Dropbox may be that install-and-forget application to many computer users who have too many devices and want to keep their files in sync. But to developer and founder Drew Houston, it wasn't always that way. In a feature interview with Forbes, Houston details how the company started with meager beginnings, and even recalls developers building code in their boxers because the A/C was out. He also shares a story in which the late Apple ex-CEO Steve Jobs personally approached him and partner Arash Ferdowsi for a nine-figure acquisition deal, saying Apple wants to integrate its work into iOS. However, Jobs said Dropbox was not actually a product, but just a feature.
Building On the Freemium Business Model
Fortunately for Dropbox, Houston declined. He was adamant at building a "big company," and it seems recent developments at Dropbox are helping the 20-something CEO achieve his dream. With a US$ 250 million fresh round of financing from Index Ventures, Sequoia, Greylock, Benchmark, Accel, Goldman Sachs and RIT Capital Partners, the five-year-old company with 50 million users is now valued at US$ 4 billion.
At this point, Dropbox has already been a success story, earning US$ 240 million per year, while keeping its "freemium" business model. In fact, 96% of Dropbox' 50 million users are non-paying customers. Only 4% pay the nominal monthly fee for excess usage, but the number of users has ballooned due to the Dropbox referral program that rewards users for referring friends and contacts. Even without new customers in 2012, Dropbox expects to double the number of customers upgrading to premium plans, due to increasing storage demand.
Dark Clouds Lining the Sky?
Even with this early success, Dropbox will need all the money and resources it can get. Competition has just become tougher, with Apple's recent release of iOS 5, the fifth-generation operating system that powers compatible iPhones, iPads and iPod Touch devices. iOS 5 has a built-in feature called iCloud, which synchronizes and backs up the device contents to the cloud. Then there are also other companies that offer the same services, such as Box.net, which itself raised US$ 81 million in venture capital recently.
Dropbox is not going to take iCloud's threat sitting down. The company will be using its beefed-up war chest to improve its feature set and ensure that the Dropbox brand and product becomes ubiquitous. That is, Houston plans Dropbox to be in every device as the default cloud storage and solution. Houston says he plans to have partnerships with smartphone and device manufacturers to embed Dropbox as a built-in feature. The technology can be integrated into televisions, cameras and even cars.
Integration With Everything
Dropbox has already signed a deal with HTC to have the software built into certain Android smartphone models, giving 5 GB of free cloud storage with HTC's Sense UI version 3.5. Sure, it's not as big a potential market as Apple's 222 million iPhone, iPad and iPod Touch users. But what Dropbox has is multi-platform capability -- it works on Mac OS X, Windows, Linux, iOS devices, Android devices, BlackBerry and the web. Dropbox also has API support for hundreds of applications that take advantage of file syncing and sharing via its cloud-based storage.
The four-billion dollar question now is whether Dropbox can stand up to the iCloud challenge.