Can we keep playing, wait, okay good.
Can we turn it up a little bit, so it's more pumped up?
>> That's loud.
>> Okay, here we go, okay.
>> Okay, so we gotta find the beat and
then we gotta clap to the beat.
>> Okay.
All right.
Okay, that's pretty good guys.
All right, we're good.
We're good.
Thank you.
Okay, please stop.
Okay, stop the music.
Thank you.
Okay, cool. Can you put on
the presentation, thank you.
>> That'll be the most pumped up
thing that ever happens in enterprise software, so
the rest is sort of downhill from here.
>> So, thank you for that intro,
that well-rehearsed intro, thank you.
>> Confirming the facts as you're saying them,
very good.
So I'm Aaron Levie, CEO and co-founder of Box.
Welcome to this edition of how to
build an enterprise software company.
That's my understanding. This is the course that
you're taking, right, is that correct?
>> No, okay, so.
>> Here's my job today.
My job is to try and
convince you that everybody else who speaks throughout
this whole class is wrong and that you
actually wanna build an enterprise software company.
And so hopefully we'll be able to
kinda work through this, and you'll have a good sense of
why it's super cool to be in the enterprise.
And why a lot of the perceptions of
going into the whole consumer space, where it's,
you know, so much fun and everything.
Why that's wrong and
why you wanna do enterprise software.
Who wants to build an enterprise software company?
Good, all right.
Thank you very much.
Hopefully we'll do a vote at the end and
hopefully that will not have shrunk.
So that's really actually the only goal I
have at this point.
So, we're gonna talk about three things today.
The first is the quick background and
history of Box.
Cuz when we started the company, we didn't know that
we wanted to do enterprise software and so I wanna kind
of get through a little bit about why we decided to
go after the enterprise and what we do today.
And then I'm gonna talk a little bit
about what are the major kind of factors that
have changed in enterprise software that make it
possible to do a start up today in this category.
And then finally we'll talk a little
about some patterns that you can kind of exploit and
some ways to recognize and ways to actually go
build an enterprise software company yourself and
hopefully that'll be some practical, useful advice.
Just as a forewarning, my voice,
as I've been speaking a lot the past couple days.
So hopefully, I'll be able to get to that third part of
the advice and actually be able to talk, so we'll see
how we make it but I'm gonna be downing a lot of water so
I apologize for that.
So building for the enterprise.
This is what we're gonna talk about.
So just quick kinda high level stats about Box.
We've about 240,000 businesses that use
the product.
There are over 27 million users that have brought Box
into their organization and used it as individuals and
we're in about 99% of the Fortune 500.
Unfortunately that last 1% is really just Microsoft.
And they don't seem to wanna buy from us.
So.
>> We have to work on that a little bit.
But certainly, a decent amount of scale,
a lot of users that have brought Box into
enterprise environments, these are some of
the large organizations that are using the product.
So, a very wide range of industries, everything from
manufacturing and consumer products to companies like
General Electric.
Stanford Healthcare actually uses the product for
collaboration within the hospital environments and
the research.
But between healthcare, media, manufacturing.
These are the sort of the range of
industries that we serve.
So, the question's how did we get here?
Cuz we didn't really start the company to try and
go build an enterprise software company even
though that is how things ended up happening.
So when we started the product, so
we launched the company in 2005.
We got the idea actually in college back in 2004.
And so, was anybody using the internet back in 2004?
Okay great.
So basically, I don't know if
millennials use the internet back then.
Sorry.
Okay, no more age jokes.
All right, here's the point.
So, back in 2004, you might remember that there wasn't
a lot to do on the internet.
It was actually kind of boring right?
This is before Facebook.
This is certainly before Snapchat.
So not a lot of things that you could go to,
you couldn't send people 15 second messages and
photos that disappeared,
cuz you didn't even have a phone to send them photos.
So in the internet in 2004, there wasn't a lot going on.
This was basically what the internet looked like.
Sort of a barren, deserted landscape and
this was the internet and just to clarify,
the happy camel's Google and the sad camel's Yahoo!
>> And that was effectively the internet and
this is accurate, this is the internet in 2004.
Yahoo has done a lot better since then but,
but back in the middle 2000s
they were certainly trying to find their way and
Google was sort of taking over the world but
this was the entire, this was the extent of the world.
So, what we noticed in 2004 in college was that it was,
for some reason, and this isn't so
much the case today but
back in 2004 it was like, really hard to share files.
And as simple of an idea as that is now, you go back
ten years and it was either really expensive or
it was really hard to
move data through different corporate networks.
So I had an internship at the time,
and in the internship, most of my job using data was
actually just to copy printed out pages and
then put them in cabinets.
