Uh let's hear it for Dropbox. >> >> All right, thank you. I'm Drew and this is Arash and we're going to be showing you a quick tour of Dropbox. All right, it's 2008. It is still such a pain to do even the most basic things like work across multiple computers or share files across a team or put photos and video up on the web. When we think about the future, it's kind of hard to imagine Tom Cruise having to carry around a USB drive or having to like log into Gmail to send himself a file or an email attachment. Well, in 5 years this problem's going to be solved. You'll sit down at any computer or use any mobile device and your stuff will just be in front of you. And while dozens of companies have tried to solve this problem, the one that's going to make it a reality is the one that makes it so easy to use that anyone can figure it out. >> That was Drew Houston, co-founder of Dropbox. He'd just demoed the product publicly for the first time at TechCrunch 50 in September of 2008. By the time he walked off that stage, Dropbox had a waiting list of nearly 200,000 people. The idea was almost absurdly simple. A folder on your desktop that effortly keeps every file in sync across every device you owned. You save something on your phone and it just appeared everywhere else. At the time, that felt like a small miracle. Drew's demo drew hundreds of thousands of sign-ups, >> >> then millions. By 2020, Dropbox had 700 million registered users across 180 countries. That is a lot of people, but why does it feel like no one uses Dropbox anymore these days? So, it's worth asking, when was the last time you actually opened Dropbox? For a lot of people, the honest answer is they can't remember. The account still exists, but they kind of just forgot about Dropbox. Now, to be clear, Dropbox isn't dead. The company still earns over 2.5 billion dollars a year and has over 18 million paying customers. >> >> But culturally, it's invisible. And for a company that once felt like the future, that's a strange place to end up. So, this is the story of what happened. How the company that invented an entire category was slowly forgotten, and why turning down Steve Jobs might have been the most expensive decision in Silicon Valley history. Let's get into it. >> You are watching ColdFusion TV. >> In the early 2000s, the world was still finding its footing in the digital age. The internet was fresh, and people were getting used to storing their whole lives on computers. In such a new paradigm, there were still some niggling problems that nobody had quite solved. Moving a file from one computer to another was super clumsy. You would copy it onto a USB drive, and just hope you didn't lose it. Email it to yourself, only to hit an annoying size limit. Most people wouldn't even bother with anything more complicated than that. A 24-year-old MIT graduate had forgotten his hard drive one too many times, and started thinking about the file transfer problem. Eventually, he couldn't stop thinking about it. In 2007, a long bus ride from Boston to New York was the final straw that broke the camel's back. He'd forgotten his flash drive again, the one that he needed for work. So, he spent hours writing code for a fix. That fix became Dropbox. He spent months refining the prototype. When he felt ready to turn it into a real startup, he applied to Y Combinator. It was one of Silicon Valley's most prestigious accelerators, responsible for launching companies like Airbnb and Reddit. But, there was a problem. Y Combinator's co-founder, Paul Graham, told him that the idea was interesting, but he would need a co-founder to get a spot. So, Drew made a short screencast of Dropbox working on his computer, and he posted it on the website Hacker News, a popular forum where founders and investors gathered daily. He figured that it might get Graham's attention. The video hit the top of Hacker News for 2 days. It caught the attention of Arash Ferdowsi, another MIT student, who reached out after seeing it. The two met up, and by the end of the conversation, Arash decided to leave his degree behind with just a few months left before graduation. The idea was just that good. Drew himself later confirmed the strategy worked just as intended. The public launch of Dropbox at TechCrunch 50 in September 2008 was nearly a disaster when the Wi-Fi cut out mid-demo. But Drew had prepared a second video already seeding the internet. By the time the conference wrapped up, the beta list was growing rapidly. A simple referral program did the heavy lifting. Invite a friend and both of you get 500 megabytes of extra storage. That was it. In just 15 months, Dropbox went from 100,000 users to 4 million, a growth rate of 3,900%. The numbers grew so fast that the team ran out of wall space for their milestone printouts and moved onto the ceiling. >> And so we for the first several years it was doubling, 10x-ing every year, putting user like taping user counts that we printed out to the wall and then running out of space on the wall having to put, you know, 100,000 users, 200,000, 500k, a million, 10 million on the ceiling. So it was wild. >> As I've mentioned a number of times on this channel, the subscription economy has fundamentally changed the way we use software. As a consequence, juggling multiple subscriptions is not only a hassle, but the costs add up and it becomes expensive. That's where Memoot comes in. If you're one of those people who use AI for your business or work, this one might be for you. Instead of paying for a bunch of different services, Memoot gives you access to the leading models all in one place. 