He pivots and changes direction.
“And what that means,” Levie continues, “is that it’s a catalyst for IT buyers to implement the next generation of technologies that they’re going to run their businesses off of. This opportunity did not exist in ’03 or ’05 or ’07 or ’08 or ’09. It is happening right now.”
Levie leaves no room for doubt: The hard drive is finally dead. The PC is on life support. The office worker of today has gone rogue; most likely, you and your employees are accessing your files from iPhones or Android phones or maybe tablets. All the trends we’ve been hearing about for years -- the consumerization of IT, BYOD (Bring Your Own Device), software as a service -- are now fully upon us. The research company Gartner predicts that by 2015, at least 60 percent of information workers will be accessing their content on mobile devices.inlineimage
For IT departments, the convergence of these trends presents an extraordinary challenge: How do you manage so much information on so many different platforms?
“You have iPads, Android devices; you have iPhones; you have Macs,” Levie tells his new recruits. “It’s changing the IT landscape fundamentally. And we have to make sure that we’re growing as aggressively as possible, selling to all the CIOs as the solution to run their business on.”
Box has about 20 million users, spread out among 180,000 businesses, who use the platform to upload files, collaborate, and share content online. Box has customers at 97 percent of the companies on the Fortune 500.
“We have to build the best brand,” Levie says, “and we have to develop our site around the enterprise. If you don’t become the company that rallies developers in the ecosystem, you don’t get to have the network effects.”
His speech is winding down. He clicks to the last slide.
“What we’re relying on is that we can build enough traction, get enough of the industry, that we become the de facto platform in enterprise,” he says. “That gives us a launch-off point into a bunch of other services. It will be determined in the next year and a half to two years, because the market is adopting this right now.”
Levie asks for questions, and an awkward pause ensues. He stands there sipping his coffee, eyeing the room, when, finally, an employee raises a hand.
“Is it possible for a company to last forever?” the employee asks.
Levie laughs, a sort of nerdish chortle that echoes through the room.
“Well, um, ha ha, yeah,” Levie says. “I appreciate you think I know the answer to that. So that’s good. And…the answer is yes. It is possible. And we will be that company!”
The recruits laugh as Levie takes a moment to actually consider the question.
“I mean, it’s possible we won’t even have capitalism in 200 years. Maybe the Internet even won’t exist. The idea is that you’re always talking about disrupting, always talking about what’s next.”
Box, which Levie launched out of his dorm room at the University of Southern California in 2005, is a golden child among Silicon Valley tech companies. The company has more than doubled its revenue every year and is on pace to reach $100 million by the end of 2013. Box has more than 900 employees, spread out in offices in Los Altos, San Francisco, London, Paris, and Munich. Next year, Levie and his co-founder and chief financial officer (and boyhood friend), Dylan Smith, plan to take the company public.inlineimage
Investors, who have poured $300 million into the start-up, are valuing the business at $1.2 billion -- a sign both of their belief in Box and their confidence that cloud computing has finally matured. In one recent survey of IT buyers, researchers noted a “whopping 65.6% of respondents indicated cloud as a top investment area for 2013.”
Even these numbers, however, don’t explain why Aaron Levie is Inc.’s Entrepreneur of the Year. That has more to do with his anticipation of change and his boldness in doing what looks crazy in the short term but in time looks revolutionary. Cloud storage is basically a commodity. Levie recognized this early on and changed Box’s orientation from consumers to enterprise customers, where his relentless focus on great design was particularly striking -- and thus he put some distance between Box and the pressures of the commodity marketplace. He moved quickly into mobile. He got out in front of fears about security. He was, and is, unencumbered by legacy ideas and models, and he keeps making good decisions.
Levie likes to say that fundamental shifts in technology come around only every 10 to 15 years, and much the same could be said about an entrepreneur like him. He possesses the sort of wisdom and focus you’d expect of an industry guru, but he acts with the 24/7 obsession of a scrappy start-up founder. Give him 10 minutes, and he will make you a believer. Scott Weiss, a partner at Andreessen Horowitz, one of the venture firms that have invested in Box, describes Levie as a “glow-in-the-dark” entrepreneur. “He’s unmistakable,” Weiss says. “You talk with him for five minutes, and he says something funny and something smart and something insightful. He’s a larger-than-life character.”
He’s also only 28. Levie stands a little under 6 feet tall and has a slim, wiry frame. His hair sprouts in a graying forest above his forehead. His eyes, deep-set and bluish-gray, are each covered by a thin wisp of a brow. Like a lot of young tech entrepreneurs, he has a uniform; his is a slim-cut J. Crew suit, a pressed button-down shirt, and red sneakers.
Levie’s routine over the past several years has been stringent. He wakes at around 10. He showers quickly, and arrives at the office by 11 a.m. He downs two coffees, sometimes holding two cups at once. He rarely eats breakfast or, for that matter, lunch. He spends 90 percent of his daylight hours in meetings or interviews, to which he walks very quickly or even runs. He is almost never at his desk. At around 7:30 p.m., he takes a nap for about an hour, and when he wakes up, he gets really, really productive. Each night, he probably sends a couple of hundred emails, and by 2 a.m. or 3 a.m., he’s finally done. Levie does not take weekends off, and, in the last handful of years, he has taken one vacation, a three-day trip to Mexico with his girlfriend.
