Ashton Jackson

Drew Houston’s company was born from a very millennial problem.

As a student at MIT, Houston repeatedly lost USB drives with important information on them, he told “Lenny’s Podcast” in an episode that aired earlier this month. In 2007, at age 24, he got fed up and created a cloud storage platform for his own personal use. Later, he built it out into the file-hosting company Dropbox — which has a $9.62 billion market cap, as of Thursday afternoon.

“I started Dropbox more out of just personal frustration,” said Houston, now 41. “It really felt like something only I was super interested in as far as file syncing, and focusing on one customer, which was myself.”

This wasn’t Houston’s first entrepreneurial foray: He’d launched an SAT prep company called Accolade in 2004. The gig was “ramen profitable, so to speak, but more importantly a great introduction to the wild world of starting companies,” he writes on his LinkedIn profile.

Dropbox’s success, in contrast, gave Houston a net worth of of $2.3 billion, according to Forbes. He remains the company’s CEO today, overseeing more than 700 million users from 180 different countries on the platform.

But Dropbox’s growth didn’t happen overnight.

‘They just totally nuked our business model’

Popularizing cloud storage was a double-edged sword, Houston said: As Dropbox became popular, it increasingly had to survive competition from giants like Apple, Microsoft and Google.

“All of them launched competing products in one form or another,” said Houston. “Steve Jobs was on stage in 2011 announcing iCloud, calling out Dropbox by name as something that will be viewed as archaic. And similarly, we always felt like we were in the shadow of the hammer of Google launching Google Drive.”

Dropbox was relatively large itself by that point, with a reported $4 billion valuation in 2011. Over the next few years, it acquired an email app called Mailbox and launched a photo management app called Carousel.

But new product lines couldn’t solve a bigger problem: By 2015, platforms like Facebook, Snapchat and Instagram were providing some of Dropbox’s core file-sharing services for free.

“They just totally nuked our business model ... [It was] even worse because it was so easily anticipated,” Houston said. “So this became a very public and personal embarrassment for me. How could we not have predicted that, or been out in front of that?”

‘All you can control is how you respond’

Houston read business books to help him strategize, including “Playing to Win” by ex-Proctor and Gamble head Alan G. Lafley, he said. His takeaway: Focus on what you can control and do well, instead of what your competitors are doing.

Dropbox shuttered Carousel and Mailbox, cutting an undisclosed amount of staff. It launched Magic Pocket in 2015, an “in-house multi-exabyte storage system” that allowed Dropbox users to handle bigger file uploads and store files at a larger scale — a new competitive edge, said Houston.

The lesson, he said, is to view challenges as opportunities to improve: Without the strong competition, Dropbox might never have pushed itself to grow.

“Every time you move up a league, your reward is a stronger and better opponent and potentially a more unlevel playing field,” said Houston. “That’s just the way it is. You can’t control that. All you can control is how you respond.”

CNBC