Drew Houston
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Dropbox is reimagining the workplace with Dropbox Studios
The pandemic has been a time for a lot of reflection on both a personal and business level. Tech companies in particular are assessing whether they will ever again return to a full-time, in-office approach. Some are considering a hybrid approach and some may not go back to a building at all. Amidst all this, Dropbox has decided to reimagine the office with a new concept they are introducing this week called Dropbox Studios.
Dropbox CEO and co-founder Drew Houston sees the pandemic as a forcing event, one that pushes companies to rethink work through a distributed lens. He doesn’t think that many businesses will simply go back to the old way of working. As a result, he wanted his company to rethink the office design with one that did away with cube farms with workers spread across a landscape of cubicles. Instead, he wants to create a new approach that takes into account that people don’t necessarily need a permanent space in the building.
“We’re soft launching or opening our Dropbox Studios [this] week in the U.S., including the one in San Francisco. And we took the opportunity as part of our focus to reimagine the office into a collaborative space that we call a studio,” Houston told me.
Houston says that the company really wanted to think about how to incorporate the best of working at home with the best of working at the office collaborating with colleagues. “We focused on having really great curated in-person experiences, some of which we coordinate at the company level and then some of which you can go into our studios, which have been refitted to support more collaboration,” he said.
Dropbox Studio coffee shop. Image Credits: Dropbox
To that end, they have created a lot of soft spaces with a coffee shop to create a casual feel, conference rooms for teams to have what Houston called “on-site off-sites” and classrooms for organized group learning. The idea is to create purpose-built spaces for what would work best in an office environment and what people have been missing from in-person interactions since they were forced to work at home by the pandemic, while letting people accomplish more individual work at home.
The company is planning on dedicated studios in major cities like San Francisco, Seattle, Tokyo and Tel Aviv with smaller on-demand spaces operated by partners like WeWork in other locations.
Dropbox Studio classroom space. Image Credits: Dropbox
As Houston said when he appeared at TechCrunch Disrupt last year, his company sees this as an opportunity to be on the forefront of distributed work and act as an example and a guide to help other companies as they undertake similar journeys.
“When you think more broadly about the effects of the shift to distributed work, it will be felt well beyond when we go back to the office. So we’ve gone through a one-way door. This is maybe one of the biggest changes to knowledge work since that term was invented in 1959,” Houston said last year.
He recognizes that they have to evaluate how this is going to work and iterate on the design as needed, just as the company iterates on its products and they will be evaluating the new spaces and the impact on collaborative work and making adjustments when needed. To help others, Dropbox is releasing an open-source project plan called the Virtual First Toolkit.
The company is going all-in with this approach and will be subletting much of its existing office space as it moves to this new way of working and its space requirements change dramatically. It’s a bold step, but one that Houston believes his company is uniquely positioned to undertake, and he wants Dropbox to be an example to others on how to reinvent the way we work.
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Dropbox to acquire secure document sharing startup DocSend for $165M
Dropbox announced today that it plans to acquire DocSend for $165 million. The company helps customers share and track documents by sending a secure link instead of an attachment.
“We’re announcing that we’re acquiring DocSend to help us deliver an even broader set of tools for remote work, and DocSend helps customers securely manage and share their business-critical documents, backed by powerful engagement analytics,” Dropbox CEO Drew Houston told me.
When combined with the electronic signature capability of HelloSign, which Dropbox acquired in 2019, the acquisition gives the company an end-to-end document-sharing workflow it had been missing. “Dropbox, DocSend and HelloSign will be able to offer a full suite of self-serve products to help our millions of customers manage the entire critical document workflows and give more control over all aspects of that,” Houston explained.
Houston and DocSend co-founder and CEO Russ Heddleston have known each for other years, and have an established relationship. In fact, Heddleston worked for Dropbox as a summer in intern in 2010. He even ran the idea for the company by Houston prior to launching in 2013, who gave it his seal of approval, and the two companies have been partners for some time.
“We’ve just been following the thread of external sending, which has just kind of evolved and opened up into all these different workflows. And it’s just really interesting that by just being laser-focused on that we’ve been able to create a really differentiated product that users love a ton,” Heddleston said.
Those workflows include creative, sales, client services or startups using DocSend to deliver proposals or pitch decks and track engagement. In fact, among the earliest use cases for the company was helping startups track engagement with their pitch decks at VC firms.
The company raised a modest amount of the money along the way, just $15.3 million, according to Crunchbase, but Heddleston says that he wanted to build a company that was self-sufficient and raising more VC dollars was never a priority or necessity. “We had [VCs] chase us to give us more money all the time, and what we would tell our employees is that we don’t keep count based on money raised or headcount. It’s just about building a great company,” he said.
That builder’s attitude was one of the things that attracted Houston to the company. “We’re big believers in the model of product growth and capital efficiency, and building really intuitive products that are viral, and that’s a lot of what what attracted us to DocSend,” Houston said. While DocSend has 17,000 customers, Houston says the acquisition gives the company the opportunity to get in front of a much larger customer base as part of Dropbox.
