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Dropbox: Building Business Through Lean Startup Principles

Vishal Kumar
Vishal Kumar
Vishal KumarEntrepreneur, Innovator, Author & Mentor

A Deck by Drew Houston from Dropbox explaining how Dropbox incorporated Lean Startup Principles in building their company. A great primer on how dropbox executed their startup.

Dropbox: Building Business Through Lean Startup Principles

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Startup Lessons Learned

     Drew Houston
     @drewhouston
Background
• Cofounder & CEO, Dropbox
• Earlier: MIT comp sci (‘05), started
  online SAT prep co, engineer @ startups


• Easiest way to share files across
  computers & with other people
• Founded in ‘07, launched Sep ’08
• Sequoia & Accel-backed startup in SF
• Millions of users, rapidly growing
Some context
• 100,000  many millions of users in 18
  months since launch
• No advertising spend
• Hostile environment: lots of competitors,
  software download
• Mostly done by engineers w/ some guidance
  but no prior marketing experience
How we applied lean startup
    principles at Dropbox

(sometimes on purpose, sometimes by accident)
When to Launch?


 Paul Graham:        Joel Spolsky:
Early and often     When it doesn’t
                    completely suck
                  (avoid “Marimba Phenomenon”)
2006: Dozens and dozens of
2006: Dozens and dozens of
  cloud storage companies
  cloud storage companies
Ad

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Dropbox: Building Business Through Lean Startup Principles

