Dropbox CEO Drew Houston Praises Penn State’s Entrepreneurial Efforts
In a week brimming with historical university initiatives and industry-leading speakers in an effort to foster an entrepreneurial culture on campus, Penn State may have saved its most famous presenter for last by closing the annual IST Startup week on Friday with the CEO of the popular file-hosting service Dropbox, Drew Houston.
Houston, an MIT computer science graduate, met his future business partner while in school, and attributes much of his success to his time spent at college, not from corporate experiences. Hardly 15 years later, experts now estimate Dropbox to be worth roughly $10 billion, and Forbes estimated Houston’s net worth at $1.2 billion in 2014. Dropbox was built from Houston’s entrepreneurial spirit and startup mentality in which he wasn’t afraid to pursue a passion in an effort to solve a problem. It’s the same sort of spirit that Penn State has sought to foster through its annual IST Startup Week.
Houston’s beginnings stemmed from a love of computer gaming, and an interest in the mechanics behind them. His curiosity led him to make his own discoveries about the engineering behind computers, but more importantly created a lifelong passion for programming.
“I signed up to test a game, and started poking around under the hood,” he said in a small room in the HUB, just hours before his on-campus presentation to conclude the week’s events.
After journeying to MIT, Houston knew he wanted to study computer science as it fell right in line with his interests. He worked hard in the classroom and joined a fraternity, where he found himself learning lessons that went far beyond academics or his computer.
“I took a bunch of offices. I had no idea at the time but those were my first courses in management, trying to get 35 unpaid volunteers to do anything,” he said, recalling a struggle familiar to the officers of any student organization.
Eventually, Houston felt that the time was right to create his own company.
“I loved the idea of starting my own company since I was a kid. I started my first company during my junior year of school. I had this idea of starting my own SAT-prep company,” Drew recalls of his first startup, Accolade. “I called up a former teacher of mine from high school and we met in a Chili’s and started working on a company together.”
While Accolade would achieve mild success, it didn’t grow like Houston had hoped. He would later pitch the idea to Y Combinator, a company he describes as a “startup that creates other startups.” Y Combinator is more formally a seed accelerator that invests in small companies with great growth potential. It’s also one of the inspirations for the Penn State Summers Founders Program, Penn State’s new initiative that will fund six teams of entrepreneurs, all with at least one Penn State student, with a $10,000 grant to pursue their own startups for a summer. The teams were officially announced by President Eric Barron Thursday evening, and marked another moment in his steady support for student entrepreneurship, especially after a $30 million investment in January.
Y Combinator ultimately turned down Accolade, identifying flaws in its business model. Houston warned that not all college students should jump off the deep end and create their own companies like he did, but should decide if its a path that’s “exciting” for them. IST Startup Week and the Penn State Summers Founders Program provide a less risky trail to make these decisions.
“The earlier you figure it out, the better, and the best way to figure it out is to take an internship at a startup,” he advised. “[IST Startup Week] is a great place to find your friends who are interested in startups and band together.”
Soon after his rejection by Y Combinator, Houston created Dropbox. In the midst of experiencing trouble working with data across different computers, he stepped onto a bus one day, thinking of all the work he needed to get done. He then realized that he had forgotten his flash drive and would be unable to do the work he wanted to.
“That ride was where I wrote the first lines of code [for Dropbox],” he recalls. The initial seed of a huge company was sown through one man seeking a solution to an everyday dilemma, just like the stated goals of the six teams selected for the Penn State Summers Founders Program.
Houston then sought a co-founder and was introduced to Arash Ferdowski. Houston felt strongly about Ferdowski’s character; he believes that trust is the foundation of successful business collaboration. He showed Ferdowski demo video of Dropbox, and told him that the Y Combinator application deadline was quickly approaching.
“He dropped out of school the next day,” Houston said, laughing as he recounted the impulsivity of the company’s founding. Neither Houston nor Ferdowski had a formal business background, but Houston tought himself the fundamentals through an abundance of books. He specifically recalls The Innovator’s Dilemma, a book dealing with the psychology behind successful startups, as an influence. These developments saw him take charge of the company’s business platform while Ferdowski focused on the internal work.
Dropbox started to see success when Houston launched a series of two demo videos on the Internet. He made the first video more technical but specifically targeted the second video to broader audiences on Reddit and Digg.