It’s worth noting that Box offers a similar secure document-sharing capability enabling users to share a link instead of using an attachment. It recently bought e-signature startup SignRequest for $55 million with an eye toward building more complex document workflows similar to what Dropbox now has with HelloSign and DocSend. PandaDoc is another competitor in this space.
Both Dropbox and DocSend participated in the TechCrunch Disrupt Battlefield, with Houston debuting Dropbox in 2008 at the TechCrunch 50, the original name of the event. Meanwhile, DocSend participated in 2014 at TechCrunch Disrupt in New York City.
DocSend’s approximately 50 employees will be joining Dropbox when the deal closes, which should happen soon, subject to standard regulatory oversight.
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Dropbox shifts business product focus to remote work with Spaces update
In a September interview at TechCrunch Disrupt, Dropbox co-founder and CEO Drew Houston talked about how the pandemic had forced the company to rethink what work means, and how his company is shifting with the new requirements of a work-from-home world. Today, the company announced broad changes to Dropbox Spaces, the product introduced last year, to make it a collaboration and project management tool designed with these new requirements in mind.
Dropbox president Timothy Young says that the company has always been about making it easy to access files wherever you happen to be and whatever device you happen to be on, whether that was in a consumer or business context. As the company has built out its business products over the last several years, that involved sharing content internally or externally. Today’s announcement is about helping teams plan and execute around the content you create with a strong project focus.
“Now what we’re basically trying to do is really help distributed teams stay organized, collaborate together and keep moving along, but also do so in a really secure way and support IT, administrators and companies with some features around that as well, while staying true to Dropbox principles,” Young said.
This involves updating Spaces to be a full-fledged project management tool designed with a distributed workforce in mind. Spaces connects to other tools like your calendar, people directory, project management software — and, of course, files. You can create a project, add people and files, then set up a timeline and assign and track tasks, In addition, you can access meetings directly from Spaces and communicate with team members, who can be inside or outside the company.
Houston suggested in his September interview a product like this could be coming when he said:
Back in March we started thinking about this, and how [the rapid shift to distributed work] just kind of happened. It wasn’t really designed. What if you did design it? How would you design this experience to be really great? And so starting in March we reoriented our whole product road map around distributed work.
Along these same lines, Young says the company itself plans to continue to be a remote-first company even after the pandemic ends, and will continue to build tools to make it easier to collaborate and share information with that personal experience in mind.
Today’s announcement is a step in that direction. Dropbox Spaces has been in private beta and should be available at the beginning of next year.
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Dropbox CEO Drew Houston says the pandemic forced the company to reevaluate what work means
Dropbox CEO and co-founder Drew Houston, appearing at TechCrunch Disrupt today, said that COVID has accelerated a shift to distributed work that we have been talking about for some time, and these new ways of working will not simply go away when the pandemic is over.
“When you think more broadly about the effects of the shift to distributed work, it will be felt well beyond when we go back to the office. So we’ve gone through a one-way door. This is maybe one of the biggest changes to knowledge work since that term was invented in 1959,” Houston told TechCrunch Editor-In-Chief Matthew Panzarino.
That change has prompted Dropbox to completely rethink the product set over the last six months, as the company has watched the way people work change in such a dramatic way. He said even though Dropbox is a cloud service, no SaaS tool in his view was purpose-built for this new way of working and we have to reevaluate what work means in this new context.
“Back in March we started thinking about this, and how [the rapid shift to distributed work] just kind of happened. It wasn’t really designed. What if you did design it? How would you design this experience to be really great? And so starting in March we reoriented our whole product road map around distributed work,” he said.
He also broadly hinted that the fruits of that redesign are coming down the pike. “We’ll have a lot more to share about our upcoming launches in the future,” he said.
Houston said that his company has adjusted well to working from home, but when they had to shut down the office, he was in the same boat as every other CEO when it came to running his company during a pandemic. Nobody had a blueprint on what to do.
“When it first happened, I mean there’s no playbook for running a company during a global pandemic so you have to start with making sure you’re taking care of your customers, taking care of your employees, I mean there’s so many people whose lives have been turned upside down in so many ways,” he said.
But as he checked in on the customers, he saw them asking for new workflows and ways of working, and he recognized there could be an opportunity to design tools to meet these needs.
“I mean this transition was about as abrupt and dramatic and unplanned as you can possibly imagine, and being able to kind of shape it and be intentional is a huge opportunity,” Houston said.
Houston debuted Dropbox in 2008 at the precursor to TechCrunch Disrupt, then called the TechCrunch 50. He mentioned that the Wi-Fi went out during his demo, proving the hazards of live demos, but offered words of encouragement to this week’s TechCrunch Disrupt Battlefield participants.
Although his is a public company on a $1.8 billion run rate, he went through all the stages of a startup, getting funding and eventually going public, and even today as a mature public company, Dropbox is still evolving and changing as it adapts to changing requirements in the marketplace.