“Tip: Take the stodgiest, oldest, slowest moving industry you can find,” “And build amazing software for it.” Levie recently tweeted.
For all his decisiveness, he is a somewhat uneasy man -- self-deprecating, certainly less cocksure than your average 28-year-old centimillionaire -- and as he talks about Box’s competitors in a crowded market, I begin to understand why he drives himself so hard.
“My hair’s gotten grayer,” says Levie. “I was gray before Obama was.”
Box’s daily battles are with Accellion, Citrix, Huddle, Google, Hightail, IBM, and Oracle -- and the biggest of them, Microsoft. Microsoft’s SharePoint collaboration tool is a behemoth that generates nearly $2 billion in revenue from 65,000 companies, which manage a total of 125 million SharePoint licenses.
SharePoint was built in 2001 and was originally focused on sharing files within a company’s intranet system. Microsoft has made efforts to keep the platform up to date, but there is a broad sense that it is falling behind. As a Forrester report put it recently, SharePoint is experiencing its “awkward teenage years.” The report went on to note that SharePoint’s “uninspired user experiences mean that business management isn’t satisfied.”
At Box, the user experience trumps all. Levie’s big insight, in 2010, was that successful enterprise platforms of the future would be driven by mobility and design -- the ethos that has propelled the consumerization of IT. Consumerization means people are rejecting clunky business-specific hardware even for work purposes; they insist on cool consumer devices.inlineimage
This had been talked about for years, but it really hit an inflection point in 2011, when smartphone shipments outpaced PC shipments for the first time in history. Then, tablet sales began to explode. The research company IDC predicts that in 2013, for the first time, more tablets will be shipped than laptops. The effect of this proliferation of mobile hardware has been a shift in expectations around the software that runs on them.
“People aren’t going to put up with crappy software anymore,” says Ben Haines, the chief information officer of Box. “You have to have a fast, good user experience. And people expect to have their information everywhere. If you’re building an application that takes four weeks of training, you’re doing something wrong.”
If you’ve ever used an old-school collaboration tool like SharePoint, using Box is a pleasure by comparison. Let’s say you have a large document you’d like to share with colleagues. It could be a Word document, an Excel spreadsheet, or even a large movie file. You log in to Box and quickly upload the file, tagging it with any relevant information. Other users within your Box network can then log in to their own accounts, download the file, or share it with others as they please. The Box platform also integrates with other enterprise software providers (including Salesforce, NetSuite, Zen-Desk, and others), which means you never really have to click off screen. The site is designed with light-blue accents and a news feed; until recently, it had a Like button--it’s a bit like using a work version of Facebook.
And, as with Facebook, many of Box’s early users were driven to the platform because their friends or colleagues were using it. It had a viral network effect because it was different, better. Using Box makes sending files easier and makes collaborating with co-workers faster. In some small way, it makes work more fun.
“Tip: Take the stodgiest, oldest, slowest moving industry you can find,” Levie recently tweeted. “And build amazing software for it.”
Over the past few years, employees disenchanted with SharePoint’s stodgy user interface or simply frustrated by the difficulty in sending large files over email began migrating to Box. It was easy enough to do: Box is free to the basic user. And as users signed up in droves, IT managers -- who wanted a better way to secure the sensitive company files being trafficked through Box -- began to take notice and started buying up Box “seats,” the industry term for subscriptions.
It was a Trojan horse strategy -- sneak inside the enterprise and then expand from within. Today, Box’s revenue growth comes through viral adoption within its enterprise customers -- at each renewal cycle, IT managers are adding more and more seats. For businesses, the service costs $15 per month per seat, while enterprise customers pay around $35 per seat.
This story represents a powerful lesson to entrepreneurs entering the enterprise software business: Build something employees aren’t told to use but something they want to use. Levie didn’t start off by selling to IT department buyers; he started off by creating a great, free product that would attract early adopters. Once these employees got hooked, they wanted more, and IT buyers were forced to purchase. Today, Box has a sales team of more than 300 people, responding to inbound sales calls from around the world.
On the second floor of Box headquarters, the company has set up what it calls the Genius Bar/IT Desk, an area in which about a dozen mobile devices, ranging from Android smartphones to Apple tablets, sit on wooden stands.