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So, if you're already using multiple tools for productivity or you're just tired of multiple subscriptions, this one's definitely worth checking out. Head to maimooth.ai using the description to learn more. Thanks to Maimooth for sponsoring this episode. Now, let's get back to the episode and see how Dropbox is about to experience massive growth. By late 2011, Dropbox had 50 million users. A year later, 100 million and in early 2014, a 350 million funding round valued the company at 10 billion. But back in December of 2009, before any of those milestones, came the meeting. The rockstar of 2000's tech wanted to chat. It was Steve Jobs. Drew and Arash drove to Apple's Cupertino headquarters in a rented Zipcar. Drew would later admit that the feeling was hard to describe. Quote, "I mean, Steve freaking Jobs. How do you even prepare for that?" End quote. Jobs reportedly offered somewhere north of 800 million dollars to buy the company. Drew said no. Jobs smiled and made one thing clear. In a menacing sense of foreshadowing, Jobs said that in his view, Dropbox was a feature rather than a real product and Apple was planning to come after their market directly. Drew walked out confident. A threat you could see felt like a threat you could fight. But what Drew couldn't quite see yet was the scale of what was coming. When you build a category that proves genuinely useful to users, there's no market differentiation. The bigger companies eventually crush you and that process was already underway. >> >> Apple launched iCloud in October of 2011, building it directly into every iPhone, iPad, and Mac. Google Drive followed in April of 2012, and Microsoft rebranded SkyDrive to OneDrive in 2014, bundling it with Windows and Office 365. Drew would later describe all of this as watching a mushroom cloud in the distance. You could see it, but you couldn't quite feel it yet. >> Around 2013-14, so um and maybe before that, 2011-2012, we started getting all the incumbents um or all the big platform companies, you know, Apple, Microsoft, Google, all of them launched competing products in in one form or another. But weirdly, it was sort of like you know, you see the the videos where there's like the mushroom cloud in the distance, you see it, but you don't hear or notice it. Um so mostly just seemed like nothing happened when, you know, Steve Jobs was like on stage >> >> in 2011 announcing iCloud, calling out Dropbox by name as something that will be viewed as archaic. The products launched, but you >> >> would never be able to look at our numbers and see when that happened. >> Consider the numbers. Dropbox's free tier offered just 2 GB of storage. Google Drive offered 15 GB for free, more than seven times as much. Google's paid plan started at $1.67 a month. Meanwhile, Dropbox's cheapest plan started at $9.99 a month. OneDrive would match Google's $1.67 a month. And for anyone already paying for Microsoft 365, they got a full terabyte included at no extra cost. And iCloud didn't even need to compete on price. It was simply already there, running on hundreds of millions of Apple devices. For Google, Microsoft, and Apple, storage was never the product. It was a way of drawing users into their ecosystem. >> >> These companies could offer it for so cheap because they could afford it. For them, it was worth it if they lost money on storage because the ecosystem is where the real money gets made. Dropbox, on the other hand, had no such ecosystem to hook users. They didn't have other parts of the business to offer storage so cheap that they could just lose money. You can't compete on price when bigger competitors can just make the same thing. Dropbox even said as much in its own investor filings. Buried in the risk disclosures was the line, "quote, some of these competitors have inherent advantages developing products and services that more tightly integrate with their software and hardware platforms or those of their business partners, end quote." That's a remarkably candid way of admitting the game was structurally rigged. Then came the moment that changed public perception permanently. In 2012, hackers breached Dropbox through a single stolen employee password and silently walked away with the login credentials of 68 million accounts. That alone would have been damaging enough, but Dropbox's reaction, they tried to sweep it under the rug and stay silent. Dropbox had quietly reset some passwords without ever telling users why or how many people were affected. Meanwhile, Dropbox tried to distract users with new bells and whistles. From 2013 onwards, Dropbox got to work and they launched products in every direction. There was Paper, a collaborative document editor. Mailbox, an email app acquired for around 100 million. Carousel, a photo management tool. There was also a password manager, a document scanner, Spaces, a collaborative workspace. And after a while, a predictable pattern emerged. Build it, launch it, nobody uses it, and then shut it down. Mailbox and Carousel were gone by early 2016. The password manager lasted 5 years before being discontinued in October of 2025. >> Killed Carousel, killed Mailbox, um went all in on productivity. And I wish I could say like then everything got better. Um it was the opposite, actually. The the narrative completely flipped on the company. The press started, you know, we should we killed these new products and then um internally and externally the narrative became super negative. >> The failed products pointed to an identity crisis of