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Why is Dropbox reinventing itself?
According to Dropbox CEO Drew Houston, 80% of the product’s users rely on it, at least partially, for work.
It makes sense, then, that the company is refocusing to try and cement its spot in the workplace; to shed its image as “just” a file storage company (in a time when just about every big company has its own cloud storage offering) and evolve into something more immutably core to daily operations.
Earlier this week, Dropbox announced that the “new Dropbox” would be rolling out to all users. It takes the simple, shared folders that Dropbox is known for and turns them into what the company calls “Spaces” — little mini collaboration hubs for your team, complete with comment streams, AI for highlighting files you might need mid-meeting, and integrations into things like Slack, Trello and G Suite. With an overhauled interface that brings much of Dropbox’s functionality out of the OS and into its own dedicated app, it’s by far the biggest user-facing change the product has seen since launching 12 years ago.
Shortly after the announcement, I sat down with Dropbox VP of Product Adam Nash and CTO Quentin Clark . We chatted about why the company is changing things up, why they’re building this on top of the existing Dropbox product, and the things they know they just can’t change.
You can find these interviews below, edited for brevity and clarity.
Greg Kumparak: Can you explain the new focus a bit?
Adam Nash: Sure! I think you know this already, but I run products and growth, so I’m gonna have a bit of a product bias to this whole thing. But Dropbox… one of its differentiating characteristics is really that when we built this utility, this “magic folder”, it kind of went everywhere.
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Meet your new chief of staff: An AI chatbot
Years ago, a mobile app for email launched to immediate fanfare. Simply called Mailbox, its life was woefully cut short — we’ll get to that. Today, its founders are back with their second act: An AI-enabled assistant called Navigator meant to help teams work and communicate more efficiently.
With the support of $12 million in Series A funding from CRV, #Angels, Designer Fund, SV Angel, Dropbox’s Drew Houston and other angel investors, Aspen, the San Francisco and Seattle-based startup behind Navigator, has quietly been beta testing its tool within 50 organizations across the U.S.
“We’ve had teams and research institutes and churches and academic institutions, places that aren’t businesses at all in addition to smaller startups and large four-figure-person organizations using it,” Mailbox and Navigator co-founder and chief executive officer Gentry Underwood tells TechCrunch. “Pretty much anywhere you have meetings, there is value for Navigator.”
The life and death of Mailbox
Mailbox, a mobile email management system, was responsible for many of the features both Apple Mail and Gmail use today, including swipe to archive or delete.
It launched in 2013, as mentioned, to quick success. At the time, Apple’s App Store was much newer and there were few available options for mobile email, especially ones that prioritized design and efficiency, as Mailbox did.
As a result, Mailbox, created by a venture-capital backed Palo Alto startup by the name of Orchestra, exploded. Mere weeks after its launch, it attracted 1.25 million people to its waitlist. Shortly after that, it hit another milestone: It was acquired.
Dropbox paid $100 million to bring Mailbox and its 13 employees on board, including Underwood and his co-founder Scott Cannon. Dropbox CEO Drew Houston, still years away from leading his company through a successful IPO, told The Wall Street Journal his plan was to “help Mailbox reach a much different audience much faster.”
“That was a very special time,” Underwood said. “There were still a lot of opportunities for improvements for how email was being used on these tiny little devices.”
Two years later, in 2015, the worst happened. Dropbox made the unpopular decision to shut down Mailbox, despite its cult following, in order to focus more on its own core product and the development of other new productivity tools.
“That was a hard time for us and Mailbox users,” Underwood said. “It was a tough decision for Dropbox as well … Ultimately, Mailbox didn’t meet the focus criteria for Dropbox and I understood the decision. It was in every sense their right to do with it what they thought was best.”
Act two
About a year later, in 2016, the Mailbox team had licked their wounds and begun work on an entirely new venture.
Much like Slack disrupted the frequency and efficiency of workplace communication, Navigator hopes to reimagine meetings, an essential element of business that’s often dreaded the most.
“What we saw with Mailbox was that really great processes were an effective way to help teams be creative; yet, lots of teams don’t make use of great processes,” Underwood explained. “After Mailbox, we really wanted to find a way to help teams be more effective and Navigator is a teamwork assistant whose job is really to help teams basically make the most of working together.”
According to Doodle’s 2019 state of the meeting report, 71% of working professionals lose time every week because of unnecessary meetings, most often because those meetings are ineffective or poorly organized. This is a cause of frustration and a loss of time and money; in fact, Doodle estimates nearly $400 billion is lost annually as a consequence of botched meetings.
Still, meetings aren’t going away. Workers in corporate America spend roughly five hours per week in meetings and another four hours per week preparing for meetings. Managers spend double that. There’s a big opportunity here to leverage technology to improve, even eliminate, this pain point.
The video conferencing business Zoom, for example, is hyperfocused on refining the video meeting, specifically for the remote worker. Its recent initial public offering and subsequent performance on the public markets has proven its value and the demand for technology that makes doing business easier. Slack’s direct listing today, which saw the business tripling in value at its debut, is further proof of the market opportunity for productivity tech.
