
Box CEO Aaron Levie | Breakthrough Innovation: Evolving into a Digital-First Business
Greymatter
The Rise and Fall of Box
When you started the company, we didn't make a distinction between consumer and enterprise. We were just focused on individuals. And so even in the initial business plan, we talked about professionals and small businesses using our product. Eventually, we made the decision that you did have to make that distinction. It was probably like a few million dollars in revenue, five million revenue a year of 10 million a revenue year somewhere in that kind of ballpark.
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Speaker 2
I am despite the joshing old enough to remember working with thumbtribes and FPP and Blackberries as a professional. So you have some street cred? Yes, definitely. Well, like fast forward a little bit. You guys started as a more consumer oriented business and then I think it was maybe 07, like right before the financial crisis, you were moving into the B2B business. Is that right? That's right. Can you talk a little bit about that? Like what box looks like then and what it felt like later?
Speaker 1
Yeah, you know, it's interesting. When we started the company, we didn't make a distinction between consumer and enterprise. We were just focused on individuals. And so even in the initial business plan, we talked about professionals and small businesses and teams would use our product. And we never really felt like you had to make this distinction between the personal use case and the enterprise use case. Eventually, we made the decision that you did have to make that distinction. But when we started the company, it was really to solve individual problems with being able to access their data. And what happened was one of our early investors, Josh Stein basically said, you know, hey, you have this business model where you're doing all of this work to get $2.99 from a consumer. And they're just churning away and they're going to get free offerings from Google and Microsoft and Apple and Facebook and Yahoo and all these other companies. Alternatively, if you went after the enterprise, you might get, you know, $1,000 or $5,000 or $100,000 from enterprises. And those companies are trying to move off of legacy software that was not working for them, that was way too complicated where there wasn't as much competition. And so we basically studied both markets and we looked at, okay, what was the onslaught of competition that we had in the consumer space and it was massive. And basically the big tech giants would be able to give away free unlimited storage for everybody. And because you could sell advertising or you could sell devices or subscription to other services. And then you looked at the enterprise market and you had companies that had been around for a decade or two decades that were just, just basically totally extracting profit out of their customer base. They weren't innovating. It was really hard to install is very cumbersome. People hated using the technology. And these were these sort of legacy software products that were just really complicated. And so we said, okay, we think we could actually take that initial strategy of being very end user focus, very individual focus and apply it to the enterprise. So could you bring almost a consumer instinct to enterprise software where you built software that was simple, that was easy to use, that was virally adopted. But your business model was to go and sell to the corporate CIO or the IT organization and try and get, you know, money for every single, you know, per user inside of the organization. And that was the pivot we made in kind of 0708. Unfortunately, that came right at the time as the recession hit, which surprisingly was less dramatic than it could have been because we had very low revenue. And so there was still a tremendous amount
Speaker 2
of upside. Well, the
Speaker 1
business done. It was probably like a few million dollars in revenue, five million revenue a year of 10 million a revenue year somewhere in that kind of ballpark. And so we unfortunately did have to make some cuts early on very swiftly during the financial crisis. But within about a quarter or two, we actually started to see growth continue to maintain and ultimately looking back, we kind of know why that happened, which was people were still investing in infrastructure. They were still needing to move their businesses forward. They wanted to be able to bring modern technology to their enterprise. And then the thing that we got really, really lucky with was, and this is something that when people look back on 08 and 09, we sometimes conflate multiple events. Yes, there was an economic recession, but it also was at the same time when mobile took off massively. And so you had this economic recession combined with the growth of the iPhone and the iPad and Android and the early stages of cloud computing. So basically, what happened was for all of the economic headwinds facing businesses paying for software, you had this massive tailwind of a completely new way to work that was starting to emerge that basically made it impossible for legacy software to be able to serve customers. And the corollary to today's environment is obviously unbelievably high in terms of how similar this environment is.
Box CEO and co-founder Aaron Levie sat down with Greylock General Partner Sarah Guo on Greymatter to discuss his company’s journey during the past decade leading up to the Covid-19 pandemic, how it has changed their product roadmap, and where he believes the opportunities for innovation still lie. This episode is part of Greymatter's #WorkFromAnywhere series hosted by Greylock partners Sarah Guo and David Thacker.
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