So I’ve been super curious on how other startup founders got their ideas, built their team, and got their first customers, so I compiled a list of a bunch of em and I thought they were super compelling and useful so I thought I’d share them here.

To start off, here’s the story of Dropbox:

The idea

Drew Houston came up with the idea for Dropbox during a bus ride from Boston to New York while he was a student at MIT. He was frustrated because he had forgotten his USB flash drive and couldn’t work on his files during the trip.

This annoyance sparked the idea for creating a cloud-based file storage and syncing service, leading to the development of Dropbox.

How he met his co-founder

Drew Houston met his co-founder, Arash Ferdowsi, at the MIT. He eventually dropped out to work with Drew on Dropbox.

In 2007, Houston applied to Y Combinator. His application initially was for a solo founder, but Y Combinator’s preference for teams led him to bring Ferdowsi on board.“Arash [Ferdowsi] and I probably knew each other for two or three hours before we threw in together.”He explains that when he applied to Y Combinator as a solo founder, he received an email from Paul Graham telling him the ideas for Dropbox was interesting but he needed to find a cofounder. With the application deadline three weeks away, Drew recounts:

“That’s like saying you need to get married in the next three weeks.

”Drew was explaining is situation to his friend from MIT, Kyle Vogt, who suggested he meet with Arash:“I probably have the email somewhere to Arash which said ‘hey, let’s meet up.’ We hung out in the student’s center for a couple of hours, and then he dropped out of school the next day. It was pretty wild.”

First Customers

Instead of developing a fully functional product initially, Dropbox’s founder, Drew Houston, created a demo video. This video was not just a simple demonstration; it showcased the essential features of Dropbox, highlighting its ease of use and value. The video, tailored to resonate with the tech-savvy community, went viral within this group, leading to a significant increase in beta sign-ups — from 5,000 to 75,000 overnight. This approach confirmed the market demand without extensive development.

You can check the original Dropbox demo here. It’s super interesting.

Scaling Challenges

Dropbox, in its early stages, faced significant challenges related to server costs and managing the growth of its user base. Initially, they launched an invite-only beta primarily because they were unsure how much usage their servers could handle. This strategy not only helped manage server load but also generated more interest due to the psychology of restricted access​​.

Managing rapid growth was a critical issue, especially given Dropbox’s data-heavy nature. In the first few years, they had a very small team of one to three people scaling the backend from 4,000 to 40,000,000 users. Ensuring stability while handling such rapid expansion was a significant challenge, but Dropbox focused on ensuring that their product consistently worked well​​.

Moreover, Dropbox’s adoption of the freemium business model meant that free users represented a substantial marketing cost. To balance the economics of this model, Dropbox sought ways to save costs without compromising user experience. A notable instance of this was when they discovered that their unlimited “undo” feature, which allowed users to recover deleted files indefinitely, was responsible for about half their hosting costs. This feature consumed substantial storage space and was not widely used, leading Dropbox to limit it to paid accounts only, a change they communicated transparently to minimize negative feedback from free users.

Growth Strategy

A key aspect of Dropbox’s growth strategy was its referral program, which used invites as a mechanism for expansion. This system offered additional free storage space to both the referrer and the referred, incentivizing users to spread the word. The simple sharing process, combined with the direct benefits to users, created a viral effect.

This strategy not only accelerated user base growth but also fostered a sense of community among early adopters. The invite system was cost-effective, reducing the need for heavy spending on traditional advertising and aligning perfectly with Dropbox’s nature as a file-sharing tool​

First Investor

Drew Houston and Arash Ferdowsi met their first major investor, Sequoia Capital, through a somewhat serendipitous process.

This exposure led to their pivotal meeting with Sequoia Capital. The pitch to Sequoia was successful, and Dropbox secured its first major round of funding. They raised about $1.2 million in this seed round.

These stories gave me a ton of ideas on how to approach fundraising, customer acquisition, and avoiding the mistake these entrepreneurs made, so I hope you find them useful too! I have a compilation of a bunch of these but I’m sure adding a link to that here would break the rules of the sub so you’re gonna have to look for it. I’ll post a bunch more of these if you guys think it’s useful.