Similar to Slack, which began as an artful online game, Aspen has prioritized design in building Navigator, the first of many products it plans to launch.
“We approached the problem of helping teams work together as a design problem,” Underwood said. “We tried over 200 different prototypes of different ways to encode and distribute best practices within a team. The concept of a virtual teammate was the one that finally began to show signs of working.”
Underwood says nothing was directly imported from Mailbox, aside from a dedication to human-centered design.
“We are solving a different problem but the way we are going about solving it, in trying to build something that resonates with people, is certainly consistent,” he said. “As a team, we seem to gravitate toward these ubiquitous, uncomfortable, painful problems, like email and meetings, and try to build solutions that transform people’s experiences of them.”
Making meetings suck less
Navigator focuses on team meetings and one-on-ones, requesting information from meeting attendees before and after the meeting takes place.
First, it learns the topic of the meeting from participants and organizes them into a clear agenda complete with discussion topics. During the meeting, workers can use Navigator to quickly capture key takeaways that are later shared with every member of the meeting afterward. Later, the assistant checks in with attendees to learn whether they’ve completed their tasks.
“It’s sort of like a chief of staff focused on helping meetings run effectively,” Underwood said. “It helps people show up. They feel invited and welcome and like their voice is valued, which changes how it feels for them to enter that room.”
Currently, Navigator works with Google’s G suite, Microsoft’s Office 365 and Slack. Soon, it will offer task integration with Asana, Jira, Trello and others.
For now, it comes without a cost as the team continues to work out bugs with its first cohort of customers. Underwood says later this year they will begin to incorporate subscription-based feeds for the product.
“Navigator is another teammate, not another tool,” Underwood said. “It’s about turning meetings from painful, expensive wastes of time, to effective, meaningful moments of deep collaboration. They have that potential. When done well, they can be exceedingly powerful.”
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MLG co-founder Mike Sepso joins 100 Thieves board of directors
Mike Sepso has joined the board of directors for 100 Thieves, an esports and content creation brand.
Sepso co-founded Major League Gaming in 2002, bringing the first true semblance of infrastructure to competitive gaming. MLG became the biggest independent esports league in the world, and played a big part in the evolution of esports as we know it today. In fact, MLG secured the first televised esports series ever with NBC sports, and eventually launched its own esports streaming platform.
MLG was acquired for $46 million by Activision Blizzard in 2016, but still lives as an esports content hub for Activision Blizzard titles like Call of Duty and Overwatch.
Sepso joins the 100 Thieves board alongside 100 Thieves founder and CEO Matthew “Nadeshot” Haag, president and COO John Robinson, Jake Cohen from Detroit Venture Partners and Scooter Braun (entertainment industry mogul who represents Justin Bieber and Ariana Grande).
“Mike is the godfather of esports,” said Haag. “The most influential thing that happened in my career was seeing Halo 2 competitions on Major League Gaming on TBS on the weekends. It was just mind-blowing that kids like me could play games competitively.”
Currently, Sepso serves as chairman and co-founder of the Electronic Sports Group, which is an advisory firm for executives across the finance, media, advertising and sports industries as they navigate esports deals.
“[Haag] been able to move quickly and build something that transcends esports and esports teams and has become an increasingly significant mainstream brand, and that opens up a lot of business opportunities,” said Sepso. “The strategy that 100 Thieves has put in place, using esports and gaming personalities as a way to bring this brand to market, I think it could eventually be much more than that.”
Before founding 100 Thieves, Haag was a decorated pro player in his own right and continues to be a popular Twitch streamer and YouTuber. Many esports orgs are founded by former pros, but Haag has taken a Silicon Valley approach to building out 100 Thieves, at least with regards to pace.
100 Thieves built out professional teams for a variety of titles very quickly. The company also secured capital from the likes of Sequoia, Marc Benioff, Drew Houston, Dan Gilbert, Tao Capital and Advancit Capital. Alongside traditional VCs and tech angels, 100 Thieves has also gotten investment from Scooter Braun and Drake.
Total funding for the org is $25 million.
Beyond titles and professional teams, 100 Thieves is diversifying its product early as well, with a content creator house and a line of apparel coming this spring.
The company recently signed a deal with Totino’s (yes, the pizza rolls) that includes an upcoming docuseries that offers a look behind the scenes at the 100 Thieves Call of Duty team.
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How students are founding, funding and joining startups
Shawn Xu is a managing partner at The Dorm Room Fund.
There has never been a better time to start, join or fund a startup as a student.
Young founders who want to start companies while still in school have an increasing number of resources to tap into that exist just for them. Students that want to learn how to build companies can apply to an increasing number of fast-track programs that allow them to gain valuable early stage operating experience. The energy around student entrepreneurship today is incredible. I’ve been immersed in this community as an investor and adviser for some time now, and to say the least, I’m continually blown away by what the next generation of innovators are dreaming up (from Analytical Space’s global data relay service for satellites to Brooklinen’s reinvention of the luxury bed).
