As It Becomes an App Platform, Dropbox Gobbles Up More Than One App Startup Per Month
Once a simple way to move stuff around between devices and people, Dropbox now wants to be a platform for apps that help people deal more deeply with that stuff.
In addition to a massive hiring spurt and fundraising stockpile, Dropbox has been quietly acquiring startups that make productivity and media apps so their teams can work on similar products internally.
In just the last three months, Dropbox’s acquisitions have included photo app Loom, collaborative document tool Hackpad, corporate chat tool Zulip and social e-book reader Readmill. The first two were undisclosed until now; the latter two had previously leaked out.
The companies each had about 10 employees when Dropbox swooped in to buy them for an undisclosed price. They’re starting to account for a significant portion of Dropbox’s 700-person staff.
While Dropbox has the attraction of being a promising pre-IPO company, it’s also generous with the acquisition offers. “They make it a no-brainer for a lot of these startups to come on board with them,” was how one venture capital source described it.
More than files: Photos, books, collaboration and chat
In some cases, the place to plug a startup team into Dropbox is fairly obvious. Loom was a personal photo stream app. The team of eight, formerly based in Germany and San Francisco, now works on Dropbox’s new Carousel photo app. The Loom product is being shut down, and users will be migrated to Carousel.
Shutting down your app sucks, but Loom co-founder Jan Senderek doesn’t seem too torn up about it. He said Dropbox showed him the Carousel app early in the acquisition conversation. “There was 100 percent alignment of the things we wanted to build and how we wanted to build them,” he said. “For us it was the decision, either we’re going to go into a war with Dropbox — or is it more important that we build this?”
In other cases, the next step for the acquired startup is more vague. Seven of the 11 Readmill team members — who were also based in Germany — are joining Dropbox. They had built an app that worked across e-books from various sources and vendors.
Members of the Readmill team haven’t yet been assigned to a particular project, said co-founder and CEO Henrik Berggren, whose deal closed just two weeks ago.
But the point for him was that he was guaranteed to have a bigger impact on the world at Dropbox than by trying to change the world of publishing as an independent mobile reading app.
“Readmill was definitely on a slower growth trajectory than we had hoped for, but I think we would have been able to raise another round,” Berggren said. “We didn’t enjoy closing down the product, but what’s important here is to look at all the things that can happen.”
The Hackpad and Zulip products, meanwhile, are being kept alive for the time being — though Zulip had been in private beta, so that’s not saying much.
The Zulip founders were students at MIT at the same time as the Dropbox founders, and since then had sold their software updating startup Ksplice to Oracle. They had come to Silicon Valley to raise a Series A round when they were persuaded by their old classmates to join forces instead.
Meanwhile, Hackpad was a Y Combinator startup that made an online text editor that competes directly with Google Docs. Here are 10 reasons, and five more reasons, that it’s better — at least according to the people who make it.
Hackpad is an obvious play for Dropbox to try to make written files more usable rather than just moving them around. However, it’s worth noting that Dropbox has already said pretty clearly it doesn’t want to make a Microsoft Word clone. Last week it publicly debuted a to-be-released tool called Project Harmony that overlays Dropbox user chat on top of desktop documents, starting with Microsoft Office.
The timing is interesting. Dropbox is picking up these app companies at a time you might think it would be cutting prices like its cloud storage competitors. A yearly subscription to Google Drive now costs a quarter of the same service at Dropbox.
Instead, for now, Dropbox is zagging in another direction. “What’s the point of storing things unless you have a delightful experience in which to consume them and share them?” is how Dropbox VP of engineering Aditya Agarwal put it.
Dropbox is making a big deal of the transition it’s currently undergoing, internally calling it “Chapter Two” and externally declaring its ambitions to be “a home for life” (as unspecific as that slogan may be) at a big public event on April 9.
As Dropbox investor and board member Bryan Schreier, a partner at Sequoia Capital, described it, “The next chapter of Dropbox is building a family of apps that are powered by Dropbox, taking advantage of that user base and ecosystem they’ve already built.”
The best-known effort on this front has been Dropbox’s acquisition of the startup Mailbox last year. Mailbox basically made a better iPhone client for Gmail (it now works on other mobile and desktop platforms).
The next addition to the app family, also announced on April 9, is Carousel, a personal photo archive that is scrollable and privately shareable.
Former Mailbox CEO Gentry Underwood and his young children stole the show at the event, as he used their photos to demonstrate the app, with the two little ones sitting with their mom in the front row, adorably excited about their starring roles. Sure, Carousel is yet another photo app, but the pitch of Dropbox’s value being more than just files was pretty believable in that one moment.
Underwood — who now oversees both Mailbox and Carousel — is the most visible example of what Agarwal described as a larger project to recruit leaders into Dropbox by buying their companies.
Agarwal himself landed at Dropbox through its first-ever acquisition in 2012, his productivity startup Cove. Dropbox has bought about a dozen more companies since then, the majority under the leadership of its corporate development head Sara Adler.
“Fundamentally, we look at teams that we can bring into Dropbox that can help us accelerate our vision,” Adler said. “We’re not just throwing money around; that’s not how we operate.”
Versus other “acqhirers” — Adler used to have a similar gig at Facebook — Dropbox tries to keep acquired teams together when possible.
“The dream and the vision we’ve sold them on is a lot of freedom,” said Agarwal. “We try to provide them with infrastructure on two axes: Technical and code infrastructure to build faster, cheaper and more scalably, and then all the things in a company you would usually have to scale up, like user operations, recruiting help, accounting help, legal help, and — let’s call it out — revenue help.”
But the problem with spending millions of dollars to acquire startup talent is that type of person — newly rich and anointed a successful entrepreneur — doesn’t tend to stay around very long. Dropbox doesn’t have enough history to prove it has more sticking power than other big companies. So far most everyone has stayed, according to Agarwal, though his own Cove co-founder (and wife), Ruchi Sanghvi, left Dropbox last fall.
Investor Schreier said he’s betting Dropbox will be different. “The strategy for this business becoming very much about applications on top of the Dropbox platform is perfectly aligned with keeping entrepreneurial leaders in the company,” he said. “They can essentially build very large services on top of Dropbox.”