How to Win as a First-Time Founder, a Drew Houston Manifesto

How to Win as a First-Time Founder, a Drew Houston Manifesto

Dropbox CEO Drew Houston shares his strategy for getting up to speed fast to succeed as a novice founder.

In 2007, Drew Houston flew to San Francisco determined to find a co-founder for Dropbox. At the time, it was just him. No backers. No team. On a friend’s advice, he walked into Y Combinator’s offices unsolicited to talk to Paul Graham about finding the right person. It didn’t go well.

“It wasn't a great experience, coming in unannounced,” Houston recently told students in an exclusive Dorm Room Fund interview at MIT. “Getting into Y Combinator is like getting into a great school. So imagine having your two minutes with the dean of admissions and them coming away thinking you’re an asshole. That plane ride back was the worst. No co-founder. Lower chance of getting into YC. I was panicked.”

The good news is, early founders can turn things around. Soon after he thought it was all over, Houston teamed with fellow-MIT alum Arash Ferdowsi and made it into YC. Today, he’s led Dropbox to nearly 200 million users — and the company’s growing faster than ever before. This hasn’t been a piece of cake, but Houston’s rocky start did teach him to forge ahead and throw out assumptions that discourage many would-be founders. Looking back, he recommends six strategies that helped him cut through the fear, drown out the noise, and make it happen.

1) Start with a worthy problem.

Prospective entrepreneurs are primed to find problems. While he was still in college, Houston signed up to beta test an online game as it was being built. When he ran out of things to do, he started poking around under the hood, and he discovered a bunch of security vulnerabilities.

“So I started hacking around on the game, and ended up telling the developers, ‘Hey guys, you have to do this and this…’ They responded, ‘Okay great, want to just do that for us?’” That’s how Houston landed his first engineering gig. Dropbox was born out of a similar moment, when he simply got fed up with the lack of seamless storage solutions for his files.

But not every idea is bound to be a good one, or worth your time. After coming up with a cohort of aspiring founders (some successful, some not) and observing their various fates, Houston has devised a list to help new entrants choose their projects wisely:

  • It just pulls you. This is the least scientific of his recommendations, but that gut feeling that a problem is critical and needs an answer shouldn’t be overlooked. “Sometimes you just get this feeling — it’s a compulsion or an obsession. You can’t stop thinking about it. You just have to work on this thing,” he says. “You need that hunger no matter what, because eventually the honeymoon period wears off. Somewhere between printing your business cards that say ‘founder’ on them and everything else you have to do, you realize, ‘Oh, actually this is a ton of work.’”
  • You think it can go far. “With something like Dropbox, it was immediately like, ‘Wow, this is literally something that anyone with an internet connection could use.’ Everyone needs something like this, they just don’t realize it yet.” Now, with the app approaching 200 million users, Houston already has his eyes fixed on a billion. “It’s crazy that we live in a world where that’s a totally reasonable thing to go after. But I look at all the things we can do, and the magnitude of the opportunity in front of us is so clear.”
  • It optimizes for learning. It’s always smart to go where you’ll have the ability to learn the most. Go where people are smart and fierce, because wherever you go, you’re bound to learn through osmosis. “If you join a company, work with world-class people because that’s the fastest way to learn how to do things. If you start your own thing, you can learn a lot really fast from doing things wrong. Ask yourself, ‘Where can I find an environment where I can work really hard and learn the most?’”

2) Own Being a Beginner.

In his book Outliers, Malcolm Gladwell suggests that it takes 10,000 hours before you can truly become an expert at anything. Given the immense challenge of starting a company, one might think that founders need to be vastly experienced. But Houston disagrees. He’s got some powerful evidence too: Google, Apple, Dell and Facebook — all unicorns, all started by first-timers or people who failed on the first try.

“A lot of times it’s an asset to not know everything about everything,” Houston says. “As you advance in your career, you feel like you know so much about the world and what’s possible. Then you have this mental model about how things work that gets less and less flexible. You can get stuck.”

His favorite example came early on when the first articles were being written about his company. He remembers one quote precisely:

Fortunately, the Dropbox founders are too stupid to know everyone's already tried this.

“A lot of really great, innovative things have happened when people just didn’t know it wasn’t supposed to be possible,” Houston says.

