Aaron Levie is unusual for a 26-year-old CEO -- he's much more excited about business software than consumer products like Foursquare.
Levie founded Box.net, an online service for sharing and collaborating on documents and other files, in 2005.
About three years in, he looked at the company and saw a split between consumers and business users. He realized he would have to choose one or the other, and banked on enterprises.
It turned out to be the right move: Box.net has made the turn from being used by individuals and small departments to selling directly to CIOs, and is winning contracts away from giants like Microsoft -- the company just got an 18,000-seat deal with Procter & Gamble.
In fact, the company's customers are growing so fast that Box recently filed for a new $35 million round -- just months after closing a $48 million round in February. The company is on track to have more than $100 million in funding at a $500 million valuation. It's also overflowing its current headquarters with more than 240 employees, and is planning to move into a new space early next year.
We caught up with Levie last week to ask him about Box and why enterprise startups are the best-kept secret in tech.
Here's some of what we talked about:
- Why most startups are focused on consumers. "When you're 22 years old or 25 years old -- the Y Combinator demographic -- you have no context for the enterprise. If you're in your early 20s and you're hanging out with a bunch of other people in their early 20s, nobody has a sense of the kinds of problems that 'real workers' run into every day. They're running into a completely different set of problems like 'what's the party going on right now that I should be going to? What are my friends looking at on the Internet that I want to read? How do I share photos and videos?' That's their frame of reference for life."
- Selling to businesses is much more exciting -- and a better business. "In the consumer market, we were making it easier to get to a file from a device, or another computer, or to be able to look up your photos. That was very interesting, but it wasn't 10x innovation. Within the enterprise, if you compare Box to something like IBM Filenet, or Microsoft SharePoint, you get almost a 10x improvement on productivity, speed, time to market for new products. So we saw an opportunity to create real innovation in that space and that's what got us excited....We think the market for enterprise collaboration will be much larger than the market for checking into locations on your phone."
- Companies should focus on what they're good at. "A jack of all trades is a master of none....What you saw with the suite product from Microsoft [Office 365], they're trying to bundle ERP, CRM, collaboration, e-mail, and communication all as one package. If you go to the average company in America, that's not what they've implemented. They've implemented Salesforce as their CRM, Google Apps for email -- a large number of them, in the millions -- they'll be thinking of Workday or NetSuite for their ERP. Each of those companies is or will become a multibillion-dollar company just focused on that best-of-breed aspect of what they're trying to solve."
- Which is why Google+ will fail. “Google wants to move into social. Do you really think they're going to be able to do that? My bet is no. I think that Facebook will block them out. Maybe if Google buys Twitter, that could work. But the way our brains work and the way companies can manage areas, the companies that tend to succeed do when they have that level of focus....The dynamic with social is you tend not to have products with 30% market share. It's all or nothing. Email works because we have open standards that let you communicate across any email client. But with something like Google+, you really are going to have 5%, Robert Scoble and you and some other digerati, but unless you get over that curve to my mom, you're really going to have a hard time getting the full scale you need."
- Time is on his side -- and working against Oracle and Microsoft. "Companies that keep customers captive because of contracts aren't always the hardest to disrupt. Ultimately, it doesn't create a great customer-vendor relationship. There's a lot of fractures in the market where that exists. I wouldn't mind being a Workday or a NetSuite going up against Oracle customers because Oracle has had now 20 years of these very difficult tenuous customer relationships. There are literally lawsuits from vendors to customers and customers to vendors in that industry. It's kind of a crazy industry because there's this asymmetry where you'll sell software to an enterprise, and they will pay you regardless of whether that's successful or not. That's entirely unlike SaaS where customers will only pay us if we're successful."
- One reason Steve Jobs will be irreplaceable. "I think for the next 5 to 10 years Apple will just perform just fine. But what was the next device category that he would have created -- it won't come to the market with as much credibility. Just think about our company. Within minutes of watching the iPad keynote last January, we put a team on building an iPad app....for no other reason that Steve Jobs was behind it, we felt confident that we could build an app for this thing because he will make it go to market....If you only follow him every time he did something, maybe 20 percent of the time you'd go down the wrong path, but the vast majority of the time you'd be successful."