Drew Houston took the stage at SXSW looking like a typical 29-year-old: jeans, a hoodie, sneakers. But the unassuming is Houston is hardly typical—he's the CEO and founder of Dropbox, an online storage company valued at about $4 billion he created in 2007.
In October 2011, the company landed a staggering $250 million round of Series B financing, led by Index Ventures and a host of top-tier firms, such as Benchmark Capital, Greylock Partners, and Institutional Venture Partners. And with about 50 million users, the site is showing some serious hockey-stick growth.
In a conversation with Kara Swisher, the tech journalist and editor of AllThingsD, Houston (which is pronounced "How-stun") explained how to fend off potential suitors, grow your company, and find hidden opportunities.
1. Found the right co-founder.
Venture capitalists tend to talk (ad nauseum) about the value of "team." For Houston, it's been no different: finding his co-founder, Arash Ferdowsi was part of the key to his success.
But in the beginning, Houston didn't even plan to have a co-founder. In fact, it wasn't until Paul Graham, who runs Y-combinator, a start-up accelerator program Houston applied to, told Houston he needed a partner.
Graham insisted on "arranged marriage," Houston said, adding that Graham told him that "we're not going to fund you unless you had a co-founder."
"They felt that companies that had teams outperformed companies that had one founder," Houston said.
Through a mutual friend, Houston connected with Arash, who was attending MIT (where Houston had recently graduated).
"We got introduced over email and hung out in the student lounge," Houston recalled. "Of course after two hours we agreed to basically spend the rest of our lives together."
2. Solve a problem people don't even know they had.
Two questions that comes up in every early-stage VC pitch meetings are these: "What problem does your company solve, and how big of a problem is it?"
What's particularly noteworthy about Dropbox is that the company solved a problem people didn't even know they had.
"There was no market for this," Houston said. "No one was searching for it. People were doing just fine and carrying their thumb drives. if you don't know you have a problem you're not going to search for it."
But Houston was convinced cloud storage was necessary, even if people didn't realize it yet. Emailing files to yourself or holding thumb drives were quickly becoming outdated ways of storing information, especially as Wi-Fi became more accessible.
"To help solve a problem that people don't even know they have, well, that opens a lot of doors," he says.
3. Resist the urge to sell out early.
Sure, a big exit is a dream for plenty of entrepreneurs. Not for Houston, who turned down an offer from Apple that was purported to be $100 million.
Houston explains how a meeting with Steve Jobs turned sour when Houston refused to sell the company.
"You either get chill Steve or asshole Steve," Houston recalled. "I sucked in my breath and waited for chairs to be thrown. He told us 'You guys are a feature not a product. You'll never have deep access to the OS of the phones."
Houston smirked it off.
"Like every start-up that gets traction, you get inquiries," Houston said. "We made it clear that the company is not for sale. But we talked to Steve anyway. I said we were really flattered, but we want to build this company. It's been a great experience and it's been a unique thing to do in life."