- The speaker is Aaron Levy, CEO and co-founder of Box, an enterprise software company.
- He wants to convince the audience that building an enterprise software company is better than going into the consumer space.
- Box has 240,000 businesses and 27 million users, serving a wide range of industries.
- The company started in 2005 with the idea of making it easy to share files online.
- The cost of storage was dropping, browsers and networks were improving, and there was a growing need for cloud data.
- Box launched as a free product and gained a large user base.
- The speaker will discuss the history of Box, the changes in enterprise software, and provide advice for building an enterprise software company.

- The startup had a problem where they had built a comprehensive product for consumers, but an insignificant product for enterprises.
- Consumers didn't need all the features, while enterprises needed more security and capabilities.
- They had to choose between focusing on consumers or enterprises.
- Consumer startups are fun but face the challenge of monetization, while enterprise software is unsexy and complex.
- Enterprise IT spending is much larger than consumer app spending.
- Enterprise software sales process is slow and the user experience is often complicated.
- The founders were young and inexperienced, and investors doubted their ability to succeed in the enterprise market.
- They decided to bring the scale and consumer experience of their company into the enterprise market.
- They focused on changing the complexity of software, speeding up the sales process, and designing for the user.
- They built their company around the changes happening in the enterprise market.
- They now have 240,000 businesses using their product.

- The enterprise and the software used within it have undergone significant changes in the past 5 years.
- Most application categories are moving to the cloud, eliminating the need for on-premise technology implementation.
- The shift to cloud computing allows for cheaper, on-demand computing and easier adoption of new technology by enterprises.
- Customized software is being replaced by standardized platforms, allowing for more customization at the user level.
- The market for enterprise software has expanded to include small businesses as well as large corporations.
- The rise of mobile devices has led to a user-led IT model, creating opportunities for startups to provide software solutions.
- The increase in smartphones and internet users has fundamentally changed IT models and created opportunities for software companies.
- Enterprises in various industries are undergoing business model and technology disruptions, creating a need for new technology solutions.
- Examples include the need for technology in retail for omni-channel commerce, in healthcare for personalized experiences, and in media for on-demand content distribution.

- The convergence of industries is leading to the need for new software and technology in various sectors.
- Every company will need to incorporate technology into their operations to survive and remain competitive.
- Partnerships between companies and the technology industry will be crucial in the next 5 to 10 years.
- Spotting technology disruptions and identifying gaps in existing solutions are key to building successful enterprise software companies.
- Starting small and focusing on a specific problem or user experience can lead to expansion and success.
- Finding asymmetries that incumbents cannot or will not address can give a competitive advantage.

- The key to success in building a technology company is to make the technology work across all platforms and be adaptable to different customers.
- Look for opportunities to do things that are technically or economically infeasible for traditional incumbent companies.
- Find customers who are at the bleeding edge of their industry and work with them to discover how your product can evolve.
- Listen to your customers, but don't always build exactly what they ask for. Distill their requests into the best and simplest solution to their problems.
- Modularize, don't customize. Build a platform that can deliver vertical or custom experiences through openness and APIs.
- Focus on the user experience and bring consumer DNA into the product development process.
- Leverage the internet and user data, but still utilize salespeople to help customers navigate the product and competitive landscape.
- Read the books "Crossing the Chasm," "Innovator's Dilemma," and "Behind the Cloud" for valuable insights.
- Now is a great time to start an enterprise software company, but if it doesn't work out, there are job opportunities available.

- Aaron Levy, CEO and co-founder of Box, discusses the advantages of building an enterprise software company over a consumer-focused one.
- Box started in 2005 as a file-sharing platform and has grown to serve 240,000 businesses and 27 million users across various industries.
- The shift to cloud computing, standardized platforms, and mobile devices has created opportunities for enterprise software companies.
- Technology disruptions in industries like retail, healthcare, and media require new software solutions.
- Building successful enterprise software companies involves spotting disruptions, focusing on specific problems, and adapting to customer needs.
- Leveraging user data, focusing on user experience, and utilizing salespeople are important strategies.
- Recommended books for insights are "Crossing the Chasm," "Innovator's Dilemma," and "Behind the Cloud."
- Job opportunities are available if starting an enterprise software company doesn't work out.

Lecture Transcript: http://tech.genius.com/Aaron-levie-lecture-12-sales-and-marketing-annotated

Aaron Levie - founder of Box, enterprise master, Twitter comedic genius. In this lecture, he'll convince you to Build for the Enterprise.

See the slides and readings at http://startupclass.samaltman.com/courses/lec12

Discuss this lecture: http://startupclass.co/courses/how-to-start-a-startup/lectures/64041

Can we turn it up a little bit so it's more pump up?

We gotta find the beat and then we gotta clap to the beat.