Bill Gates in 1973
First, let’s look at student founders and why they’re important. Student entrepreneurs have long been an important foundation of the startup ecosystem. Many students wrestle with how best to learn while in school —some students learn best through lectures, while more entrepreneurial students like author Julian Docks find it best to leave the classroom altogether and build a business instead.
Indeed, some of our most iconic founders are Microsoft’s Bill Gates and Facebook’s Mark Zuckerberg, both student entrepreneurs who launched their startups at Harvard and then dropped out to build their companies into major tech giants. A sample of the current generation of marquee companies founded on college campuses include Snap at Stanford ($29B valuation at IPO), Warby Parker at Wharton (~$2B valuation), Rent The Runway at HBS (~$1B valuation), and Brex at Stanford (~$1B valuation).
Some of today’s most celebrated tech leaders built their first ventures while in school — even if some student startups fail, the critical first-time founder experience is an invaluable education in how to build great companies. Perhaps the best example of this that I could find is Drew Houston at Dropbox (~$9B valuation at IPO), who previously founded an edtech startup at MIT that, in his words, provided a: “great introduction to the wild world of starting companies.”
Student founders are everywhere, but the highest concentration of venture-backed student founders can be found at just 5 universities. Based on venture fund portfolio data from the last six years, Harvard, Stanford, MIT, UPenn, and UC Berkeley have produced the highest number of student-founded companies that went on to raise $1 million or more in seed capital. Some prospective students will even enroll in a university specifically for its reputation of churning out great entrepreneurs. This is not to say that great companies are not being built out of other universities, nor does it mean students can’t find resources outside a select number of schools. As you can see later in this essay, there are a number of new ways students all around the country can tap into the startup ecosystem. For further reading, PitchBook produces an excellent report each year that tracks where all entrepreneurs earned their undergraduate degrees.
Student founders have a number of new media resources to turn to. New email newsletters focused on student entrepreneurship like Justine and Olivia Moore’s Accelerated and Kyle Robertson’s StartU offer new channels for young founders to reach large audiences. Justine and Olivia, the minds behind Accelerated, have a lot of street cred— they launched Stanford’s on-campus incubator Cardinal Ventures before landing as investors at CRV.
StartU goes above and beyond to be a resource to founders they profile by helping to connect them with investors (they’re active at 12 universities), and run a podcast hosted by their Editor-in-Chief Johnny Hammond that is top notch. My bet is that traditional media will point a larger spotlight at student entrepreneurship going forward.
New pools of capital are also available that are specifically for student founders. There are four categories that I call special attention to:
- University-affiliated accelerator programs
- University-affiliated angel networks
- Professional venture funds investing at specific universities
- Professional venture funds investing through student scouts
While it is difficult to estimate exactly how much capital has been deployed by each, there is no denying that there has been an explosion in the number of programs that address the pre-seed phase. A sample of the programs available at the Top 5 universities listed above are in the graphic below — listing every resource at every university would be difficult as there are so many.
One alumni-centric fund to highlight is the Alumni Ventures Group, which pools LP capital from alumni at specific universities, then launches individual venture funds that invest in founders connected to those universities (e.g. students, alumni, professors, etc.). Through this model, they’ve deployed more than $200M per year! Another highlight has been student scout programs — which vary in the degree of autonomy and capital invested — but essentially empower students to identify and fund high-potential student-founded companies for their parent venture funds. On campuses with a large concentration of student founders, it is not uncommon to find student scouts from as many as 12 different venture funds actively sourcing deals (as is made clear from David Tao’s analysis at UC Berkeley).
Investment Team at Rough Draft Ventures
In my opinion, the two institutions that have the most expansive line of sight into the student entrepreneurship landscape are First Round’s Dorm Room Fund and General Catalyst’s Rough Draft Ventures. Since 2012, these two funds have operated a nationwide network of student scouts that have invested $20K — $25K checks into companies founded by student entrepreneurs at 40+ universities. “Scout” is a loose term and doesn’t do it justice — the student investors at these two funds are almost entirely autonomous, have built their own platform services to support portfolio companies, and have launched programs to incubate companies built by female founders and founders of color. Another student-run fund worth noting that has reach beyond a single region is Contrary Capital, which raised $2.2M last year. They do a particularly great job of reaching founders at a diverse set of schools — their network of student scouts are active at 45 universities and have spoken with 3,000 founders per year since getting started. Contrary is also testing out what they describe as a “YC for university-based founders”. In their first cohort, 100% of their companies raised a pre-seed round after Contrary’s demo day. Another even more recently launched organization is The MBA Fund, which caters to founders from the business schools at Harvard, Wharton, and Stanford. While super exciting, these two funds only launched very recently and manage portfolios that are not large enough for analysis just yet.
