542: In Retrospect - How I Built Dropbox Into a $12B Unicorn | Drew Houston

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0:39Just head to omnisend.com forward slash founder without the E to get started. All right, now let's jump back into the show. 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 business.

1:21Drew'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 stories, learn the proven methods, and accelerate your growth and future through entrepreneurship. Welcome to the Founder Podcast with Nathan Chan. So the first question I ask everyone that comes on is, how did you get your job? 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 if it wasn't a bus ride I was 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 thumb 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 billions of dollars in annual revenue, hundreds of millions of users.

2:26You'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? Yeah, I think there's one thing that's been surprising about going through this process and meeting other people who've 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? Or like, who is this, 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.

3:11And it's a lot of, I mean, there are a lot of factors that go into making something work out. Some of those are outside your control. We've benefited from timing with Dropbox and so on. And true, the odds are stacked against having a company that goes public or 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.

3:59And it doesn't always look successful from the outside. 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, as a leader, a leader of this company, you have to make decisions every single day. You know, you talk, you see like, you know, people are the same out as a 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 how 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 percent of the time and I think that's a really critical thing well I'd give one answer today but I think there's also been a journey where that that answer would have been different along the way.

5:04And 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 company is 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.

5:44And 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, like, no one gets all the decisions right. When you look at what makes decisions, 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 things that are important about making good decisions in general.

6:21But then I think more important is like, how do you make good decisions? 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. um 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 uh 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 um things that i need to that that my company and i need to be on top of and it can be overwhelming.

7:16And 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 like 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, um, or you'll be, get totally overwhelmed, which is not helpful. Um, so then, then the question is like, well, how, how do you train yourself to do that? Like, what does that look like?

7:52How do you learn? Um, and a big part of your job as a startup founder needs to be had the way I think it is about is how do you keep your, your learning curve or your growth curve at other companies 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 right more often than wrong about a lot of different things. And so I've found a few things valuable. First, just thinking about it that way. It's like, 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 time scales so when you're I remember back in you know 11 years ago we just raised a seed round we had a prototype and we're about to raise our first round 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 it'd be like all all right, we have a prototype, but we have no users.

9:05We need to figure out how to get users, right? But then five years later, how to become a good executive, how to become a good manager, how to become a good leader, how to become a good public speaker. There's a to-do list of 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.

9:38So 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. Yeah, because, you know, when I think about, you know, founders that I've seen that are really successful, a lot of the times they've just been able to outlearn everyone. That sort of really comes down to. Of course, they've got an incredible team, great product, all those other things.

10:17But with the CEO leading the company, they've been able to outlearn. 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 outlearn or? I think it helps a lot because there's a part of the learning that you have to do yourself 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 take care of both. So for me, the environment was really important.

10:56So going back even to college, a lot of the first employees that worked at Dropbox were some of our fellow students at MIT. And Arash, my co-founder and I, 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.

11:42got 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. But that kind of environment of choosing your peers, like being intentional about it, not just having to be the random people around you. And then certainly moving to Silicon Valley, being in Y Combinator 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 um especially as you make progress on your business and if you do if you do interesting things then you get access to interesting people um which is helpful in a bunch of ways uh but i think being thoughtful about designing your environment is is as important as a lot of the skills of how do i learn and and but those those skills are important too interesting so i'd like to switch gears and talk about yesterday's announcement um so yeah for for those that are not familiar with uh the the new vision and mission i'd love to hear like kind of what the what their kind of switch is yeah well yesterday we introduced dropbox spaces and spaces is part of a bigger evolution we've been uh we've been on that that really started with our customers and realizing that the experience of using technology at work has become incredibly fragmented and distracting.

13:15And 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. and so that was a higher level problem but then with spaces what we wanted to do is like well if how do we fix this environment how do we make it less fragmented how do we make it less distracting um you know how do we take people out of 100 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 in it's very different from 20 years ago when we got five emails a day not 500 um 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 so many help the the 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.

14:30It'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 is actually really well positioned to help people focus their 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?

15:03We'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 Trello boards and whatever else you have, give you one space, not 10. The second is turning Dropbox into more of a workspace. So when you look at how Dropbox has worked since the beginning on your computer, the interface is the operating system.

15:44And that's in many ways what people love about it. It's just in the background, it 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. And it's a list of files and folders, There was stuff starting with A. 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.