“In the background, the stuff that I was working on were all these little Easter eggs, things that people from that community could recognize,” he said. Amongst those were pictures of Tom Cruise jumping on a couch, and a young Barack Obama before he was president. These “guerilla marketing” tactics proved hugely successful and drew thousands more users to his product than he could have imagined.
Dropbox exploded onto the scene and found itself competing with other software giants. “Like sports, as you make your way through the playoffs, you get hit harder. It really forces you to be really good at what you do. I spend a lot of time on recruiting, handpicking the best people,” Houston said.
Houston also taps into some unorthodox methods in order to draw the best and brightest to his company. His office design is unique, to put it lightly. Employees roll around on scooters, take breaks to play with Legos, and even find themselves matched for blind lunch dates via an algorithm.
“What we try to do is lift a lot of the constraints [of a big company],” he explained. “How can we design an environment that attracts the best people and lets them do the best work of their lives? We think of it as an investment. We build a place where people want to be.”
The idea of a specific workspace, though maybe not that unorthodox, is one familiar to Barron’s vision and the Penn State Summers Founders Program. In his investment pledge, Barron promised to “create flexible and vibrant physical spaces in key locations” to spur innovative ideas. Eli Kariv, a Penn State senior who played an important role in creating the Founders Program, also spoke to the importance of original, innovative workspaces.
“If you have a space where everyone can come together and work together, that’s where collaboration and innovation occur,” he explained.
Back at Dropbox, Houston reveled in his company’s position in the middle of an increasingly competitive market.
“Every company that becomes big grows up in the shadow of someone that’s trying to step on your head,” he said. Houston spends a ton of time recruiting, and handpicking the best people allows Dropbox to keep up with the formidable competition.
While it may be tempting to think of Dropbox as the story of two men building and living out their dreams, this line of thinking fails to accurately represent the scope of such a company. Though hugely successful entrepreneurs sometimes face criticism for their wealth, visionaries like Houston create thousands of jobs for other people both directly and indirectly. Roughly 1,200 people work for him, and countless other contractors, businesses, and related correspondences find themselves employed because of the services his company provides. Houston also admitted a degree of pressure comes with such responsibility.
“Anyone who runs a company finds that the company runs you, too,” he said. “That’s why you hire other good people so you don’t have it all on your shoulders.”
He firmly believes that keeping the right people around him pays huge dividends that reach far beyond the bottom line. Personally, Houston retained many of his friends from high school and college. In many ways, Barron and the Summers Founders Program hope to do that too. The only criteria is that teams have one Penn State student, so many of the six employ the skills of Penn State graduates with more experience, and touch on a diverse set of talents. Almost all of the teams started as a simple group of friends trying to solve a problem, too.
Despite his success, Houston has no trouble finding motivation.
“What you find is that people do this because it can be fun and rewarding. What’s really satisfying for me is building something that a lot of people use and working with really talented people,” he said.
Houston also implored entrepreneurially-minded students to learn computer skills, even they weren’t majoring in computer science.
“Most industries are becoming software industries. In the beginning, it was like instead of the library you can use Google or instead of going to Blockbuster you see it on Netflix,” he continued. “Now it’s like when you need a ride or a place to stay you can use Uber or AirBnB.”
Last Wednesday, also as part of IST Startup Week, Penn State alum and successful entrepreneur Matt Brezina further stressed the importance of computer skills. He said all students should know some coding, not only to create software, but to learn powerful decision-making and problem-solving skills. Brezina sold a multi-million dollar company to Yahoo, and now heads Sincerely, the “world’s largest gifting network.”
Houston feels very positively about the direction Penn State’s IST Startup Week is taking.
“I remember going to events like this. I went to the first startup school that Y Combinator put together, and I still remember some of the talks,” he said. “They can be fun but they can be scary. It’s one of the most fulfilling things I’ve done in my life, and I want other people to have that experience.”
A billionaire, Houston wasn’t forced to speak at Penn State to a room full of hopeful young entrepreneurs. But, as he explained, it’s part of the entrepreneurial attitude — one Barron hopes to bring to Penn State.
“There’s a culture among entrepreneurs of paying it forward. Anyone you talk to received a lot of help from people who didn’t need to help them.”