Over the last few months, I’ve collected and cross-referenced publicly available data from both Dorm Room Fund and Rough Draft Ventures to assess the state of student entrepreneurship in the United States. Companies were pulled from each fund’s portfolio page, then checked against Crunchbase for amount raised, accelerator participation, and other metrics. If you’d like to sift through the data yourself, feel free to ping me — my email can be found at the end of this article. To be clear, this does not represent the full scope of investment activity at either fund — many companies in the portfolios of both funds remain confidential and unlisted for good reasons (e.g. startups working in stealth). In fact, the In addition, data for early stage companies is notoriously variable in quality, even with Crunchbase. You should read these insights as directional only, given the debatable confidence interval. Still, the data is still interesting and give good indicators for the health of student entrepreneurship today.
Dorm Room Fund and Rough Draft Ventures have invested in 230+ student-founded companies that have gone on to raise nearly $1 billion in follow on capital. These funds have invested in a diverse range of companies, from govtech (e.g. mark43, raised $77M+ and FiscalNote, raised $50M+) to space tech (e.g. Capella Space, raised ~$34M). Several portfolio companies have had successful exits, such as crypto startup Distributed Systems (acquired by Coinbase) and social networking startup tbh (acquired by Facebook). While it is too early to evaluate the success of these funds on a returns basis (both were launched just 6 years ago), we can get a sense of success by evaluating the rates by which portfolio companies raise additional capital. Taken together, 34% of DRF and RDV companies in our data set have raised $1 million or more in seed capital. For a rough comparison, CB Insights cites that 40% of YC companies and 48% of Techstars companies successfully raise follow on capital (defined as anything above $750K). Certainly within the ballpark!
Dorm Room Fund and Rough Draft Ventures companies in our data set have an 11–12% rate of survivorship to Series A. As a benchmark, a previous partner at Y Combinator shared that 20% of their accelerator companies raise Series A capital (YC declined to share the official figure, but it’s likely a stat that is increasing given their new Series A support programs. For further reading, check out YC’s reflection on what they’ve learned about helping their companies raise Series A funding). In any case, DRF and RDV’s numbers should be taken with a grain of salt, as the average age of their portfolio companies is very low and raising Series A rounds generally takes time. Ultimately, it is clear that DRF and RDV are active in the earlier (and riskier) phases of the startup journey.
Dorm Room Fund and Rough Draft Ventures send 18–25% of their portfolio companies to Y Combinator or Techstars. Given YC’s 1.5% acceptance rate as reported in Fortune, this is quite significant! Internally, these two funds offer founders an opportunity to participate in mock interviews with YC and Techstars alumni, as well as tap into their communities for peer support (e.g. advice on pitch decks and application content). As a result, Dorm Room Fund and Rough Draft Ventures regularly send cohorts of founders to these prestigious accelerator programs. Based on our data set, 17–20% of DRF and RDV companies that attend one of these accelerators end up raising Series A venture financing.
Dorm Room Fund and Rough Draft Ventures don’t invest in the same companies. When we take a deeper look at one specific ecosystem where these two funds have been equally active over the last several years — Boston — we actually see that the degree of investment overlap for companies that have raised $1M+ seed rounds sits at 26%. This suggests that these funds are either a) seeing different dealflow or b) have widely different investment decision-making.
Dorm Room Fund and Rough Draft Ventures should not just be measured by a returns-basis today, as it’s too early. I hypothesize that DRF and RDV are actually encouraging more entrepreneurial activity in the ecosystem (more students decide to start companies while in school) as well as improving long-term founder outcomes amongst students they touch (portfolio founders build bigger and more successful companies later in their careers). As more students start companies, there’s likely a positive feedback loop where there’s increasing peer pressure to start a company or lean on friends for founder support (e.g. feedback, advice, etc).Both of these subjects warrant additional study, but it’s likely too early to conduct these analyses today.
Dorm Room Fund and Rough Draft Ventures have impressive alumni that you will want to track. 1 in 4 alumni partners are founders, and 29% of these founder alumni have raised $1M+ seed rounds for their companies. These include Anjney Midha’s augmented reality startup Ubiquity6 (raised $37M+), Shubham Goel’s investor-focused CRM startup Affinity (raised $13M+), Bruno Faviero’s AI security software startup Synapse (raised $6M+), Amanda Bradford’s dating app The League (raised $2M+), and Dillon Chen’s blockchain startup Commonwealth Labs (raised $1.7M). It makes sense to me that alumni from these communities that decide to start companies have an advantage over their peers — they know what good companies look like and they can tap into powerful networks of young talent / experienced investors.
Beyond Dorm Room Fund and Rough Draft Ventures, some venture capital firms focus on incubation for student-founded startups. Credit should first be given to Lightspeed for producing the amazing Summer Fellows bootcamp experience for promising student founders — after all, Pinterest was built there! Jeremy Liew gives a good overview of the program through his sit-down interview with Afterbox’s Zack Banack. Based on a study they conducted last year, 40% of Lightspeed Summer Fellows alumni are currently active founders. Pear Ventures also has an impressive summer incubator program where 85% of its companies successfully complete a fundraise. Index Ventures is the latest to build an incubator program for student founders, and even accepts founders who want to work on an idea part-time while completing a summer internship.