sorts. Dropbox never decided what company it actually wanted to be. By 2014, the pressure for Dropbox was becoming impossible to ignore. The users were switching. It's not that Dropbox as a service had gotten worse. It's just that all the competition was offering essentially the same thing for cheaper. It's not rocket science to see why that was a real problem. While Dropbox was throwing out new products, trying desperately to win over customers, the full scale of the data hack had stayed hidden for 4 years. >> >> But that all changed in 2016 when the stolen data appeared for sale on the dark web. 4 years of silence for a breach of that scale. People just couldn't forgive that. When the truth finally came out, the response was immediate. Edward Snowden, the former NSA contractor, singled Dropbox out by name and called it hostile to privacy. Then, as if to confirm every suspicion, former US Secretary of State Condoleezza Rice joined the Dropbox board. Rice had served under President George W. Bush and had publicly defended the NSA's warrantless mass surveillance program during that time. For a privacy-conscious user base already reeling from the breach, that appointment to the board felt like pouring gasoline on an already burning fire. While Dropbox was still deciding what to become, its closest rival Box had made a clean choice early, going all in on enterprise and building its entire business around it. Microsoft and Google already had the enterprise relationships and swept up corporate clients. Dropbox chose neither lane. Rather than winning consumers back, Dropbox kept making things worse. In 2019, the free accounts were capped at three devices, while every competitor still offered unlimited. The same year, subscription prices raised 20%. >> >> Now, Dropbox is betting on AI. Its new product, Dropbox Dash, is a universal search tool that works across Google Drive, OneDrive, Slack, and Notion. And that's pretty emblematic of the whole situation. Rather than competing against platforms, they're simply trying to become an AI layer that sits on top of them. And they stumble into the same problem. The bigger players are all building the same thing with unlimited resources. Dropbox is once again finding itself stumbling into a crowded space. Once upon a time, Dropbox hit 1 billion in revenue faster than any B2B software company in history. But now, look at this graph. The blue bars show revenue growing year after year. The orange dotted line is the growth rate, and it's crashing. Back in 2016, Dropbox was growing at 40% per year. By 2014, barely above 1%, and in 2025, revenue actually decreased for the first time in the company's history. Since its peak head count in 2022, the company has cut roughly a third of its workforce from around 3,100 employees down to just over 2,100. In December 2024, the company borrowed 2 billion in secured loans and immediately announced a fresh 1.2 billion-dollar share repurchase program. Going into debt to buy back stock rather than invest in growth has a name. It's called a harvest strategy. Essentially, you stop trying. You extract the value that already exists for as long as it lasts. To be fair, Dropbox has its defenders. The product still works well. It syncs reliably and is the best in its class. The interface is cleaner than most of its competitors, and free cash flow remains strong. But a fine business and a great one are two very different things. In hindsight, the most expensive decision Dropbox ever made wasn't turning down Steve Jobs. It was everything that came after. The Dropbox story is really about one idea. If your entire product can be replicated for cheaper, then you have no discernible advantage. You have a structural problem that no amount of marketing can solve. Payment infrastructure company Stripe, data warehouse giant Snowflake, and AI data platform Databricks all face that same threat and held their ground by being deeply technical and genuinely hard to replicate. Dropbox was elegant, but it was never that hard to copy. The second lesson is about focus. Every failed product, every half-committed lane, every distraction was a drain on the one thing that built Dropbox's reputation. Unplanned growth can sometimes kill clarity, and without clarity, even the best products lose their way. Ultimately, Dropbox isn't a collapse story. They just disappeared from the cultural conversation, even while the lights are still on. Drew Houston built something genuinely new. He turned a forgotten flash drive into a $10 billion company, looked Steve Jobs in the face, turned him down, and said no. He outlasted a decade of pressure from the biggest tech companies on Earth. That's not nothing. But Steve Jobs had a point in 2009. >> >> Features eventually get absorbed by platforms, and Dropbox was a feature and not a product. The question was only how long would it take for them to get usurped. It was always a risk that they were aware of, even back in 2008 when they publicly launched on stage. This very question came up from one of the panel members. >> This question is, why isn't this just a feature of somebody else's uh system, you know, whether it's Google or Microsoft? >> So, I'm curious of what you think of this story. Do you still use Dropbox? Did you ever use Dropbox? And what do you think you would have done differently if you had the helm? And yes, selling early is a valid answer. Anyway, that's about it from me. My name is Dagogo, and you've been watching ColdFusion, and I'll catch you again soon for another episode. Cheers, guys. Have a good one. >> >> Cold fusion. It's me thinking.