  • 1. Startup Lessons Learned Drew Houston @drewhouston
  • 2. Background • Cofounder & CEO, Dropbox • Earlier: MIT comp sci (‘05), started online SAT prep co, engineer @ startups • Easiest way to share files across computers & with other people • Founded in ‘07, launched Sep ’08 • Sequoia & Accel-backed startup in SF • Millions of users, rapidly growing
  • 3. Some context • 100,000  many millions of users in 18 months since launch • No advertising spend • Hostile environment: lots of competitors, software download • Mostly done by engineers w/ some guidance but no prior marketing experience
  • 4. How we applied lean startup principles at Dropbox (sometimes on purpose, sometimes by accident)
  • 5. When to Launch? Paul Graham: Joel Spolsky: Early and often When it doesn’t completely suck (avoid “Marimba Phenomenon”)
  • 6. 2006: Dozens and dozens of 2006: Dozens and dozens of cloud storage companies cloud storage companies
  • 7. VC: “There are a million cloud storage startups!” Drew: “Do you use any of them?” VC: “No” Drew: “…”
  • 8. Building a bulletproof, scalable, cross-platform cloud storage architecture is hard
  • 9. From competitor’s support forum: "[product] ended up turning all my Word docs and half my Excel Spreadsheets into 0 byte files. Needless to say, I am not happy."
  • 11. Dropbox’s minimum viable product: Dropbox’s minimum viable product: 3 min screencast on Hacker News (Apr 07): 3 min screencast on Hacker News (Apr 07): Lots of immediate, high-quality feedback Lots of immediate, high-quality feedback
  • 12. Simple landing page: capture interest/email Simple landing page: capture interest/email address address
  • 13. Private beta launch video  12,000 diggs; Private beta launch video  12,000 diggs; beta waiting list jumps from 5,000 to 75,000 in beta waiting list jumps from 5,000 to 75,000 in one day (Mar 2008) one day (Mar 2008)
  • 14. What we learned • Biggest risk: making something no one wants • Not launching  painful, but not learning  fatal • Put something in users hands (doesn’t have to be code) and get real feedback ASAP • Know where your target audience hangs out & speak to them in an authentic way
  • 15. When “best practices” aren’t best
  • 16. Public launch (Sep 2008): Time to get real Public launch (Sep 2008): Time to get real
  • 17. Public launch (Sep 2008): Time to get real Public launch (Sep 2008): Time to get real Our Web 2.0 Marketing Plan Our Web 2.0 Marketing Plan •• Big launch at TechCrunch50 Big launch at TechCrunch50 •• Buy some AdWords Buy some AdWords •• Hire, um, a PR firm, or a VP of Marketing, or Hire, um, a PR firm, or a VP of Marketing, or something something
  • 18. Experiment: Paid search • Hired experienced SEM & affiliate marketing guy ($$) • Picked out keywords, made landing pages • Hid the free account option for people arriving via paid search, replace with free time-limited trial • Went live in early 2009
  • 19. Cost per acquisition: $233-$388 Cost per acquisition: $233-$388
  • 20. Cost per acquisition: $233-$388 Cost per acquisition: $233-$388 For a $99 product. Fail. For a $99 product. Fail.
  • 21. Experiments failing left and right • Problem: Most obvious keywords bidded way up – Probably by other venture-backed startups • Problem: Long tail had little volume • Problem: Hiding free option was shady, confusing, buggy • Affiliate program, display ads, etc sucked too • Economics totally broken
  • 22. But we were still doing well…? • Reached 1mm users 7 months after launch • Beloved by our community
  • 23. What we learned • Lots of pressure (or guilt) to do things the traditional way. But think first principles • Fortunately, we spent almost all our effort on making an elegant, simple product that “just works” and making users happy • And we worked our asses off • And hired the smartest people we knew • “Keep the main thing the main thing”
  • 24. What we learned • Mostly ignored (or woefully mishandled): – hiring non-engineers – mainstream PR – traditional messaging/positioning – deadlines, process, “best practices” – having a “real” website – partnerships/bizdev – having lots of features • Product-market fit cures many sins of management
  • 25. Fourteen Months to the Epiphany
  • 26. Why were conventional techniques failing, yet we were still succeeding?
  • 27. AdWords wasn’t the problem • Nobody wakes up in the morning wishing they didn’t have to carry a USB drive, email themselves, etc. • Similar things existed, but people weren’t actively looking for what we were making • Display ads, landing pages ineffective • Search is a way to harvest demand, not create it
  • 29. Steve Blank & Market Type •Existing Market •Resegmented Market •New Market •Marketing tactics for one market type fail horribly in others
  • 30. New strategy: encourage WOM, viral • Give users better tools to spread the love • Referral program w/ 2-sided incentive permanently increased signups by 60% (!!) – Inspired by PayPal $5 signup bonus • Help from Sean Ellis: Surveys, split tests, landing page/signup flow optimizations, encourage sharing  big wins • Big investment in analytics
  • 31. Trailing 30 days (Apr 2010) :: users sent Trailing 30 days (Apr 2010) users sent 2.8 million direct referral invites 2.8 million direct referral invites
  • 32. Results • September 2008: 100,000 registered users • January 2010 (15 mos later): 4,000,000 • Mostly from word-of-mouth and viral: – 35% of daily signups from referral program – 20% from shared folders, other viral features • Sustained 15-20%+ month-over-month growth since launch
  • 33. Wrapping up • Learn early, learn often • Best practices aren’t always best • Know your market type & how your product fits into your user’s life

Editor's Notes

  1. Unusual aspects
  2. A few examples/stories
  3. As a founder lots of questions
  4. Back in 2006 the cloud storage market was insane
  5. Investor meetings had an interesting pattern
  6. (as I spent the bulk of my 20s discovering) This is not your typical rails app that you can bang out in a weekend.
  7. One thing I ran into over and over again was products that half worked. I promise you, if they did, I wouldn’t be here, I would be using that instead. But these were the guys who launched early. And now most of them are dead, not because of Dropbox but largely by self inflicted wounds.
  8. So, launching early and joining the pigpile of halfassed storage products was not terribly appealing
  9. So shipping code was out of the question YC app – ship in 8 wks vs 18 mos Prototype worked; video could show product in best light; get much of the same feedback as if we shipped working code
  10. YC’s motto
  11. As engineers
  12. We ran a bunch of experiments; adwords example -- everybody else is doing it
  13. - SEM is an example, but others – guilt to do what everyone else is doing -- to hire a product person, or a VP of whatever, or make an analytics dashboard, or a PR firm, etc. Often these are great things to do but that’s not a license to blindly do them
  14. To do something well in general you’ll be doing something else poorly