That's what you do
as an intern if you're not a computer science student.
So I was really, really good at copying paper.
And unfortunately not a skill that has
really been useful today.
But, it was really hard to share files and
then in classroom environments you
were constantly working with lots of other people and
it was also hard to share files.
I went to USC.
And USC gave you 50 megabytes of online storage
space in your email account.
50 megabytes.
So you can basically store about one file and
then it would auto-delete every six months.
I don't know who was running IT at the time but
they certainly didn't buy hard drives.
So, there was just really, really hard to store and
share files.
And so we said, well,
why don't we make it really easy to store and
share files from anywhere?
And so we got this idea for,
at the time it was called box.net.
And what we noticed was there were a bunch of
factors that had changed in the software world.
The first was that the cost of storage was sort of
dropping dramatically.
So, in our business, basically every year or
two, you can double the amount of data and
storage that goes in to a hard drive.
So, what was uneconomical two or three years ago,
all of the sudden becomes feasible because the cost of
computing and the cost of storage has dropped.
We had more powerful browsers and networks so
Firefox was just emerging, people were using the much
faster internet in both their homes and
in the classroom.
And then people had more locations that they
wanted to store and share information from.
And so we had these sort of three factors that all of
a sudden were emerging.
And I'm gonna sort of pull these factors back
later when I give some sort of tactical advice but
sort of the first point to remember is, always look for
these changing technology factors.
Cuz any market that has a significant change in
the underlying, either raw materials or
enabling factors is an environment that's about to
change in a very significant way.
And so we were very fortunate that basically
the need for data in the cloud was growing in
importance, and the cost and
the feasibility of doing it was also improving rapidly.
And so we decided to put together this really quick
version of Box, we launched it as box.net, and
the idea was, let's make it really easy to share files.
And it turned out that the idea clicked.
We got angel funding from this guy named Mark Cuban.
And this was before Shark Tank, but
it was very similar.
And so, we got this funding, and we decided that, okay.
This is gonna be super exciting.
We are going to drop out of college.
We're gonna move to the Bay Area, and
it's gonna be totally awesome.
And when you drop out of college.
Anybody drop out of college yet?
Okay, good, stay in school.
So when you drop out of college, like everyone sort
of pictures it, it's just gonna be, you know,
incredible, like Bill Gates dropped out of college.
It will be like Bill Gates, or
Michael Dell dropped out of college and
it'll be super exciting like Michael Dell, or
Steve Jobs dropped out of college, so
this is what people imagine.
But nobody ever remembers that this guy dropped out of
college also.
>> And, so it's not really a guarantee obviously that
it's gonna be successful.
But, it's what you do, and actually, funny,
I don't even know if this guy dropped out of college.
>> It just sort of looks like he had to.
>> I apologize if anyone's related to him,
it's just a funny picture on the internet.
So.
>> So basically we decided we would drop out of
college.
We moved up to first Berkley and
then we moved to Palo Alto a little bit thereafter.
And we decided that we were gonna open up the product
for free.
We got hundreds of thousands of people that would sign up
for the product every single month.
So, we had a free version of the product called,
if you went to box.net, you got a free one gigabyte of
file storage space, which was,
again, quite a bit back in 2006 at this point.
But we were getting so many users and
we were trying to figure out what to do.
And what we ran into was a common problem that really
any startup runs into but was really pronounced by
our business model, which was that for consumers, we
had built a very robust, a very comprehensive product.
And for enterprises,
we had actually built too insignificant of a product.
So, for consumers, what we were running into was, we
had all these features that you could pay for but a lot
of the consumers didn't need all of those features.
And for enterprises,
we didn't really have enough, security.
And we didn't have enough capabilities around how
enterprises wanted to use their data.
So we basically had more functionality than what
a consumer wanted and less than what enterprise wanted.
And so we found ourselves at this juncture.
And we found ourselves basically in this
period where it's very difficult to figure out what
we wanted to go do with the business, so
we had to make a choice, right?
And so we were at this path where basically,
we're at a juncture where we had to
choose which path do go down.
And this was back in early, mid 2006, up to late 2006,
so I was, I think, 23 at the time.
The co-founder was, was 22.
Our founding team was even younger.
When we all dropped out of college.
And so back in 2006, 2007, we imagined these two
paths and the worlds were very, very different.
Like when you do a consumer start up,
it's basically just lots of fun.
And, you know?
You have parties all the time.
And it's just super exciting.
And then the enterprise,
you basically are battling these just large incumbents.
It's a fairly thankless, you know?
Model because you know?
People just generally hate enterprise software.
So that was sort of how we imagined that the two
paths was, we had to choose, you know,
one of these two worlds.
