing. And we tell ourselves this story and it's like when we hit this, it's going to be amazing. And then you hit it, and then what's the next thing? I'm curious, at this point of your growth as a CEO and a founder, can you have it all? And do you still have that going through your mind? Like, I hope I can't wait till we get to this. Is this what you're going through now with the new.
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Drew Houston
Well, it's an interesting journey. I mean, I think some of the big. We've been through a lot of cycles where a lot of the stuff we've done has been very successful. And we've had periods where a lot of people were wondering what we were doing. I think what I've learned is stuff that's pretty obvious, but it's really important that people say, get passionate about what you do. Okay. But I think you need to kind of be obsessed. And so I think one of the most important things you need to figure out is what can you get obsessed with and figure out what's your playbook as an entrepreneur? And you're not really going to know until you start. But for me, I've realized my playbook at this point is get really frustrated about something, want to solve it permanently. Yeah. That's not necessarily other people's playbook. And I can't stand Carrying my thumb drive. This is dumb. We should all live in the cloud. Why is it not like this? There are no good answers. Okay, let's just do it. And then three, four, five years ago, similar kind of thing. I'm like, I've kind of collected all the merit badges that I want for in startup land. Like, what am I doing? And it's great the stuff that we're doing with files, but there's so many more bigger challenges in the world. And then realizing that, well, I talked to this engineering director at SpaceX who was literally working on a Mars landing, and I'm like, this is really amazing. How does that work? What tools do you use? How do you all work together? And he looked at me like I had three heads. He's like, what are you talking about? And I was like, what's it going to take to put some on Mars? And the answer was basically a lot of emails and a lot of files. And I realized that every. Whether it's Mars landing or sustainable energy, climate change, healthcare, educate, any big thing, big cause you care about depends on organizing groups of knowledge workers and basically getting them to be able to use your brains. And when I talk to him and anyone else I talk to, like, the struggles of a rocket scientist are the struggles of an everyday knowledge worker. Like, all these things and distraction can't focus. And so I realized, like, wait, we're only as good as our tools and the tools are getting in the way when they should be helping us. And I'm experiencing this as just in my own professional life. I'm like, can't. Running around all the time, like meetings all day, inbox all night and. But I'm like, I'm not actually using my brain, like, what's up with that? And got super frustrated. I'm like, I want to fix that problem permanently. And so just I got obsessed with that problem where, like, if you have a big organization that can often have a lot of smart people, but the company makes some questionable decisions or build stuff that doesn't make sense. And I got fascinated with that. And I was. I also had the chance to watch some of my friends who kind of reached the finish line, went on the beach, had a blast for like two months, and then they started having these existential crises, like, what am I doing with my life? They weren't happy, actually. And I realized the happiest people around me were the ones who really could were working on something that they really cared about. I think this is a lesson you just have to keep relearning and, you know, my first company, I really love the idea of being a founder. I really love photoshopping business cards. That's in founder on them. But I was doing test prep and helping kids get into college, and there's nothing wrong with that. But I was like, if all my dreams come true, I'm going to be the king of, like, standardized test prep. And I'm like, I don't know if that's really what I. Again, nothing wrong with that. But, like, I think it was like, other stuff that I'm probably more passionate about and kind of burned out and. And that led me on a meandering path to forgetting my thumb drive and kind of becoming obsessed with Dropbox. So I think a lot of these things are. The fundamentals are kind of basic, but there are lessons you have to keep relearning, even if you've been through it before.
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Interviewer
So can you have it all?
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Drew Houston
No, of course not. You. I think the other thing, the last thing that is really important is there's this quote. I think it's Ray Dalio. He might have gotten it from somewhere else, but he's like, you can have anything you want. You just can't have everything you want. And that sounds. That's like obvious. But if you think about it, it's like, then it means trade offs, right? So I love what I do. But yeah, there are a lot of things and I don't love every moment. It's a lot of responsibility, right. And there's just a lot of stuff that comes at you that you have to deal with. And, you know, and by choosing one thing, you're saying no to a lot of other things. But when you also realize that it's your choice, it's not a burden you carry, it's a choice you're making that's important. Because if you're like, oh, this is such a pain and it's happening to me, and I know you're basically saying, I have no control over this, I'm helpless, I'm a victim, and that's a recipe for burnout and resentment and all kinds of bad stuff. But if instead you're like, no, no, no, I'm choosing to do this because, like, look at this future state that the world. Look at the way the world should be, and it's not happening by itself. Like, I actually need to put a dent in that problem, and I choose to do that. And I choose to have this. And look at all this awesome stuff I have. And yeah, there's this. The parts of my job or whatever that aren't as great, but it's my choice. Then you have agency and it's true like you're making these choices. But I think that's really important because then that carries you through. One of your biggest risks can be burnout and getting exhausting giving up and so figuring out how to manage your own psychology prevent that from happening. No one's going to do that for you. And so mindset and having a healthy mindset around these things is. Is really critical.
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Interviewer
Yeah, I agree. Well, look, we have to work towards wrapping up. Thanks so much, Drew. Really enjoyed our conversation.
- [33:00]
Drew Houston
Thanks for having me.
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Interviewer
You're welcome. Thank you.
- [33:02]
Nathan Chandler
Hey guys. I hope you enjoyed this episode. As a parting message, I want to express how thankful I am to you for being on this journey with me. So if you've been inspired by this podcast and have taken action, please reach out to support founder.com f o n d r.com we'd love to hear from.