It’s important to not underestimate your ability to learn on the fly. “Everything can seem so mystifying before you start,” he says. “But when you look behind the curtain at how some of these huge companies were built, it wasn’t a lot of magic. It’s people iteratively trying to make reasonable decisions and surround themselves with the smartest people they can.”

3) Assume Nothing & the First Mover Disadvantage

At the time Houston got the idea for Dropbox, people thought the problem was already solved. They had email attachments and thumb drives — and for the power users, external hard drives. What more did they need? Even the forward thinkers would have guessed a solution would come from Google or Microsoft.

“People make basic assumptions based on what they have now. But you have to ask yourself, is this really what people are going to be doing in five years?” he says. “Very few people ask themselves what they would actually want instead if they could wave a magic wand. What if there could be this magic folder that you could access from anywhere and never need to back up?”

Something a lot of entrepreneurs assume is that they have to be first to market in order to win in a category. But when you look at the breakout success stories, this is almost never the case. Google was preceded by Yahoo, Alta Vista, Ask Jeeves, and 100 other little search engines. Facebook entered stage left and slaughtered both MySpace and Friendster.

“The fact is that there’s a problem with being first,” Houston says. “When you do that, you create a market, and if you’re too early, you essentially leave the door open behind you for someone to do it better. I actually don’t think it matters how early or late you are as long as you hit critical mass.”

When Dropbox was getting off the ground in 2007, there were hundreds of small storage companies. It was almost a cliche, the way that many people believe mobile photo sharing is a cliche now, he says. “The important thing was, I would keep asking people if they used any one of these hundred options, and they all said no. These are my favorite problems to solve. You can’t focus on what everyone else is doing — it has to be about what’s really broken and what you can do to fix it.”

Even today, Houston’s reminded all the time that he has 400 people against Google’s 40,000. It’s daunting, but he has to shrug it off. In the end, tech is about disruption, and there’s plenty of proof that numbers of users, or employees or dollars doesn’t always make the difference.

Small teams can take on bigger companies because of their focus and speed. That's also what makes it fun.

This kind of challenge can seem like too big a gamble for many people who might otherwise start companies. With odds so heavily in favor of the Goliaths, chances for success seem slim, but Houston does his best to de-risk the idea for aspiring entrepreneurs.

“People assume — and misunderstand — that it’s risky to join a startup or start their own company, but you have to know this is ridiculous,” he says. “Even if it doesn’t work out, the experience is so valuable to so many employers that your worst case scenario is, ‘Ok, so that was a bust, I’ll get a six-figure job at whatever company.’ Risk is this outmoded idea — your parents might not understand that, but taking these types of risks doesn’t have a downside.”

4) Build a knowledge machine.

For Houston, learning new things became an addiction — one he actually systematized.

“I was living in Boston, working for a startup during the summer, living in my fraternity house. But every weekend, I would take this folding chair up to the roof with all these books I got on Amazon. I would just sit there and read all of them. I would spend the whole weekend just reading, reading, reading.”

His process wasn’t complicated, but he did keep a list of target topics in his head. “I’d be like, alright, I don’t know anything about sales. So I would search for sales on Amazon, get the three top-rated books and just go at it. I did that for marketing, finance, product, engineering. If there was one thing that was really important for me, that was it.”

If you’ve never started a company, or worked at a smaller company, you’ll run into a vertical learning curve, Houston says. There’s no way to know everything you need to from the start, so you need to a) gain as much knowledge as you can as fast as you can, and b) plan ahead to learn what you’ll need months down the line. You have to be prepared for a never-ending conveyor belt of challenges.

"You have to adopt a mindset that says, ‘Okay, in three months, I’ll need to know all this stuff, and then in six months there’s going to be a whole other set of things to know — again in a year, in five years.’ The tools will change, the knowledge will change, the worries will change."

You have to get good at preparing yourself to understand what's on the horizon.

This is especially important for skills and habits that you can’t internalize overnight. “You’re not going to become a great manager overnight. You’re not going to become a great public speaker or figure out how to raise money,” he says. “These are the things you want to start the clock on as early as possible.”

As a founder, this goes for both you and your employees. This can be a huge advantage when it comes to recruiting the best talent, too. One young engineer comes to mind for Houston, who was swayed by the opportunity to be thrown into the deep end right away.