And so we looked at that and
we said okay, well consumer looks really fun,
enterprise looks really hard and,
and there's a lot of competition.
At the same time, in the consumer space,
you are always fighting this issue of,
how do you monetize?
How do you, how
do you actually get people to pay for products?
And in the consumer space, there's really only two sort
of business models that you can do.
You can have people pay for your application.
Or you can provide advertising on
the application.
And so just to give you a little bit of perspective,
these are today's numbers.
Just to give you a little bit of a sense of
the scale difference, in the consumer world,
there's about $35 billion spent on
mobile apps every year, pretty big number, right?
$35 billion that's,
that's a lot of money being spent on mobile apps today.
For advertising, the global digital advertising market
is $135 billion.
So, you know, basically combined
most consumer companies are going after, if you're not
doing e-commerce, about $170 billion of
either sort of purchasing power on applications or
global advertising around these kinds of services.
So, big numbers, lot of opportunity there, however,
in enterprise, there's actually $3.7 trillion spent
on enterprise IT every single year.
So these are the servers, the infrastructure,
the software, the networking, the services.
All of that stack of technology equates to
a few trillion dollars spent every single year.
And so what we realized was, okay,
there's a pretty wide delta between these two markets.
We are gonna be fighting over trying to
get consumers to pay a few dollars a month.
And Google and Microsoft and Apple will probably try and
make this product be free over time.
And there were sort of rumors that Google Drive was
coming out and these kind of products that
eventually happened were going to come out.
But in the enterprise, it's not so much about that they
are trying to always save money on IT.
They're actually trying to increase productivity.
They're trying to
get higher performance from their businesses.
So the value equation is very different right?
In consumer, we have a limited amount of money that
we want to actually make sure that we conserve for
as few things as possible that we're gonna spend.
In the enterprise,
it's a little bit of a different shift,
where you're trying to think about actually,
what can I get out of technology, and
how much value is that for me.
So, that was a really important data point.
However, the problem was that enterprise software
was really, really unsexy.
Right? So again, very competitive,
very difficult to build a business.
It wasn't something that really you should have
shot out of bed in the morning and said, okay, I'm
super excited to build an enterprise software company.
And the reason for
that was actually pretty straightforward at the time.
The way that you built software was very slow.
So you had to be very slow because
you couldn't break anything for customers.
The sales process was very slow because customers take
a long time to purchase technology.
So I think everyone's sort of used to this concept that
usually when you try and sell enterprise software to
a company, it can take up to a couple of years for
them to actually just buy the software.
And then they can take a couple more years for
them to even implement the technology in
the first place, so a lot of companies are around for
a few years without having their technology even used
in the enterprise.
That felt like a huge problem.
And not like something we wanted to be a part of.
The technology itself is fairly complex.
So the user experience, I don't know how many
people have had to use most enterprise software, but
it's generally really complicated.
You find yourself asking why in God's name did
the designer try to put 47 buttons on the page.
And you just can't even understand it, and
the reason is something we'll get into in a second.
But basically, there's just no love or
care for the design and user experience,
the software's just really complex.
And then, finally, if that wasn't bad enough,
all of a sudden you had to
think about how do actually sell the software.
And, for anybody who loves the power of the internet.
This notion of having a sorta sales intermediary, to
get to your customer, seemed like, really unappealing.
Like, you're gonna have to go hire a bunch of people
that, that are gonna be everywhere in the country.
And they're gonna be the only interface,
you have to your customer.
You're gonna have to hire these guys named Chuck.
And Chuck's gonna roll in with a briefcase, and
he's gonna just try and
sell, lots of enterprise software to the customer.
Just so we're clear, this is what Chuck looks like.
And that was the sales process that you, in
the enterprise, that we at least imagined in our heads.
And I mean, Chuck looks like a happy guy, but
he's still an intermediary to getting your software.
And we were saying, well,
why can't we take the power of the Internet and
actually, get our technology out to people directly?
Why should we have to go through this
sales intermediary as we scale the business?
Now, I'll get into, in, in a minute,
why we were wrong about, the sales process but
this was the sort of fear that we had at the time.
And then, if that wasn't hard enough we
had investors in 2007 saying basically,
there's no way you're gonna make it in the enterprise.
You basically are again,
a founding team of, of early 20 year olds.
You don't have anybody on your team that has been in
the enterprise.
The Microsoft and Google and all these things are, or
not Google, but Microsoft, EMC, Oracle, IBM.
These kinds of companies are gonna stomp on you and
it's gonna be very, very hard to actually achieve.
And to be fair they were
right on a number of areas, right?