That'll be about the most pump up thing that ever happens in enterprise software, so The rest is sort of downhill from here.

So, thank you for that intro, that well rehearsed intro.

Confirming the facts as you're saying them.

So I'm Aaron Levy, CEO and co-founder of Box.

Welcome to this edition of, of how to build an enterprise software company.

This is the course that you're taking, right?

My job is to try and convince you that everybody else who speaks throughout this sort of whole class is wrong.

And that you actually want to build an enterprise software company.

And so hopefully we'll be able to kind of work through this and you'll have a good sense of why it's super cool to be in the enterprise.

And why a lot of the sort of perceptions of, you know, going into the whole consumer space where it's, you know, so much fun and everything, why that's wrong.

And why you want to do enterprise software.

Who wants to build an enterprise software company?

And we'll hopefully that will not have shrunk.

So that's, that's really actually the only goal I have at this point.

So, well, we're gonna talk about 3 things today.

The first is the quick background and, and kinda history of Box.

Cuz when we started the company, we didn't know that we wanted to do enterprise software.

And so I wanna kinda get through a little bit about why we decided to go after the enterprise and what we do today.

And then we're gonna talk a little bit about what are the major kind of factors that have changed in enterprise software that, that make it possible to, to do a startup today in this category.

And then finally, we'll talk a little about some, some patterns that you can kind of exploit and some ways to recognize and ways to actually go and build an enterprise software company yourself.

And that's hopefully there'll be some practical, useful advice.

Just as a forewarning, My voice is, I've been speaking a lot the past couple days.

So hopefully, I'll be able to get to that third part of the device and actually be able to talk.

But I'm gonna be downing a lot of water, so I apologize for that.

So just quick kind of high level stats about Box.

We've got 240,000 businesses that use the product.

There are over 27 million users that, that have brought Box into their organization and use it as individuals.

And there's, we're in about 99% of the the Fortune 500.

Unfortunately that last 1% is really just Microsoft.

And they don't seem to want to, they don't seem to want to buy from us.

So we have to, we have to work on that a little bit.

But certainly you know, a decent amount of scale.

A lot of users that have brought Box into enterprise environments.

These are some of the, the large organizations that are, that are using the product.

Everything from manufacturing and consumer products to companies like General Electric.

Stanford Healthcare actually uses the product for collaboration within the hospital environment and some of the research.

But between healthcare, media, manufacturing, these are the sort of range of industries that we serve.

Cuz we, we didn't really start the company to try and go build an enterprise software company, even though that is how things ended up happening.

So, when we started the product so we launched the company in 2005.

We got the idea actually in college back in 2004.

And so was anybody using the Internet back in 2004?

So, so basically, I don't know if, if millennials use the Internet.

So back then, sorry, okay, no more age jokes.

So, back in 2004, you might remember that there wasn't a lot to do on the Internet.

So not a lot of things that you could go to.

You couldn't send people 15 second messages and photos that disappeared, because you didn't even have a phone to send them photos.

So so in the Internet in 2004, there wasn't a lot going on.

This is basically what the Internet looked like.

Sort of a, a barren, deserted landscape and this was the Internet.

And just to clarify The happy camel's Google and the sad camel's Yahoo.

And that was, that was effectively, this was the Internet, and this is accurate.

Yahoo has, has done a lot better since then, but, but back in the middle 2000s, they were certainly trying to find their way.

And Google was sort of, you know, kind of taking over the world.

But this was the entire, this was the extent of the world.

So, what we noticed in 2004 in college was that it was, for some reason, and this isn't so much the case today, but back in 2004, it was like really hard to share files.

And as simple of an idea as that is now, you, you go back 10 years and and it was either really expensive or it was really hard to move data through different corporate networks.

So I, I had an internship at the time and And in the internship, most of my job using data was actually just to, to copy, you know, printed out pages and then put them in cabinets.

That's also, that's what you do as an intern and if you're not a, a computer science student.

So, So I was like really, really good at copying paper.

And unfortunately not a skill that has really been useful today, but it was really hard to share files.

And then in classroom environments, you're constantly working with lots of other people, and it was also hard to share files.

Where I went to USC, and USC gave you 50 megabytes of online storage space in your email account.

And and then it would auto delete every 6 months.

So So basically, I don't know who was running IT at the time, but they certainly didn't buy hard drives.

So it was just like really, really hard to store and share files.

And so we said, well, why don't we make it really easy to store and share files from anywhere?

And so we got this idea for, at the time it was called box.net.

And the, the, what we noticed was there were a bunch of factors that had changed in the software world.

The first was that the cost of storage was sort of dropping dramatically.

So in our business basically every year or 2 you can double the amount of data and storage that goes into a hard drive.