Let’s now look at students who want to join a startup before founding one. Venture funds have historically looked to tap students for talent, and are expanding the engagement lifecycle. The longest running programs include Kleiner Perkins’ class=”m_1196721721246259147gmail-markup–strong m_1196721721246259147gmail-markup–p-strong”> KP Fellows and True Ventures’ TEC Fellows, which focus on placing the next generation’s most promising product managers, engineers, and designers into the portfolio companies of their parent venture funds.
There’s also the secretive Greylock X, a referral-based hand-picked group of the best student engineers in Silicon Valley (among their impressive alumni are founders like Yasyf Mohamedali and Joe Kahn, the folks behind First Round-backed Karuna Health). As these programs have matured, these firms have recognized the long-run value of engaging the alumni of their programs.
More and more alumni are “coming back” to the parent funds as entrepreneurs, like KP Fellow Dylan Field of Figma (and is also hosting a KP Fellow, closing a full circle loop!). Based on their latest data, 10% of KP Fellows alumni are founders — that’s a lot given the fact that their community has grown to 500! This helps explain why Kleiner Perkins has created a structured path to receive $100K in seed funding to companies founded by KP Fellow alumni. It looks like venture funds are beginning to invest in student programs as part of their larger platform strategy, which can have a real impact over the long term (for further reading, see this analysis of platform strategy outcomes by USV’s Bethany Crystal).
KP Fellows in San Francisco
Venture funds are doubling down on student talent engagement — in just the last 18 months, 4 funds have launched student programs. It’s encouraging to see new funds follow in the footsteps of First Round, General Catalyst, Kleiner Perkins, Greylock, and Lightspeed. In 2017, Accel launched their Accel Scholars program to engage top talent at UC Berkeley and Stanford. In 2018, we saw 8VC Fellows, NEA Next, and Floodgate Insiders all launch, targeting elite universities outside of Silicon Valley. Y Combinator implemented Early Decision, which allows student founders to apply one batch early to help with academic scheduling. Most recently, at the start of 2019, First Round launched the Graduate Fund (staffed by Dorm Room Fund alumni) to invest in founders who are recent graduates or young alumni.
Given more time, I’d love to study the rates by which student founders start another company following investments from student scout funds, as well as whether or not they’re more successful in those ventures. In any case, this is an escalation in the number of venture funds that have started to get serious about engaging students — both for talent and dealflow.
Student entrepreneurship 2.0 is here. There are more structured paths to success for students interested in starting or joining a startup. Founders have more opportunities to garner press, seek advice, raise capital, and more. Venture funds are increasingly leveraging students to help improve the three F’s — finding, funding, and fixing. In my personal view, I believe it is becoming more and more important for venture funds to gain mindshare amongst the next generation of founders and operators early, while still in school.
I can’t wait to see what’s next for student entrepreneurship in 2019. If you’re interested in digging in deeper (I’m human — I’m sure I haven’t covered everything related to student entrepreneurship here) or learning more about how you can start or join a startup while still in school, shoot me a note at sxu@dormroomfund.com. A massive thanks to Phin Barnes, Rei Wang, Chauncey Hamilton, Peter Boyce, Natalie Bartlett, Denali Tietjen, Eric Tarczynski, Will Robbins, Jasmine Kriston, Alicia Lau, Johnny Hammond, Bruno Faviero, Athena Kan, Shohini Gupta, Alex Immerman, Albert Dong, Phillip Hua-Bon-Hoa, and Trevor Sookraj for your incredible encouragement, support, and insight during the writing of this essay.
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Drew Houston to upload his thoughts at TC Disrupt SF in September
Dropbox is a critically important tool for more than 500 million people, which is why we’re so excited to have founder and CEO Drew Houston on the Disrupt stage in September.
Dropbox launched back in 2007 and Houston has spent the last decade growing Dropbox to the behemoth it is today.
During that time, Houston has made some tough decisions.
A few years ago, Houston decided to move the Dropbox infrastructure off of AWS. In 2014, Houston chose to raise $500 million in debt financing to keep up pace with Box, which was considering an IPO at the time. And in March 2017, Dropbox took another $600 million in debt financing from JP Morgan.
Houston also reportedly turned down a nine-figure acquisition offer from Apple.
All the while, Houston led Dropbox to be cash-flow positive and grew the company to see a $1 billion revenue run rate as of last year.
And, of course, we can’t forget the decision to go public earlier this year.
Interestingly, Houston first told his story to a TechCrunch audience at TC50 in 2008 as part of the Startup Battlefield. In fact, you can check out the original pitch from TC50 right here.
At Disrupt SF in September, we’re excited to sit down with Houston to discuss his journey thus far, the decision to go public and the future of Dropbox.
The show runs from September 5 to September 7, and for the next week, our super early-bird tickets are still available.