So we were a very inexperienced team.
This is this was a,
in a stage where it is still early in our careers.
My co-founder, for
instance, looked like he was 13 years old.
So just not really, just to be clear.
This is what he looked like.
So So it, it sorta made sense.
Right?
This is, this is him as our CFO at,
I think this is him at 29.
But it looked like we were gonna go run
off with the money and go to Disneyland.
So I can totally appreciate why they didn't think we
would be able to pull it off.
I can't imagine giving him money.
So basically, we decided okay well we still have to
go do it, we have to just give it our best shot.
We're gonna take the sorta scale,
the consumer experience, the DNA of our company.
We're gonna see if we can bring this,
into the enterprise and then we were very
fortunate where actually we had an investor who was
equally early in his career and made a bet on us.
Because sorta with the belief that there was
something fundamentally changing about the
enterprise that we would be able to take advantage of.
And so, we decided that if we're gonna do the
enterprise, if we're gonna go after the enterprise.
That we would have to
play by a very different set of rules.
So, what about the complexity of
software can change in this new era?
What about the fact that the sales process is very slow,
can change in this new area, era?
How do we move and go directly to the user and
to the customer.
As opposed to having this very, sorta indirect process
of getting our technology out there?
How do we build, in design for that user as opposed to,
just for the sale and sorta for the RFP process that
a customer is going to go through.
And so we looked at all of the factors,
that were true of the enterprise.
And we said, we're gonna do, maybe not in all cases,
the opposite, but we're gonna find what is changed
about the technology world.
Where we can take advantage of that shift and build a,
a better and a newer enterprise software company.
And so,
that was the decision that we embarked on.
This is the path that we embarked on
about eight years ago.
And that is why, we've been focusing on the enterprise.
And so today, again, we have about 240,000 businesses
that use the product.
And the reason is, we architected the business
model, we architected the software.
We architected the solution, to
work in sorta one specific version of the world.
And it turned out that that version ended up being,
the sort of, the one that happened.
And I'll go into a little bit
about what has changed about the world.
That we sorta built out company around.
And what, I would highly recommend you,
if your building an enterprise software company,
make sure to orient to your technology and
solution around.
So, that was, sort of, why we made the decision,
and kind of how we started to take on the problem.
Now I'd talk, like to talk a little bit about.
What has changed about the enterprise,
that makes it sort of so possible to enter it today,
better and more seamlessly than ever before.
So, everything about the enterprise and then
by definition the software that an enterprise uses,
has changed just in the past five years.
This is probably the most magical time.
If there could have ever been a magical time to
build an enterprise software company now is
absolutely that time.
Just in terms of how much change is going on
within organizations.
So let's just go through a couple of these things.
So, the first is that most application categories
are moving to the cloud.
And the big difference is this idea that if you were
going to start a customer relationship management
software company, or
a business intelligence software company.
Or even a content management company ten, 15 years
ago, you basically had to go have your technology be
implemented, in every single customer location.
No matter how many customers you sold to,
no matter what regions they're in, every single
customer had to put that in their data center.
And that was the flaw with on-premise computing,
was you were repeating all of this work.
You were, creating so much redundancy.
And it was, it was
then slowing down the entire process of delivering and
building software for the enterprise.
And then all of the sudden the cloud came around.
Things like Salesforce.com, things like
Amazon Web Services that basically said.
Why is it that, that every customer,
that wants to just implement a couple servers,
has to go procure the servers.
Put them in their data center put all the security,
all the networking around those servers.
And then, and
then, six months later they go live and
then a developer can use them in the organization, or
same thing with an application.
Amazon said why does that make any sense today?
When we could just, put together thousands,
tens of thousands, hundreds of thousands of servers and
make them available on demand.
And you just use what you want when you need that.
And that was, that's obviously a definition of
cloud computing.
What is happening, though, is finally CIOs in large
enterprises are taking advantage of this.
So it's, it seems obvious for
everyone in this room because you would
never build, a company by buying your own servers.
You would start it on Amazon, or, or
Google or Azure or whatever.
But to an enterprise,
there are decades, literally decades of investment in
infrastructure, that now has to move to the cloud.
And so that's obviously a massive shift that is
finally happening.
We are moving to a world of cheaper, low cost, on demand
computing, from a world of expensive computing.
The benefit to building a start up,
is that customers don't have the same kinda friction.
When they're gonna go adopt new technology, right?
As soon as the computing, is so much cheaper,
it becomes easier to adopt new solutions.
Which means, that their barrier for
having a conversation.
Their barrier for introducing you then,
into their enterprise, is a lot lower,
which creates a massive opportunity for start-ups.
We're going from a world of customized software,
to really standardized platforms.
