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TECHNOLOGY

Box: Can It Stop a Goliath Named Google?

If the rumors are true, Google will launch a cloud service that aims squarely at Box. Does the start-up have what it takes to survive?

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Quick, answer this trivia question: How many stones did David use to kill Goliath? You might have answered five (that's how many he picked up from a nearby stream), but it only took one.

For any start-up, a combination of good timing, a smart strategy, and a unique product offering can lead to sudden (and wholly unexpected) growth. But a Goliath showing up unannounced can change all of that. You could head for the hills.

Or, you could look for a few good rocks.

At the DEMO conference last week in San Francisco, Box co-founder Aaron Levie spoke at a session where he made several interesting comments about a new competitor, one that would normally send shivers down the spine of the most jaded entrepreneur: Google.

Gearing up for a battle with Google

Rumors persist about the impending Google G-drive service which will supposedly sync your files automatically from a local desktop to the cloud using strong encryption and revision history. In other words, exactly like Box. "Yeah, I totally forgot about them," joked Levie when asked at DEMO about the new Goliath in town.

"We happened to get into a very big category," he explained, referring to what analyst firm IDC calls a $6 billion market segment. "They [Google] are going to be a very important competitor... I hope it fails."

When I reached Levie by phone, he told me he's not actually worried about G-drive. Box has differentiated itself, he says, by adding content management features—the ability to look through older archives of files or access media from an iPad—and group-sharing features where multiple users can access the same online files.

"Bigger players—Apple, Google and Microsoft—recognized the importance of storing consumers' data, and to make matters worse, they could effectively subsidize their services to the point that it would be free," says Levie. "The early Google Drive rumors forced us to reevaluate how we could differentiate ourselves in a market that would quickly become commoditized."

That's an important lesson for any small tech business: Know how you'll respond when Big Tech moves into your territory. It's also important that, when you chose your market, you think about the total size and whether or not you could be cannibalized easily by a larger company.

The backstory

To understand a bit about how Box is dealing with its own giants, here's bit of history on the company. In 2005, co-founder Dylan Smith was making the rounds playing online poker. He had a particularly successful run, and initially just put the money in the bank.

Levie and Smith were business school buddies at the time just waiting for a good start-up idea to come along. They noticed that there were few legitimate Web storage products that made it easy to access online data. They first used the poker winnings—only a few thousand dollars—to hire engineers for some initial development work, placed a few Google ads (oh, the irony), and hoped for the best. Box was born.

The pivot that may pay off long term

Sometime between 2005 and 2007, the company started noticing how consumers actually wanted fewer features in an online storage product—they just wanted a place to keep their files—but business users wanted more features. They offered basic accounts for free, but charged for business access. In 2007, they re-focused Box with even more business features for team collaboration. While other services kept on going with basic services (no encryption, no revision history, no team access), Box kept improving. And, they made the free account more attractive with a 1GB cap.

Fortunately, the company had taken a close look at the market and added features that are a few steps ahead of the current competition—namely, Dropbox. Will they be able to keep Google at bay? That's hard to guess at this point, since no one knows anything concrete about G-drive.

So, is Box nervous? Maybe. The official line is that Levie was just joking around about G-drive at the DEMO conference. The company does have one trick up its sleeve. As IT moves into a model where employees bring their own devices to work, and storage becomes more of a commodity service you can buy from anyone, Box already has tight partnerships in place. The service integrates with well-known services like Salesforce and Netsuite, and has allied with other start-ups like Yammer.

In other words: They already have a good chance against a lumbering giant.

IMAGE: Flickr/Robert Scoble
Last updated: Apr 23, 2012

JOHN BRANDON is a contributing editor at Inc. magazine covering technology. He writes the Tech Report column for Inc.com.
@jmbrandonbb




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