Box co-founder Aaron Levie has a humble goal in mind: Beat Microsoft and Oracle, among others, in the most lucrative game in software. With over $300 million in venture money raised and a mobile perspective on the future, the 28-year-old has a fighting chance
Twenty months ago, Aaron Levie, all of 26 years old, did something arguably foolish, undeniably gutsy and entirely counter to the prevailing mood that startups should be ‘lean’ in the internet age. Forty-five minutes into a routine meeting with his board at Box, Levie blithely announced: “I want to make a small adjustment. We need to raise an extra $50 million.” An awkward pause followed. Box had previously raised $106 million, already a heady sum for a company with just $25 million in sales and no profits. Levie’s early investor and biggest booster, Josh Stein of venture firm Draper Fisher Jurvetson, piped up: “I’m sorry, but you said $15 million, right?”
Nope. Five-oh. A month earlier, Levie, with the board’s acquiescence, shot down a $600 million offer from virtual-computing giant Citrix. That would have given the guys in the room three to 50 times what they’d put into Box just a few years prior. Now Levie was asking them to dilute their stake by some 15 percent. He hadn’t even told his co-founder about it.
They should have seen it coming. Levie is on a mission, and it’s an expensive one: To be the Oracle of the next generation of enterprise applications. Box is an online storage and collaboration service that finished 2012 with about $70 million in revenue, up 160 percent from 2011. Levie figures he can double that this year, but that’s not interesting to him.
Levie wants to create a transformative technology company for the mobile era, one that will become the glue connecting any big company’s myriad data and documents across all of its disparate software applications and makes them accessible securely on a tablet or phone. At that July 2011 board meeting, Box already offered a better mobile experience than anything Oracle, SAP or Microsoft offered. But it had only five people selling to big companies, which put it at a crushing disadvantage to the giants.
A two-hour cross-examination later, the board gave Levie the go-ahead to raise more cash to beef up the sales force, and he had no shortage of interest: His $50 million ask turned into an $81 million round, and he’s since raised another $150 million, at a valuation of $1.2 billion. Box has amassed more venture funding, $312 million in total, than any enterprise software firm in the current startup boom. Even Levie can’t keep track of it all. “Sorry, which round am I talking about?” he asks, nervously cracking his knuckles. Levie is perpetually fidgeting with something—his iPhone, frizzy curls, jean cuffs, sneaker laces—in between sips of endless cups of black coffee. He generally rises at 10.20 am and tends to fast through the workday, taking his sole meal at dinner, after a half-hour power nap in his office lair, an 8-by-10 room with nothing but a scribble-filled whiteboard, purple couch, two orange earplugs and an inhaler. He rarely drinks alcohol, even though he regularly schmoozes at wine-soaked business suppers, because after midnight is when he powers through e-mails before collapsing at 3 am.
His board has been accommodating to his ambition, in part because of this work ethic and in part because he’s taking the dilution along with them, betting together that they can make more owning less of something bigger. While his frenemy in the consumer online storage world, 29-year-old Drew Houston of Dropbox, has raised $250 million and kept an estimated 15 percent stake worth $600 million, Levie is down to only 8 percent or so of Box, giving him $96 million for his personal fortune. “My what?” he says, taking a mock puff of the inhaler. Levie’s biggest extravagance: A BMW 3 Series he leased five years ago. “I’m living the life I dreamed of as a 12-year-old. I don’t have hobbies. I want to build a big company, and this is it.”
He’s chosen a formidable industry. Four companies founded decades ago—Microsoft, IBM, Oracle and SAP—still control half of the $270 billion business software market, according to Gartner. All the others get scraps. The status quo consists of expensive licensing deals, even more pricey setup costs followed by ongoing maintenance and consulting fees just to keep the software up to date. Yet the products they’re selling are largely archaic. Most are stuck on servers talking to PCs and don’t run on mobile devices, even though 47 percent of American workers are using their smartphones for work and 16 percent are also using tablets, per Forrester research.
The new wave of more-convenient- to-own cloud-based business soft- ware, which began last decade with Salesforce, Netsuite and Workday, has swelled to dozens of startups now hitting the enterprise market with flexible pricing, mobile access and tools that make doing business as easy as using Facebook. B2B software has also been a much healthier investment play. The IPOs of Workday and Splunk went off brilliantly while consumer web firms Zynga and Groupon disappointed.
Levie squeezed his way with a low-B average into the University of Southern California as a business major. He exchanged startup ideas via e-mail with Smith, who was starting pre-med at Duke University. One was a sort of social network for college kids but limited to simply listing each student’s interests. Levie also launched a site called socalendar.com, a directory of events in the LA area. It flopped.
A second epiphany came in April 2010 when Levie was sitting in his bedroom watching the live webcast of Steve Jobs unveiling the first iPad. “My imagination ran wild,” recalls Levie. “The thing looked like a piece of paper, and that’s exactly what most businesses are still running their businesses on.” He instantly e-mailed Box’s engineers, ordering them to develop an app for the device by the time it debuted in stores—and they did. Around that same time, Procter & Gamble was sniffing around. Its executives were starting to use iPads and wanted access to their files. And while it took 18 months of courting and customising to close the deal, having a product that worked smoothly for 18,000 employees opened doors for Box at other giant companies.
A Seat at the Big table
(This story appears in the 22 March, 2013 issue of Forbes India. To visit our Archives, click here.)