So it used to be that you had to
build custom integration's and all of
the custom experiences on top of the software itself.
And now, customers are realizing that actually they
want, open platforms and they can customize at
the layer above the, the product.
It used to be that when you were building enterprise
software company you could only really sell to,
the top five or 10,000 companies in the world.
Because only those companies,
had the where with all, the talent,
the infrastructure and the budget to deploy your
technology into the enterprise.
Today, literally a two person company can sign up
for box, as well as we work with General Electric which
has over 300,000 employees.
So, the fact that you can now serve a small
business anywhere in the world.
As well as some of the largest companies on
the planet, mean that
there's much larger markets that you can go after.
Which makes it, obviously, even a better economic
proposition to go after the enterprise.
The platforms themselves are becoming more global.
So our customers were international literally
within the first couple of weeks,
of starting the company.
It would have been, usually if you had done enterprise
software the traditional way that would have taken years,
to actually be able to go international.
And then finally and
probably the most profound shift of all.
Is that because of mobile devices, you know,
iPhone's, iPad's, tablets Android devices, the IT
model of the enterprise has become a lot more user led.
And, that's fundamentally important because,
in an IT led world, incumbents generally win.
Because, they have the existing
relationship with the IT organization, with the CIO,
with the spending power within that company.
In a user led model, users are bringing in,
their own technology.
They're bringing it in on the sales team,
they're bringing it in, in the marketing team,
they're bringing it in in finance.
And you can build software then around the user.
Which means that they can bring the technology in.
Then you can sell to the enterprise when they
wanna have better control,
better security, better scalability.
So you still have the same business model,
as a traditional enterprise software company.
But the way to get into the company is now,
through the end user.
Okay, so those are qualitative factor changes.
Just a couple quantitative factor changes.
There's over,
nearly 2 billion smart phones on the planet.
That changes, every single IT model, on the planet,
because it used to be, ten years ago, if you
were managing technology for an enterprise.
You just had to manage the computers and
the network that were inside of your building.
But now with billions of mobile phones,
you fundamentally have to be able to
manage the network and the computing.
That is gonna be anywhere at anytime on a network.
And that creates massive opportunity for
software companies,
because no incumbent has built the technology stack.
Sorry for my voice breaking again,
so no incumbent has built a technology stack.
That powers this next generation of work, and
how enterprises are using their data.
So that creates a massive start up opportunity.
There's nearly 3 billion people online.
What that means is that every single enterprise is
equally changing how they're gonna get their own products
to their customers.
Which means, that every industry changes.
And so, there are really only two times,
there are only two moments of opportunity.
Where a technology revolution will happen in
the enterprise.
The first is if the raw materials change.
So, cost of computing goes down and then it's better to
centralize, and then let people use it on demand.
The second major change is that the very customers that
these enterprises have to go after, need new
experiences of working with those enterprises' products.
Let me give you an example.
If, you know, when you go out off campus, you
probably use something like Uber or Lyft, as an example.
The if you were in the transportation business.
If you're in the shipping business,
if you're in the logistic business,
Uber represents a massive change to your industry.
So you can't just let Uber exist and
do its own thing without understanding.
What are the implications of Uber?
What are the implications of InstaCart?
What are the implications of Lyft to my business model?
And so, in a world where,
enterprises are dealing with that kind of change.
They're gonna need new technology,
to help them evolve their business models, and
how they adapt to this disruption.
And so in every industry, and
this is why it's an amazing time to even build vertical
software companies for industries.
Right now, every single industry is going through
a major business model and
technology oriented disruption.
Which means that they're going to need
technology from startups to help them work through this.
I'll give you a couple of examples.
So, in the retail industry.
There's this notion of sort of omni-channel or
multi-channel commerce.
You're gonna shop online,
you're gonna shop on your phone,
you're gonna shop in a store, and
you want things to be delivered to you as well.
So most of the incumbent technology in the retail
industry, doesn't power multi-channel commerce.
No, nobody is prepared for
what does it mean when consumers wanna go actually
buy goods at anytime from anywhere.
With better information and better intelligence.
So every retailer in the world, is gonna need a new
technology stack to power their retail experiences.
In the health care space, every single health care
institution is trying to find ways of building a more
personalized experiences, more predictive experiences.
They wanna have medicine be adapted to the individual.
As the business model of
health care changes from being about charging for
the surgery, charging for the checkup.
And instead where the customer pays for
wellness and staying healthy.
Then all the sudden every healthcare institution,
needs better technology to deliver health care
experiences.
They're gonna wanna deliver telemedicine.
They're gonna wanna deliver healthcare in more
regional locations as opposed to
just in the monolithic hospital environment.