“We had this enormous infrastructure project where we were spending millions of dollars and he was in charge of it — and he was like 20 at the time. He just wouldn’t have gotten that opportunity if he had been employee 20,000 at Google or something,” he says. “This engineer even said to him at some point, ‘Dropbox let me do things that I wasn’t ready for.’”

This chance, to work on real things and move the needle at a company serving millions, is rare and extremely valuable. “I look at the interns we have at Dropbox, and they’re shipping real stuff every day,” Houston says. “In contrast, I had a friend who worked at Microsoft for a summer, and he spent the entire time working on the back button on Internet Explorer.”

The upshot: Making learning central to your company’s culture pays serious dividends.

5) Be resourceful. Fast.

Houston may have gotten off on the wrong foot with Y Combinator, but he was able to turn it around just as fast with limited tools.

“It was one of those things where it was a couple weeks before the deadline, and I just realized I had no choice. I had to write this application,” he says. “I was already at a disadvantage because I was a single founder and YC really wants co-founders. But I said to hell with it, I’ll just do it anyway. So I made a video.”

This demo video is now part of Dropbox mythology. Not only did it catch fire on Hacker News and Reddit, it also convinced YC partner Trevor Blackwell. The key was Houston knew his audience. “I was part of that audience, so I made the video that would get me excited about Dropbox. The production value wasn’t great. It was just me sitting in my bedroom at 3 a.m., but I knew what to say.” It worked — he got an email from Paul Graham saying there was interest, but to go any further, he’d need to find a co-founder.

He approached this task with the same attitude as his YC application. He knew what he needed. He went after it, and he moved quicker than he felt comfortable with. That’s the pace you have to get used to when you’re involved with a startup, he says. Finding a co-founder on this timetable can be one of the most daunting things an entrepreneur can do.

Drew Houston with Dropbox Co-Founder Arash Ferdowsi.
It was sort of like them telling me I needed to find someone to marry in two weeks.

Luckily, the video came in handy here too. By the time he met with Arash Ferdowsi, a friend of a friend at MIT, his future CTO had already seen the demo and was interested.

“We went to the coffee house at the student center because that’s the only thing we could do,” Houston recalls. “At the time, I was just like, this kid seems pretty smart. I can’t say it was this careful process where I had 19 things I was looking for, but he seemed intelligent and cool, and we spent a good two hours together talking. At the end, he said ‘Okay, yeah, I’ll drop out next week.’”

Now that he’s had time to reflect, he realizes how lucky he got with Ferdowsi, and he has some advice for young entrepreneurs looking for their other halves. “The most important thing is whether you respect this person, whether you trust them. Are they someone that you can see yourself being in the trenches with for a long time, because you’re going to see them more than your spouse or your significant other.”

6) Don’t lose your North Star.

Inevitably companies evolve as they grow, but Houston knows the value of keeping a higher purpose front and center. This is especially critical for Dropbox right now as it adds hundreds of new employees and expands more and more into enterprise software.

Many of even the most successful startups in tech will say their culture evolved organically — that they're only just now starting to be intentional about it at 100 to 300 employees. Dropbox falls into this category. But Houston advocates for an earlier attack.

“When you’re studying and getting your engineering degree, things like mission or values sound totally unnecessary,” he says. “But then it turns out that you have to evolve from building this system of code to building a system of people. It’s like updating your operating system. You have to adapt very quickly.”

To keep this top of mind, you have to make the company’s mission about something more than money or building great products. It has to be about the value created for users.

“Whole businesses are living out of Dropbox right now, big and small,” he says. “That’s something that’s really valuable — the fact that we’re helping employees be more productive, even at giant companies. IT departments and administrators have become an important audience for us, but at the same time we have to remember why we do what we do: We do it to make people happy.”

We're not just adding features to software. We're on our way to building the biggest assembly of human memories ever created.

“We get these emails from people that just blow us away,” Houston says. “They say things like ‘I just used Dropbox to start a music festival’ or ‘I made a movie’ or ‘I started the company I’ve been dreaming about my whole life.’ People tell us that Dropbox has completely changed how they work. And I think that’s what’s really exciting — being able to redefine how people collaborate. It’s not just the why of what we do, it’s also a huge market.