So what was uneconomical 2 or 3 years ago, all of a sudden becomes feasible because the cost of computing and the cost of storage has dropped.

We had more powerful browsers and networks.

People were using the much faster Internet in both their homes and in the classroom.

And then people had more locations that they wanted to store and share information from.

And so, we had these sort of 3 factors that all of a sudden were emerging.

And I'm going to, I'm going to sort of pull these factors back later when I, when I give some kind of tactical advice.

But, but sort of the first point to remember is, always sort of look for these changing technology factors.

Cuz any market that has a, a significant change in the underlying either raw materials or enabling factors is an environment that's about to change in a very significant way.

And so we were very fortunate that basically the need for data in the cloud was growing in importance.

And the cost and the feasibility of doing it was also improving rapidly.

And so we decided to put together this really quick version of Box.

And the idea was let's make it really easy to share files.

We we got angel funding from this guy named Mark Cuban.

And and this was before Shark Tank, but it was very similar.

And so we, we got this funding and we decided that, okay, this is gonna be super exciting.

We're gonna move to the Bay Area and it's going to be totally awesome.

And and when, you know, when you drop out of college, anybody drop out of college yet?

So when you, when you drop out of college, like everyone sort of pictures that it's just going to be, you know, incredible.

It'll be like Bill Gates or, or Michael Dell dropped out of college and, and it'll be, you know, super exciting like Michael Dell or Steve Jobs dropped out of college.

But nobody ever remembers that this guy dropped out of college also.

And, And so it's not really a guarantee, obviously, that it's going to be successful, but it's what you do.

And actually, funny enough, I don't even know if this guy dropped out of college, but it just sort of looks like he had to.

But, and I apologize if anybody's related to me.

It's just a funny picture on the Internet.

So so basically we decided we would drop out of college.

We moved up to first Berkeley and then we moved to Palo Alto a little bit thereafter.

And we decided that that we were going to open up the product for free.

We got hundreds of thousands of people that would sign up for the product every single month.

So we had a free version of the product called, if you went to box.net you got a free 1 gigabyte of file storage space, which was again, quite a bit back in 2006 at this point.

But we were getting so many users, and we were trying to figure out what to do.

And what we ran into was a common problem that really any startup runs into, but was really pronounced by our business model.

Which was that for consumers, we had built a very robust, a very comprehensive product.

And for enterprises, we had actually built 2 sort of insignificant of a product.

So for consumers, what we were running into was, we had all these features that you could pay for, but a lot of the consumers didn't need all of those features.

And for enterprises, we didn't really have enough security and we didn't have enough capabilities around how enterprises wanted to use their data.

So we basically had more functionality than what a consumer wanted, unless the enterprise wanted it.

And we found ourselves basically in this in this period where it's very difficult to figure out what we wanted to go do with the business.

And so we were at this path where there were, where basically we, we just had to choose.

We're at a juncture where we had to choose which path to go down.

And this was back in early, mid 2006 up to late 2006.

So I was, I think, 23 at the time, the co-founder was, was 22.

And so what we, back in, back in 2006, 2007, we imagined, you know, these 2 paths and, and sort of, the, the worlds were very, very different.

Like when you do a consumer startup, it's basically just lots of fun.

And you know, you have parties all the time.

And then in the enterprise, you basically are battling these just large incumbents.

It's a fairly thankless, you know, model because, you know, people just generally hate enterprise software.

So that was sort of how we imagined that the 2 paths was, was we had to choose 1 of these 2 worlds.

And so we looked at that and we said okay, well consumer looks really fun, enterprise looks really hard, and, and there's a lot of competition.

At the same time, in the consumer space, you are always fighting this issue of, how do you monetize?

How do you, how do you actually get people to pay for products?

And in the consumer space, there's really only 2 sort of business models that you can do.

You can have people pay for your application or you can provide advertising on the application.

And so just to give you a little bit of perspective, this is, these are today's numbers.

Just to give you a little bit of sense of the scale difference in the consumer world.

There's about $35 billion spent on mobile apps every year.

The $35 billion, that's a lot of money being spent on mobile apps today.

In for advertising, the global digital advertising market is $135 billion.

So, you know, basically combined, most consumer companies are going after, if you're not doing e-commerce, going after about $170 billion of either sort of purchasing power on applications or global advertising around these kinds of services.

So, big numbers, lot of opportunity there.

However, in the enterprise, there's actually $3.7 trillion spent on enterprise IT every single year.

So these are the servers, the infrastructure, the software, the networking, the services, all of that stack of technology equates to a few trillion dollars spent every single year.

And and so what we realized was, okay, there's a pretty wide delta between these 2 markets.

We are going to be fighting over trying to get consumers to pay a few dollars a month.

And Google and Microsoft and Apple will probably try and, and make this product be free over time.