16:23That'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. Certainly, you'd want to be able to have the content, and you'd want to have files and any kind of cloud content, but then you want to have people and you want to have activity. 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.

16:52These 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, there's a lot of room for improvement. Are you hesitating to take the next step in your e-commerce journey? Founder Plus has you covered. With proven frameworks tailored to your business needs for fast results, a supportive community of over 30 ,000 like-minded entrepreneurs and weekly live mentorship sessions, Founder Plus is your key to success.

17:28Try Founder Plus today for just$1 for seven days and start building your dream business with confidence. You can visit founder.com forward slash start dollar trial or click the link in the description to claim your trial. Yeah, no, it's super cool. I was really excited to see what you guys are doing. But I'd love to dig into the strategy there because you guys are one of the category kings in storage and files, right? And in some cases, you would think, okay, well, you guys do acquisitions like HelloSign. It's another tool that we use. we pay for like 100 different SaaS tools at the company, right?

18:06So 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 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, why did you choose that strategy? Because 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.

18:47Let's use our tool. Right. Well, it starts with the customer. So what problems do they need solved? And because a lot of these other problems are either solved or sort of 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.

19:27and 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 market than cloud storage which was file sync and share or the ability to collaborate on my 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.

20:05Like, are we going to compete with the iPhone to back up your iPhone? Like, how's that going to go? But then in photo sharing, a bunch of companies working on that. But we saw three, four, five years ago, So 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.

20:45So 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 duplicate just build another thing that was like everybody else's thing when there were all these other obvious problems like where like the one I just 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.

21:20The 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 just get really explicit about those things when you could kind of wing it before and and that's like those are really important questions to get right interesting because yeah as your company grows you want to you know you know expand the business model and and try and you know have that s curve right and and and you know because products come and go, right?

22:11And 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 they want to create something new because it's fun. How do you know? Because we talk about focus and this is 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? 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.

22:56And sometimes, especially in the Silicon Valley, there can be kind of this exceptionalism. It's like, oh, it's all different this time. Or my, you know, we're a tech company, so the rules don't apply to us anymore. And sometimes there are ways in which that's true. But more often, what you're experiencing 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.

23:37It was reading this book, Playing to Win, by A.G. Lafley and Roger Martin. And what was interesting about it to me is, it's a strategy book, but it's about Procter & Gamble. I thought it was interesting because I'm like, well, if we think, when people say Dropbox is getting commoditized or whatever, and I think there are important ways that are 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? Yeah. 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?

24:18Like what markets can you be number one in? How are 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 about how strategy works in general. all. So that was kind of the learning progression for us. Like we just 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.

25:00And that wasn't up to us. And so understanding the strategic questions, understanding that kind of S-curve thinking, and in our case, our initial S-curve was cloud storage. Yep. Then we sort of rode that wave and had to get on another wave, which is file, sync, and share. And that market is reaching relative maturity, although there's still a 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.

25:43Those used to be separate categories. Then they came together in the Office Suite. That was a new category. So understanding categories, now they evolve. It's 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 just 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 one of the especially a ceo one of the your jobs has to be is how do i allocate resources between like planting and harvesting right um 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 because otherwise you can't fund anything else.

26:50So it's a long answer, but it's an important series of questions. So you have to have some investments in the core business. You have to have 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. 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.

27:30So look, we have to work towards wrapping up, right? Sorry, I really enjoyed this conversation. So one last question, and I'm just curious with, you know, all that, 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, like, at this point of your growth as a CEO and a founder, can you have it all? and and do you still have that going through your mind like i hope i can't wait till we get to this this is what you're going through now with with the new 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 is is stuff that's pretty obvious um but it's really important that People say get passionate about what you do, okay?

28:36But 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. 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. that's not necessarily other people's playbook but I'm like 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

29:25and it's great the stuff that we're doing with files but there's so many more like 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. Like, 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, you know, 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, health care, any big thing, big cause you care about depends on organizing groups and knowledge workers and basically getting them to be able to use your brains.

30:15And when I talked to him and anyone else I talked to, the struggles of a rocket scientist are the struggles of an everyday knowledge worker. Like all these things and distractions 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, I'm running around all the time, like meetings all day, inbox all night. And it, but I'm like, I'm not actually using my brain. Like, what's up with that? I got super frustrated. I'm like, I want to fix that problem permanently.