There's going to be new use cases around.
How do our electronic health records get connected to
one another so doctors can make far better decisions.
All of these things are gonna require new enterprise
software to power these businesses and
these industries.
In the media space as an example.
You know, you have a world where an industry is
going from really linear programming.
So whether that's television, or
that's music, or whether that's movies, there's sorta
very linear supply chain oriented business model.
Where a film gets made,
it goes to the movie theater for three months and
then afterwards it goes to iTunes and
these other platforms.
To a world where people want experiences on demand.
So that's gonna change,
how distribution works on the scale of 3 billion
people that are on the internet.
And again, no media company has a platform.
That is gonna be able to actually power,
how content and data and
information moves through the system at scale.
We were just,
I was just in LA yesterday meeting with a media
company that has basically done predictive analytics.
To find their potential movie goers in
the population of 3 billion internet users.
They wanna be hyper targeted on how they get to the very,
the sorta specific 30 million people that are fans
of different kinds of film types.
And so all of a sudden, you have a movie company,
that actually needs big data.
And they need business intelligence and
they need marketing automation.
To go power how they're gonna go market and
distribute their movie.
So again.
Totally unpredictable mash-up of two
industries coming together, where all new kinds of
software is gonna be necessary.
So, every industry is going through some form of
this change.
You can pick any industry you want, and take and
sort of zoom into it and say, what are the underlying
technology factors that are gonna change the business
model of this industry in the next couple of years?
And then there's gonna need to be software that goes and
powers those experiences.
Cool, are we all on the same page, great.
I just need a drink water, so
if you could say something that would be great.
>> Can we also edit out my water drinking, so
it doesn't make it look like I
have some weird water problem?
Okay, cool.
I mean, think about the future of water.
Who's gonna power that, right?
>> Gonna need, that's gonna need software, I'm sure, so.
>> So basically, every company in the world.
We think of, you know, the good fortune of being in
Palo Alto, being at Stanford is, is we're so
hyper-focused on technology.
And we think of the technology industry as
an industry, but in reality what is
happening is every company, every industry is gonna have
a technology component of what they do.
You won't be able to survive in the future,
enterprises will not be able to survive in the future,
if they don't get good at technology.
If they don't have a competency in
leveraging data and using these new tools.
But they're gonna do that through working with
what we consider the technology industry,
as opposed to everybody building up these pockets of
expertise themselves.
So there's gonna be a lot of partnership over the next
five to ten years, where companies are gonna need to
use technology to work smarter, to work faster.
They're gonna need to do this more securely, and
this is gonna change, not only how individuals work in
these environments, but ultimately change
the business models of these companies.
So that was chapter two of this.
That's all the things that have been changed.
Now some practical advice,
where to kind of help you get started.
And to be fair, most of this advice is
looking through the sort of lens of retrospect, which
means that, that this is not always how things happen.
But I can look back in time and say,
these are things that led certain things to be true.
So it's hard to be super deterministic about building
a company, and you might not have all of these things
totally figured out.
But these will give you a sense of some of
the patterns to recognize and
opportunities to exploit as you're building, or
thinking about building, an enterprise software company.
So the first is, spot technology disruptions.
And this is gonna be
true whether you're building consumer or enterprise.
The rest are more enterprise oriented, but
this is just fundamental to entrepreneurship,
if you're gonna build a tech company.
So you have to look for new enabling technologies or
major trends, like fundamental trends, that
create a wide gap between how things have been done,
and how they can be done.
And so, looking back in time at our business, the gap was
basically, storage is getting cheaper, internet
was getting faster, browsers were getting better.
Yet we're still sharing files through this
very complicated, very esoteric, very slow and
cumbersome means.
So any time where the delta between what is possible and
how things work today is at its widest,
that is an opportunity to go build new technology to go
solve a problem.
And so as you're looking at the enterprise,
the question is, what about the cost of computing
dropping so rapidly changes what enterprises can
do with their data?
What does it change about what you
can do from a business model standpoint?
What was impossible, because of either
economic feasibility or technical feasibility 10 or
15 years ago, that now all of a sudden is possible.
And a fun thing you can do sometime is,
if you go look at articles from like the 1990's or
even the 1980's, business articles about technology.
All we're really doing is repeating a lot of
the technologies that were tried 10, 20, 30 years ago.
It's just, it was too expensive,
it was too unusable, and we didn't have
the enabling technologies to make it possible.
So you can kind of see this pattern emerge constantly
where something that was impossible five or 10 years
ago, all of a sudden becomes very practical.
So I'll give you an example.
There's a company called PlanGrid.
Does anybody know what PlanGrid does?
