How many of you have that little unfolding box icon on all your devices? Actually, well over 50 million of you who store more than a billion files on Dropbox servers every three days. It’s a simple but powerful concept. Founders Drew Houston and Arash Ferdowsi, former MIT students, want to solve the digital storage and file sharing problem for you, no matter which operating system or device you happen to be using—the value proposition is that simple. But making it simple for the customer takes a lot of work on the back end.
On any day of the week hundreds of millions of files are saved to Dropbox from about 18 different operating systems, four browsers, and three mobile systems. The tech gurus at the San Francisco-based company have to stay on top of any changes or updates that those software programs generate and make sure they’re immediately incorporated into Dropbox so users don’t experience any glitches. That’s no easy task.
The sign of a great product is that it solves a real problem completely—in other words, a total solution. Houston and Ferdowsi are convinced that’s what they have. In fact, in a famous meeting with Apple founder Steve Jobs (you can read about it in the November 7, 2011 Forbes article by Victoria Barret
) Jobs told Houston that Dropbox was a “feature, not a product,” and that he was going after their market (which he subsequently did with iCloud). At that moment Houston had visions of his company being the next MySpace or Yahoo, dropping like a stone after a temporary high. But that hasn’t happened so far.
Users seem to like Dropbox’s freemium business model. They get 2 GB of free storage and then can sign up for paid accounts of 50 GB and more (they now have a team account that can store up to 1 TB). For every person a user recommends who signs up with Dropbox, the referring user gets an extra 250 MB of storage. And the tactic works. Over a quarter of all users come to Dropbox through a referral, and that beats the $300 per user acquisition costs the company had been spending. Dropbox has become so much a part of users’ daily lives that they quickly run out of space and sign up for one of the paid accounts, starting at $10 a month.
Providing a total solution is just the first phase of their grand plan. Houston and Ferdowsi want to build an enduring company, something Steve Jobs would have appreciated. After all, Jobs hated all the flipper companies that Silicon Valley was producing. Houston and Ferdowsi are well aware that to get there they have to go through some pretty big competition—Google, Microsoft, and Apple, not to mention IDrive, YouSendIt, and Box.net. But it appears that they’re well on their way. With a couple hundred developers doing apps for Dropbox, they might just be able to pull it off.
Phil Libin, who doesn’t intend to exit his company, Houston and Ferdowsi may represent a new group of SV entrepreneurs who actually want to build enduring companies with simple, total solutions that solve real problems.