And there were sort of rumors that Google Drive was coming out and these kind of products that eventually happened were going to come out.

But in the enterprise, it's not so much about that, that they are trying to always save money on IT.

They're actually trying to increase productivity.

They're trying to get higher performance from their businesses.

So the value equation is very different, right?

In a consumer, We have a limited amount of money that we want to actually, you know, make sure that we can serve for as few things as possible that we're going to spend.

In the enterprise, it's a little bit of a different shift where you're trying to think about actually, what can I get out of technology and how, how much value is that for me?

So, So that was a really important data point.

However, the problem was that enterprise software was really, really unsexy, right?

So again, very competitive, very difficult to build a business.

It wasn't something that really you, you should have shot out of bed in the morning and said okay, I'm super excited to build an enterprise software company.

And the reason for that is actually, was actually pretty straightforward at the time.

The, the way that you built software was very slow.

So you, you, you, you, you, you, you had to be very slow because you're, you couldn't break anything for customers.

The sales process was very slow because customers take a long time to purchase technology.

So I think everyone's sort of used to this concept that, you know, usually when you try and sell enterprise software to a company, it can take up to a couple years for them to actually just buy the software.

And then it can take a couple more years for them to, for them to even implement the technology in the first place.

So a lot of companies are around for a few years without having their technology even used in the enterprise.

That felt like, like a huge problem and, and not like something we wanted to be a part of.

The, the technology itself is fairly complex.

So the user experience, I don't know how many people have had to use most enterprise software, but it's generally really complicated.

You, you, you find yourself asking why in God's name did a designer try to put 47 buttons on the page.

And the reason is something we'll get into in a second, but basically there's just no love or care for the design and user experience.

And then finally, if that wasn't bad enough, all of a sudden you had to think about how do you actually sell the software.

And for anybody who loves the power of the Internet, this notion of having a sort of sales intermediary to get to your customer seemed like really unappealing.

Like you're gonna have to go hire a bunch of people that are gonna be everywhere in the country and they're gonna be the only interface you have to your customer.

You're going to have to hire these guys named Chuck.

And and Chuck's going to roll in with a briefcase.

And he's going to just try and sell lots of enterprise software to the customer just so we're clear this is what Chuck looks like.

And, and that was the, the, the sales process that you, that, that in the enterprise that we at least imagined in our head.

And I mean Chuck looks like a happy guy, but, but he's still an intermediary to getting your software And we were saying, well, why can't we take the power of the Internet and actually get our technology out to people directly?

Why, why should we have to go through this sales intermediary as we as we scale up the business?

Now, I'll get into, in a minute, why we were wrong about about the sales process.

But this was the sort of fear that we had at the time.

And then, if that wasn't hard enough, we had investors in 2007 saying basically, there's no way you're going to make it in the enterprise.

You basically are, again, a founding team of, of early 20 year olds.

You don't have anybody on your team that has been in the enterprise.

The Microsoft and Google and all these things are, I mean not Google, but Microsoft, EMC, Oracle, IBM.

And it's gonna be very, very hard to actually succeed.

And to be fair, they were right on a number of areas, right?

My co-founder, for instance, looked like he was 13 years old.

So just not really, just to be clear on this, what he looked like.

This is, this is him as our CFO at, I think this is him at 29, but it looked like we were going to go run off with the money and go to Disneyland.

So, so I totally can appreciate why they didn't think we would be able to pull it off.

So, so basically, we we decided, okay, well we still have to go do it.

We're gonna take the, the sort of scale, the consumer experience, the DNA of our company.

We're gonna see if we can bring this into the enterprise.

We're actually, we had an investor who was equally early in his career and made a bet on us because sort of with the belief that there was something fundamentally changing with the enterprise that we would be able to take advantage of.

And so, we decided that if we're gonna do the enterprise, if we're gonna go after the enterprise, that we would have to play by a very different set of rules.

So, What about the complexity of software can change in this new era, what about the fact that the sales process is very slow, can change in this new era?

How do we move and go directly to the user and to the customer as opposed to having this very sort of indirect process of getting our technology out there.

How do we build and design for that user as opposed to just for the sale and sort of for the RFP process that a customer is going to go through.

And so we looked at all of the factors that were true of the enterprise and we said we're going to do, maybe not in all cases the opposite, but we're gonna find what has changed about the technology world where we can take advantage of that shift and build a better and a newer enterprise software company.

And so that was the decision that we embarked on.

This is the path that we embarked on about 8 years ago.

And that is why we've been focused on the enterprise.

And so today, again, we have about 240,000 businesses that use the product.

And the reason is we, we architected the, the business model, we architected the software, we architected the solution to work in sort of 1 specific version of the world.

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Building for the Enterprise with Aaron Levie (How to Start a Startup 2014: Lecture 12)