When Elephants Attack

Ever wondered what it’s like to be chased by a wild pack of elephants? Do a startup and you’ll find out. 

Companies are often founded to exploit some meaningful gap in existing offerings. Skype made calling free. Salesforce delivered instant CRM capabilities, without the need for software or servers. Square brought credit payments to iPad and iPhone. In the process, these companies have taken what was once a small void and created entirely new markets. But eventually, the incumbents (elephants) wake up to what’s happening, and aim their efforts directly at the new product and market. Salesforce became the target of Microsoft and Oracle. Skype and Square have been chased by Google and PayPal, respectively.

The cloud storage and collaboration market is no exception. When we started Box in 2005, the landscape was all but devoid of elephants. No one was putting data in the cloud – heck, the word ‘cloud’ wasn’t even relevant. As a way to survey the market before building the technology, I called a dozen companies and individuals and asked them how they stored or shared information: everyone came back with horror stories about mailing hard-drives, setting up FTPs, passing USB keys, etc. We knew cloud had to be the future. And while it seemed a little far out at the time, a few things had changed about the world to make the vision practical: the rapidly dropping cost of storage, better browsers and internet connections, and a growing need to share data between people, teams and organizations.

To capitalize on these changing macro factors, we launched Box in the spring of ‘05 as an all-purpose sharing and storage tool, targeting both consumers and businesses indiscriminately. And it took off. But then in late 2006 and early 2007 the market began to change. Bigger players began to recognize the importance of the space, and the first rumors of Google Drive began to circulate.

Ultimately, we concluded that there would be a dramatic race to the bottom for the price of consumer online storage, and it would be impossible to maintain a competitive offering when elephants like Google, Microsoft and Apple could effectively subsidize their offerings. Because of the potential for user lock-in, each of these players had deep incentive to provide consumers with a drive in the sky, and with storage costs dropping precipitously, we saw a future where storage would be infinite and free.  That just doesn’t make for a great startup business.

We needed to find a market where customers valued more than just the storage of the bits, but also elements like platform, collaboration, openness and security – areas that could be continually and sustainably innovated around.  And that’s why we decided to focus on the enterprise market. Fast forward 6 years, and this differentiation is the reason that we have 10 million people on Box, thousands of developers building apps on our platform, and 120,000 businesses actively using the service, including 82% of the Fortune 500. It’s also why we give our enterprise customers unlimited storage.

Now, several years after the Drive rumors first started, Google is finally charging into this space. As a $200B enterprise, Google has a responsibility to its shareholders to enter nearly any and all massive technology markets. This is why they’ve gone after spaces like payments, social, music, books, and much more. Like it or not, this is what technology elephants fundamentally must do to survive.

Of course, the downside of too much breadth can be poor execution. Google Wallet was launched with fanfare, but hasn’t quite lived up to the vision described.  With Health, Google set out to “solve an urgent need that dovetails with our overall mission of organizing patient information and making it accessible and useful.” Apparently just not forever.  Google Wave, a product that was set to revolutionize communication, well…

At Box, our focus is extremely clear.  We’re building the absolute best, simplest, and most secure way businesses can share and manage their information from anywhere. And our customers agree. Procter and Gamble uses Box to securely manage content collaboration across 18,000 globally distributed employees. McAfee uses Box to store and share all its marketing assets, while tailoring permissions to each user's role in the organization. Clear Channel uses Box to replace clunky on-premise solutions and empower its global workforce to collaborate in real-time on any device. At AAA, sharing files with internal and external partners was critical, and Box has become the company’s main sharing and collaboration service. Every story is unique, but the themes are consistent. Box helps enterprises get work done more easily, securely, and scalably.

Our belief is that the enterprise space, ultimately, is going to be a much larger market than the consumer category.  Box and others are the beneficiaries of extremely favorable macro factors: the vast majority of businesses are dealing with a changing technology paradigm (shift from on-premise to cloud), we’re experiencing an influx of new web-connected devices (mobility), we’re collaborating across nearly every business process within and beyond our organizations (death of the firewall), we want technologies to work together and cater better to end users (openness, simplicity), and we’re dealing with more data creation within organizations than ever before (data explosion).

Throughout all this, Google will continue to be a great partner for Box. Our fundamental value proposition is that we work across any device and environment you work in. iPads, iPhones, Android phones and tablets, you name it. We appreciate Google’s innovation across devices, search, Docs, email, and many other product areas, and we’re excited to find new and interesting ways to work together.

In the article Elephants, Charging, How To Avoid, it’s recommended that the best way to avoid being chased by an elephant is “of course to avoid elephant inhabited areas at all costs.” Well, that’s simply not possible when you’re trying to change how every business in the world shares, manages, and accesses their information. If we avoided all markets with competitors that are larger or better funded, the world would be all but devoid of innovation. So we’re taking a different, yet highly recommended approach:  “Climb a large tree. Preferably one without thorns, stinging ants, or lions.” Our tree just happens to be filled with CIOs.