Okay. Cool.
Are you in the construction industry?
You are?
>> Yes, I am.
>> Oh, my god. What does that even mean?
>> In terms of PlanGrid or like in construction?
>> Construction.
>> I work at a job site.
We build buildings.
>> Holy crap, that's great.
>> Okay, so.
Thank you.
So basically PlanGrid is a mobile application that
lets you manage construction projects.
Lets you get access to your blueprints, lets you manage
all of the data around a construction process.
And what this team realized was that $4 billion,
I believe, are spent every year printing out blueprints
and making all of the prints, and
updates to those blueprints any time there's a change.
And then that has to ripple and
cascade through a very wide network of contractors and
construction people every time that
there's even just one slight, minute change.
And they realized that, you know, with the iPad,
all of a sudden, we have the perfect form vector to be
able to load up blueprints and load up content.
And this is something that
could ripple through the construction industry,
which isn't necessarily notoriously known for
high technology, except for on the design side.
How could they build technology that would
make the data access, the data collaboration problem
really, really seamless and easy to do, in a very,
you know, traditional industry that
hasn't quite changed for a while.
So it was a sort of perfect, sort of discovery of
a technology change in a market and
figuring out how do those two things converge.
And then this team built a great startup out of it that
is doing incredibly well, and totally taking over
the construction industry as proven by this individual.
Thank you.
>> So the next thing is, in the enterprise you want to
start intentionally small.
What I mean by that is, you want to find, and
this is again, true of a lot of companies, but
even more true in enterprise,
in a user-led paradigm.
You want to find the wedge that is sort of the very
natural place where you can create a product that will
slip in between the gaps of other existing products.
But is something that you
think over time expands to become
a more important part of the enterprise architecture.
So, what you want to start to do is to say,
we're gonna take this sliver of a problem,
we're going to totally make the user experience on
that incredible.
We're gonna either change the business model.
We're gonna create new technology that makes this
previously difficult problem really, really simple.
And it might feel small at first.
Maybe you're going after small businesses and
then you're gonna move upmarket.
Maybe you're starting it just a sliver of
the use case and then you're gonna expand out.
But you intentionally start small because you
will not be able to compete with an incumbent.
Because the incumbent is gonna always go for
the full solution.
So you have to find what are the gaps in
the full solution that are significant enough
where a customer is going to
want to solve the problem with a discreet technology.
But that over time you're gonna be able to expand,
again either to larger customers or
to more use cases over time.
Great example is zenpayroll.
So zenpayroll, started by a Stanford graduate or
Stanford graduates, couple of years ago.
Basically discovered that the payroll process in small
businesses is an incredibly complicated and annoying and
cumbersome process.
And that's because we use the same vendors that we've
been using for decades to do that.
And they weren't sort of digitally oriented.
You didn't get your payments as a receipt, over email.
It was a very complicated.
You didn't really get to see graphs of your salaries.
There was no real good data around this.
And they said, we're just gonna take
off the slice that is most painful to startups around
hiring people and around paying people,
which is just that payroll management process.
We're going to plug into a lot of
existing infrastructure, but
we're going to make it dead simple to go do this.
And now they're able to move both up market over time
as well as deliver new services over time.
And what happens is the incumbents in
this market initially look at something like this and
payroll and they say, well, that's small.
It's only for small businesses.
It's not gonna be very powerful.
But that's just the start.
Because as they get that wedge and
as they fit into the market,
they're gonna be able to expand again over time,
build out more services and more capabilities.
But they found just the exact right opening to build
a new company and have that emerge.
The next is you really want to find asymmetries.
You want to find, my God, okay, so can we
do like some auto like some tuning of a voice later so
at least it'll sound like I'm doing rap.
\{do things that incumbents can't or
won't do because it's economically or technically
infeasible\} Okay, so you want to be able to, you want
to do things that incumbents can't or won't do.
Because, either the economics don't make
sense for them.
Or the economics are so different, or
so unusual or because technically they can't.
I'll give you two examples.
So, if you're gonna build software today for
the enterprise that goes after an incumbent category
that has more of a sweet oriented approach.
Then what you wanna go do, is you wanna build
technology that's gonna be platform agnostic.
Because what sweet players will do, is they
want everything to be integrated with itself and
that there's more value with that vertical integration.
But you wanna go after a different access, which is,
you want your technology to work across all of
the platforms.
So that way, you can work with so
many different kinds of customers, and
you can be an ally to so
many different kinds of platforms,
which a traditional incumbent is not able to do.
So that's something that is
usually technically infeasible, because of
how either something has been architected.
Or because the fundamental component of
the business model to not do that as the incumbent.
