Ina Fried

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Houston Comes to Austin as Kara Swisher Talks Lessons Learned With Dropbox CEO

It seems a little odd for someone who is not yet 30 to be reflecting on a career doing start-ups. But Dropbox CEO Drew Houston is not your ordinary executive.

At 29, Houston is already on his sixth start-up, having worked at his first at 14 and started another during high school. Dropbox itself came about when Houston was doing another start-up in Boston and struggling with having to save everything to USB drives.

“It was just personally frustrating,” Houston said in a discussion with our own Kara Swisher at SXSW in Austin on Sunday. “The first lines of code were written on a bus in South Station.”

Houston (pronounced “HOW-stuhn” — like the street in New York, rather than the city in Texas) had taken a year off from MIT to work on one of his start-ups, a company to do online SAT preparation. But, unlike prior Boston-area students Bill Gates and Mark Zuckerberg, Houston got his degree.

“I promised my parents I would go back,” Houston said. Plus, those other people dropped out because their companies were going through the roof, a problem he didn’t have. “There wasn’t a need for me to immediately drop out.”

Houston also recalled the story of how Y Combinator forced him to find a co-founder in order to get funding for Dropbox.

“It is like asking someone to get married in two weeks,” Houston said. Houston ended up convincing Arash Ferdowsi to drop out of school and joined Dropbox.

“It was clear that he was very smart,” Houston said. “He was interested in some of the same things I was.”

Swisher also prompted Houston to recall the story of how he was connected with Sequoia Capital by Palo Alto carpet seller and investor Pejman Nozad.

“It was just unconventional,” Houston said. “It’s not your typical Sand Hill Road experience.”

Nozad has been a landlord or investor for a number of major Silicon Valley start-ups from PayPal to Andy Rubin’s Danger.

Houston also related the story of how he took a Zipcar down to Apple’s headquarters, before ultimately turning down late CEO Steve Jobs’s overtures to buy his company.

“We actually didn’t get to numbers,” Houston said. “I was really flattered, obviously, we’re huge fans of Apple, but we really want to build this company.” The formal part of the meeting ended pretty quickly, Houston said, as Jobs then famously told Houston that Dropbox was a feature, not a product. The company also had talks, though less formal, with Google.

Houston said it was like Christmas morning at age 24 as he watched his bank account go from next to nothing to several million dollars, hitting refresh on his computer as the first venture money arrived via wire transfer.

Among the many lessons Houston has clearly learned is how to win over a crowd. Dropbox handed out free T-shirts before the talk started on Sunday.

“Oh, you are an easy group,” Swisher said.

(Update: Houston wouldn’t say how much revenue the company makes but confirmed that Dropbox is profitable. He also acknowledged that the last funding valued the company at $4 billion.)

On Competition:

Houston notes that the company has always faced competition in its core business. “Maybe the cast of characters changes,” he said. Houston notes that there are other companies offering more free storage and yet Dropbox continues to gain customers.

“Dropbox is useful to anyone with a phone,” he said. “That’s like two billion people.”

Most rivals work well only with a certain subset of devices, like Apple products or Google’s. “All of these guys have their home base and their turf to protect.”

On how it can protect all that data with only 110 people:

“That is our promise to people,” he said, that for tens of millions of people they are going to protect your stuff from all the various bad things that can happen from security threats to data loss and other issues. “We’ve done a lot of stuff” with a very small team, he said.

On what he worries about most:

It’s doing the things his customers want and hiring the right people, Houston said.

“If you do those two things you can screw up just about anything else,” he said.

On the future:

Houston said the company is expanding from file storage and into solving new problems, particularly trying to tie together other kinds of experiences.

“They don’t realize we are just scratching the surface of all of these amazing things we can do,” Houston said. “The world needs this really large-scale and elegant solution to tie this all together.”

On his talks with Facebook and Zuckerberg:

“There’s a lot of interesting stuff we could potentially do together,” he said.

On how they deal with government requests for information, whether U.S. or China or Syria:

“If you look at our privacy policy or terms of service, it’s written in plain English,” Houston said. “We really want to be the best possible advocate.

Dropbox has only had a few dozen requests from governments, Houston said. The company has looked into all of them and only handed over information in a “handful” of cases.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik