Dropbox and why you should invest in people

It was reported today that Dropbox will generate $100M in revenue this year. Whether or not those reports are right, it is certainly a great product, beloved by its customers and will almost certainly be wildly successful. I knew the founder, Drew Houston, back before he started Dropbox. He was an MIT CS guy, hanging around Boston in 2005 when I was working on SiteAdvisor and spending most of my time trying to recruit great devs. He was introduced to me by my investor and friend Hemant Taneja, another MIT CS guy, as a super smart kid I should recruit. I tried to recruit him but lost him to another company called Bit9.

(Funny side story about Bit9: After we sold SiteAdvisor to McAfee in 2006, I encountered Bit9 again when I was visiting SF and crashed a party hosted by one of their investors. This investor was a lifetime middle manager from Symantec who had never started a company and was now a partner at a big VC firm. He spent 30 minutes giving a speech about how the Internet was dead and people investing in it were stupid and his firm was focused on Cleantech instead, and then started talking about how rich he was and how many wineries he owned (yes, seriously). He barely mentioned the poor startup that sponsored the event. It was totally embarassing and represented everything wrong with the old, dead VC world. When I was introduced to this jackass VC after his speech as someone who had just sold his company to McAfee, he said to me “Bit9 is going to eat McAfee’s lunch.” Trying to neg a startup guy by saying a startup is going to beat an incumbent just shows how incredibly clueless and middle-managery this guy was.).

Anyways, the next time I met Drew was after I left McAfee and rented a small temporary office space in the garmet district in NYC. We were on the 19th floor of this awful shared place called E-merge (this was before the resurgence of incubators) in a tiny room infested with fruit flies. I was sitting there with my pals from SiteAdvisor Matt Gattis and Tom Pinckney coding some random machine learning ideas which eventually led to the seeds of Hunch. Drew came by to get advice on his new startup and we met for an hour or two. We chatted about strategy, recruiting, fundraising etc – the usual early stage conversations. He then moved off the California – I think to do Y Combinator. Next time I heard from him he had just closed a round of financing from Sequoia. I was never offered to invest in the company but probably I could have if I asked Drew since he had come to me for advice. Sometimes when people come to you for advice like that they are really hoping you will ask to invest and I didn’t. I’d have to say in all honesty if I were offered I probably would have passed. 2005-6 saw about 100 consumer backup/storage/file sharing companies raise funding. I remember after Drew left my office I looked at some article on RWW or Mashable or someplace that listed page after page of consumer backup/storage/file sharing companies. It just seemed like an insane idea to start another one and it seemed like Drew’s only thesis was that his product would work better.

Well, it turned out storage is a hard problem and having an MIT storage guy who builds a great product actually matters. I don’t know how under any investment philosophy that emphasized theses, areas of investment, roadmaps, etc you could have decided to invest in B2C file sharing company #120 in 2007. Obviously Sequioa knew better than me and invested. I think the only way they could have made that decision was by ignoring the space, competitors, etc. and simply investing in a super talented person/team. Dropbox is one reason I now have a strict rule to only invest in teams. There are other examples of companies I missed and other examples of the converse – companies where I invested in mediocre people chasing a great idea and the company failed – but Dropbox is emblematic to me as to why you should always invest in people over ideas.

http://twitter.com/JennyAnnChou Jenny Ann Chou

You didn’t really elaborate on why this Drew Houston was so great beyond dropping the words MIT, YCombinator and Sequioa, which made your conclusion on investing in people over ideas weak.

The title says “Dropbox and why you should invest in people” but a third of your piece was dedicated to a tangent about a pompous VC guy and the remainder appeared to be introductory set up.

I’m not saying your conclusion is wrong, but if you’re going to base an argument about great people trumping ideas, then it would be helpful to provide more evidence about these supposedly great people.

Thanks for taking feedback and suggestions,

Jenny

http://www.cdixon.org chris dixon

well i knew drew for a couple of years, so i was assuming it was clear
i thought he was great based on personal interactions. but i should
have made that clearer.
http://www.cdixon.org chris dixon

well i knew drew for a couple of years, so i was assuming it was clear
i thought he was great based on personal interactions. but i should
have made that clearer.

http://twitter.com/JennyAnnChou Jenny Ann Chou

Okay, understood. Thanks.
http://twitter.com/JennyAnnChou Jenny Ann Chou

Okay, understood. Thanks.

http://twitter.com/omarelamri Omar El Amri

Hi Chris,

Great post. I also attended your NYU Startup panel: great insight!

I have a request for a post unrelated to this topic. It’d be great if you could elaborate on the node system for the Hunch Tase Graph. I founded a startup called At (my profile picture) and I’m working on a platform called KnolFlow, based on my thesis: “Knowledge Flow: The Multidimensional Representation of Knowledge Modelled after Cerebral Neural Networks.” Let me elaborate on this to tell you why I’m asking for an explanation of the Taste Graph node system: Basically, the KnolFlow graph nodes are divided into three categories: Objects, Methods, and Common Sense. Nodes are connected on multiple dimensions. For example, the object node, Pablo Picasso, is connected on the “Endeavors” dimension to the nodes that represent his artwork, i.e. Guernica, etc… And on the “family tree” dimension, he is connected to his wife, kids, parents, etc… Simple. The Common Sense category deals with the nature of Objects and their Methods. For example, humans are connected to the Animal Kingdom, and to their methods such as Run, Eat, Talk. Each Method, has properties such as Velocity and Acceleration for Run.

Now I have studied all of the graphs out there and have come to the conclusion that at this point only two graphs are mature enough and sophisticatedly structured enough to be integrated into KnolFlow, if it were to ever be as successful as I would like it to be. They are Facebook’s Social Graph, and Hunch’s Taste Graph. And I’d like to integrate Hunch into KnolFlow on two levels actually: at the Object level and into Common Sense. First, the taste connections that you’re building will add tremendous data on the nature of the most important objects on KnolFlow, humans. This is at the Common Sense level, of course. Moreover — and this is my most immediate concern — if you’ve already mapped out a large amount of objects, it would be better for me to integrate them into KnolFlow at a one-stop-shop from Hunch, rather than to crawl for them on their respective — often greatly inconsistent — graphs. After all, a local business on the Yelp graph is just the same as its counterpart on the Foursquare graph, although the connections are semantically different, but those can come later.

So what I am asking is, if you guys at Hunch even reveal this type of information, for you to explain how you structure your nodes irrespective of the Taste Graph. Are they in SQL tables? Or in purely XML documents? How do you organize them? Are they connected? For example, is a local McDonald’s a child node of the McDonald’s corporation? Is “The Dark Knight” a child node of Warner Bros.? And finally, do you plan on building an API to open up your nodes, not necessarily your connections, to third parties?

I don’t know what your plans for Hunch are, but I do know that if you license your graph that would present a tremendous opportunity for a platform like mine. However, because I know you like to reference Metcalfe’s Law and how opening up your graph will benefit the smaller graphs more, I must say that it could open up Hunch to wide array of very lucrative applications. I’m building KQL, or Knowledge Query Language, that will allow people to query KnolFlow, and I can imagine so many applications of the taste graph within that. For example, in Ad serving, roughly something along the lines of: SELECT advertisement FROM ALL adagencies WHERE product IS NODE OF dixon, chris IN DIMENSION taste OR likes. Something like that would serve an ad of a product that you probably like according to Hunch and Facebook Likes. In the case of Hunch, it would query your data type in the Taste dimension of Common Sense.

This comment is beginning to look like an essay so I better end here. There’s so much I’d like to get your insight and advice on, but you’re extremely hard to reach. I guess if I could shamelessly ask you for one more thing it would be for you to publish your reading list that everyone talks about. I’m especially interested in what you read in cognitive science.

Thanks a lot,
- Omar
Pingback: Business News Online 24-30 April 2011 « Irish Business Advice from O'Mahony Donnelly
http://blog.botfu.com Kevin Marshall

I don’t do investments…but I do often pitch in with code and/or tech. help/advice to people in the startup world…and the way I decide on who I’ll do that for (especially since it’s usually for free or dirt cheap) is mostly based on the people/team (I’ve done it for all the wrong reasons in the past as well and it never works out as well as when I make the decision based on the people first)…
http://startupcfo.ca startupcfo

Chris, are you saying that as a seed investor your decision is based solely on the team or that you are now overweight on the team but still try to figure out the other elements and put a thesis together?
Pingback: Stop Worrying About Your Competition!
BuyGiftsItems

Dropbox and why you should invest in people” but a third of your piece was dedicated to a tangent about a pompous VC guy and the remainder appeared to be introductory set up.
a deal a day
Pingback: Stop Worrying About Your Competition! | bizibly
Pingback: Business News Online 19-30 April 2011

Chris Dixon