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Drew Houston on wooing Dropbox’s IPO investors: ‘We don’t fit neatly into any one mold’
Dropbox went public this morning to great fanfare, with the stock shooting up more than 40% in the initial moments of trading as the enterprise-slash-consumer company looked to convince investors that it could be a viable publicly-traded company.
And for one that Steve Jobs famously called a feature, and not a company, it certainly was an uphill battle to convince the world that it was worth even the $10 billion its last private financing round set. It’s now worth more than that, but that follows a long series of events, including an increased focus on enterprise customers and finding ways to make its business more efficient — like installing their own infrastructure. Dropbox CEO Drew Houston acknowledged a lot of this, as well as the fact that it’s going to continue to face the challenge of ensuring that its users and enterprises will trust Dropbox with some of their most sensitive files.
We spoke with Houston on the day of the IPO to talk a little bit about what it took to get here during the road show and even prior. Here’s a lightly-edited transcript of the conversation:
TC: In light of the problems that Facebook has had surrounding user data and user trust, how has that changed how you think about security and privacy as a priority?
DH: Our business is built on our customers’ trust. Whether we’re private or public, that’s super important to us. I think, to our customers, whether we’re private or public doesn’t change their view. I wouldn’t say that our philosophy changes as we get to bigger and bigger scale. As you can imagine we make big investments here. We have an awesome security team, our first cultural principle is be worthy of trust. This is existential for us.
TC: How’s the vibe now that longtime employees are going to have an opportunity to get rewarded for their work now that you’re a public company?
DH: I think everyone’s just really excited. This is the culmination of a lot of hard work by a lot of people. We’re really proud of the business we’ve built. I mean, building a great company or doing anything important takes time.
TC: Was there something that changed that convinced you to go public after more than a decade of going private, and how do you feel about the pop?
DH: We felt that we were ready. Our business was in great shape. We had a good balance of scale and profitability and growth. As a private company, there are a lot of reasons why it’s been easier to stay private for longer. We’re all proud of the business we’ve built. We see the numbers. We think we’re on to not just a great business, but pioneering a whole new model. We’re taking the best of our consumer roots, combining them with the best parts of software as a service, and it was really gratifying to see investors be excited about it and for the rest of the world to catch on.
TC: As you were on your road show, what were some of the big questions investors were asking?
DH: We don’t fit neatly into any one mold. We’re not a consumer company, and we’re not a traditional enterprise company. We’re basically taking that consumer internet playbook and applying it to business software, combining the virality and scale. Over the last couple years, as we’ve been building that engine, investors are starting to understand that we don’t fit into a traditional mold. The numbers speak to themselves, they can appreciate the unusual combination.
TC: What did you tell them to convince them?
DH: We’re just able to get adoption. Just the fact that we have hundreds of millions of users and we’ve found Dropbox is adopted in millions of companies [was enough evidence]. More than 300,000 of those users are Dropbox Business companies. We spend about half on sales of marketing as a percentage of revenue of a typical software as a service company. Efficiency and scale are the distinctive elements, and investors zero in on that. To be able to acquire customers at that scale and also really efficiently, that’s what makes us stand out. They’ve seen Atlassian be successful with self-serve products, but you can layer on top of that leveraging our freemium and viral elements and our focus on design and building great products.
TC: How do you think about deploying the capital you’ve picked up from the IPO?
DH: So, we’re public because they wanted us to be a public company. But our approach is still the same. First, it’s about getting the best talent in the building and making sure we build the best products, and if you do those things, make sure customers are happy, that’s what works.
TC: What about recruiting?
DH: It’s a big day for dropbox. We’re all really excited about it and hopefully a lot of other people are too.
TC: When you look at your customer acquisition ramp, what does that look like?
DH: I mean, we’ve been making a lot of progress in the past couple of years if you look at growth in subscribers. That will continue. We look at numbers, we have 11 million subscribers, 80% use dropbox for work. But at the same time, we look at the world, there’s 1 billion knowledge workers and growing. We’re not gonna run out of people who need Dropbox.
TC: What about convincing investors about the consumer part of the business? How did you do that?
DH: I think, when you explain that our consumer and cloud storage roots have really become a way for us to efficiently acquire business customers at scale, that helps them understand. Second, it’s easy to focus on how in the consumer realm that the business has been commoditized. There’s all this free space and all this competition. On the other hand, we’ve never lowered prices, we’ve never even given more free space, we know that what our customers really value is the sharing and collaboration, not just the storage. It’s been good to move investors beyond the 2010 understanding of our business.
TC: How did creating your own infrastructure play into your readiness to go public?
DH: When I say that today is the culmination of a lot of events, that’s a great example. We made a many-year investment to migrate off the public cloud. Certainly that was one of the more eye-popping investors watching our gross margins literally double over the last couple of years from burning cash to being cash flow positive. We’ll continue reaching larger and larger scale, and those investments will.
TC: Getting a new guitar any time soon?
DH: I probably should.
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