In 2010, when Apple unveiled the iPad, most of Box’s largest competitors seemed to treat the tablet as if it were a peripheral device that most people would just use in their personal lives--a consumer play. Some tech bloggers were enthusiastic, but the more mainstream audience seemed to fail to grasp the oncoming significance of tablets. Stephen Elop, then the president of Microsoft’s business division, said in an April 2010 interview that the company planned to take a “wait and see” strategy to launching any software for the iPad. Not surprisingly, IT departments, which tend to take their cues from Microsoft, followed suit.inlineimage
“When the iPad first came out, the initial reaction of IT was like, ‘We don’t support that,’ ” says Josh Stein, a managing director at the VC firm Draper Fisher Jurvetson. “But end users said, ‘Well, tough. We’re going to use these. I want to use my iPad for work, and I’m going to use it whether you let me or not.’ ”
Levie was way ahead of the curve. In January 2010, when Steve Jobs stood onstage and announced the iPad, Levie knew this tablet would change everything. (“I commit to spending 10% of my annual income on ipads,” he joked on Twitter.) In the winter of 2010, Levie called his developers into a conference room and ordered them to have a Box iPad app ready as soon as the tablet became available in stores.
“Aaron just walked into the board meeting and said, ‘We’re betting the company on this thing,’ ” Stein says. “And it was a great bet.”
On March 24, 2010 -- a week before the iPad was released and two months after he first ordered his developers to create the Box iPad app, Levie took to Twitter again.
“I’ve just seen the future... and there’s no longer any paper in it. #boxipadapp.”
Technically speaking, building a mobile platform on which to send company files isn’t all that challenging. The real difficulty is proving that the information will be secure. The idea of being able to share any file with anyone at any time is alluring, but it also introduces a massive security risk, especially for businesses dealing with sensitive customer information such as credit card numbers and health care records. Among IT professionals and their employers, there is tremendous unease. Levie saw that as an opportunity.inlineimage
“The idea is, ‘How do we make Box become the enabler for them to be able to move to the cloud--the solution for their security in the cloud,’ ” Levie says. “So not that it’s a check box that allows them to adopt Box; it’s actually the reason they put documents in the cloud.”
The promise of superior security is why the start-up drchrono became a partner of Box. Drchrono provides a medical platform for doctors and patients. At a recent health-tech conference in Silicon Valley, drchrono’s co-founder and chief operating officer, Daniel Kivatinos, demonstrated how doctors use the drchrono iPad app to quickly pull up a patient’s medical history, along with any relevant images, such as sonograms or chest X-rays. The company isn’t pulling any of that data from its own servers--it uses Box as the back-end content-management system to secure its files.
Box is able to provide this service to companies like drchrono because, as of April 2013, Box was certified as Health Insurance Portability and Accountability Act, or HIPAA, compliant, the industry standard for protecting electronic health records. Getting HIPAA certification is the official way to assure patients a provider is taking all the right steps to protect their medical information online. But becoming HIPAA compliant is a notoriously lengthy and expensive process. (SharePoint is HIPAA compliant; some other Box competitors are not.) HIPAA compliance is proving valuable: In 2013, Box’s sales in the health care industry grew more than 81 percent.
"It’s a powerful lesson about the enterprise software business: build something employees aren’t told to use but something they want to use."
Today, about 30,000 third-party developers use Box’s application programming interface, or API, a set of functions that allows a third-party company to access Box’s internal data and to layer its information onto Box’s servers. Box is recording about 700 million API calls per month from third-party developers--a measure of how often users are pulling information from Box on an app.
Nonetheless, fears about data breaches are a drag on Box’s growth. Enterprise companies are not yet convinced that putting sensitive company documents into the cloud, let alone on the servers of an eight-year-old start-up, is worth the risk. Many of the companies that use Box -- especially Fortune 500 companies -- have not fully integrated their systems within Box’s servers. They use the platform to upload and share files, but that doesn’t mean their employees are allowed to post and share just any company documents.
“The market is not mature yet,” says the analyst and writer Krishnan Subramanian. Because of these fears, Subramanian believes Box’s $1.2 billion valuation might be a bit exaggerated. He puts it at closer to $1 billion. It’s not just Box or even cloud content-management services that face concerns about security, either. It’s the entire software-as-a-service industry.
Levie knows this, and when you spend enough time around him, you begin to notice something peculiar. Despite Box’s meteoric growth, and despite the company’s valuation, and despite the fact that Levie himself is worth north of $100 million, he genuinely seems to view himself as the underdog, and not merely in the marketplace. It’s more a cosmic, even philosophical view of himself.
One of Levie’s favorite writers, Malcolm Gladwell -- whom Levie recently brought in to speak at a customer conference -- once said that underdogs are “capable of things the rest of us can’t do [because] they look at things in different ways.” In his most recent book, David and Goliath, Gladwell asks, “And what does it take to be that person who doesn’t accept the conventional order of things as a given...?”
When Levie first announced that he was building an enterprise software company for the modern age, he was 23. He had no idea what the conventions of the game were. He had never used any of the software he hoped to disrupt. But to Gladwell’s point, not knowing the conventions--or simply refusing to acknowledge them--appears to have become Levie’s best asset. And the fact that he feels the odds are against him and against Box--that isn’t a reason to stop; it’s a reason to continue.
“We are the forefront of a really transformative industry,” Levie told his group of new recruits. “So make sure you’re working as hard as possible to make sure we win.”
“And that’s mostly,” he said, “my last word.”
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