Lean Startup Success Story – Dropbox

If you haven’t yet read Eric Reis’s important book for startups, The Lean Startup, we suggest that you do so immediately. Eric Reis book has been phenomenally successful and inspired several successful startups that have followed its methodology such as Dropbox, AirBnB, TechCrunch, Aardvark, FriendFeed, Omnisio, and EtherPad.

Dropbox is perhaps the biggest and the most phenomenal Lean Startup success story, and hence we shall be discussing this amazing young company that offers cloud storage and backup for your files, at length here.

In a span of just a few years, Dropbox has achieved an extraordinary market valuation of $10 billion, revolutionized cloud based file storage, achieved enormous success in a highly crowded marketplace, in a technology that really has a low barrier to entry.

Founders Arash Ferdowsi and Drew Houston achieved all of this success by adopting a lean startup approach at the very start. Houston was an avid coder, but he wasn’t much of a salesman or a businessman by his own admission. So he read a lot, and of the books he read, Eric Reis’s The Lean Startup left the deepest impression.

As Houston says, “I didn’t know a lot about these other things that really matter in business, from marketing to sales to management,” he says. So, when Dropbox started to take off, his first order of business was to read. A lot.

“Reading a book about management isn’t going to make you a good manager any more than a book about guitar will make you a good guitarist, but it can get you thinking about the most important concepts.”

Dropbox decided from very early on not to spend too much time on getting a perfect version of a product that they were looking to sell, but to release a product to the market from the first day itself and then build upon it based on reactions got from customers. The goal was to establish early contact with customers and to maintain it on a permanent basis.

So Dropbox began its life by showing a video of a working prototype of its now famous product on a program targeted at tech savvy people called Hacker News. Dropbox was marketed as a product for “really smart people” – which created a highly positive vibe around it and got the attention of the public.

Houston remembers Dropbox’s initial days with great fondness and talks about how one of its early demos went right to the top of the website Digg, which led to Dropbox’s waiting list of buyers jumping from 5,000 to 75,000 users.

Houston says, “I just thought, this is an initial adopter audience, so where do they hang out? Sites like Digg and Reddit were huge sources of traffic and communities where people try out new technology for its own sake.”

This was classical guerilla marketing at its very best and the strategy got them a lot of feedback, which Houston and his team of programmers were able to use to create better iterations of the product, and converting its early popularity into early revenues from the get-go.

The key to Dropbox’s success was to engage the customers in the product development, giving them what they really wanted. Houston and his team spent much of their time learning about their customers and what they wanted, and what they did was to put the product into the customer’s hands at the earliest opportunity, winning the customer loyalty and creating a successful ecosystem around the product.

Constant communication with the customer was the key to Dropbox’s early success and this was maintained and built upon. Another key element to Dropbox’s success was its unified workforce, and how they were given the freedom to take quick decisions and act with real dynamism by the founders. As Houston says, “When your company grows, communication overhead becomes so much bigger, so how do you start to get people to make decisions along a similar framework that you would? I started to understand how these pieces fit together over time.”

It’s hard to think of another company that has so perfectly adapted itself to the Lean Startup methodology as Dropbox. Only time will tell if Dropbox will become the next Google or Facebook, but it is already the most exciting new startup in the world, bar none.

This blog post is a part of our series on the book “The Lean Startup – How Constant Innovation Creates Radically Successful Businesses” by Eric Reis. We believe that reading this book would help you a great deal not only in your business, but also in identifying the right business partners. As always, we look forward to your comments and suggestions, so keep them coming. Ciao!