But, the other thing is try and
do things that are economically infeasible.
You can look at the cost structure of
an incumbent company and discover where are they
not going to be able to drop their prices.
Because that business model is fundamental to
the existence of the company.
Or where can you find ways of monetizing the customer
that are unusual or
unique, that no one has discovered before.
And thus is really not practical for
anyone else to do.
That's a company called Zenefits, where they have
an HR management software company that helps you,
as a small startup,
manage all of your benefits, all of your HR information.
And instead of charging the startup, which might not
value that software at the stage that they're at.
They realized that they could get
commission from the insurance companies.
And that basically pays for
the ability to use their software.
So, the customer itself is not paying for
Zenefits, the Zenefits platform is being paid for
by the insurance company.
And they've thus invented a business model,
that no other software company has been able to
think of or attack.
And they're equally going and
disrupting a category that hasn't seen a lot of
innovation previously, which is the health and
benefit space within small businesses.
The next is you wanna find the really crazy but, but
sort of still somewhat reasonable outliers within
the customer ecosystem.
So you need to find the customers that are sort of
at the edge of their business, or
at their business model, or of their industry.
And find the unique characteristics about those
customers, and leverage them as your early adopters.
So Paul Graham has a great article, where he
talks about living in the future and building for
what is missing when you're living in the future.
So that's a sort of easy way to spot trends and
patterns about disruption that's playing out.
The same is true in the work place.
If you find customers that are working in the future,
you will be able to work with them to find what is
missing when you're working in the future.
And how we build technology that supports all these new
use cases that are going to emerge.
There's a company called Skycatch,
which does enterprise drones.
And at first it seems kind of weird, but
in the construction space, in farming, in oil and
gas, they're using drones now for data capture, and
the ability to do modeling of,
of different environments.
And so, this company is able to find all of the companies
that are at the bleeding edge of their industry, what
is unique or new about how those organizations operate.
And they built and worked with a lot of those early
adopters to establish their platform, which is again,
really one of the first enterprise drone companies.
So the idea is go look at your market.
Find the customers that are at the bleeding edge of
the market, who use technology to get ahead, and
that use technology for performance advantages.
And then go work with them to discover how your product
can evolve.
Two minutes.
Okay.
Good. Right, so.
The next one is. And
then there's a part two in five minutes from now, or
is that not the case?
Okay, so, listen to your customers, but
don't always build exactly what they're telling you.
This is a really key
distinction around building enterprise software.
Your customers are gonna have a large number of
requests.
Your job is to distill those requests down
into the ultimate product.
That does not mean that you're going to
build exactly what they tell you to build.
It is your job to listen to their problems, but
actually translate those into what is going to build
the best and simplest solution to those problems.
It's really your job, and Palantir does this,
as an example, with very, very complex issues.
And then they distill those down into simple solutions
for very, very,
complex problems that the customer otherwise would not
have known how to ask for
You want to modularize, not customize.
So build a platform, as opposed to building all of
the custom technology and custom vertical experiences
directly in the software itself.
Make sure that you really think about openness in
APIs as a way of delivering vertical or
custom experiences.
Don't build that directly into the product.
Focus on the user always.
So, again, the magical thing
about building an enterprise software company right now.
Is you can keep consumer DNA at the center of
the product.
That will always mean that adoption is easier.
Your product has a much higher chance of
going viral.
It becomes easier to sell into the organization.
So always make sure you bring consumer DNA
into the product development process.
And your product should sell itself, but
that does not mean you don't need sales people.
So this is a really important distinction.
Leverage everything about the internet, leverage
everything about users to get to your customers.
But you still will likely need sales as a way to
help your customers navigate your product.
Help your customers navigate
the competitive landscape and the ecosystem.
So you're going to want consultative, very,
very domain-oriented sales individuals,
that are gonna be able to be helpful in your customer
being deployed and enabled in these organizations.
But don't make that be a substitute.
Do not make that be a handicap for
not building a great product.
So you fundamentally have to
keep the product at the center of that.
Company called Mixed Panel comes in through
the developer, and then over time is able to sell to that
organization with a more inside sales-led process.
Also read these three books.
So Crossing the Chasm, Innovators Dilemma, and
Behind the Cloud.
These three combined, especially if you read,
if you binge and you just read them all.
You'll definitely come out
the other end with a massive software company.
And so, in closing today.
Right now,when you leave this room, is an amazing
time to go start an enterprise software company.
So I wish you the best of luck.
And of course, if it doesn't work, we are hiring.
So, and then the only other caveat is please do
not compete with me.
Because I have a lot of competition already.
So ideally either come work for us, or
build your own company.
So thank you very much.