CEOs in Conversation: Aaron Levie and Matthew Prince

Aaron, welcome to Cloudflare TV. Thank you so much for being on. We are slotted in the segment between the master commander of SEAL Team 6 who plotted the Bin Laden raid and some guy named Steve Wozniak started some fruit company. And so, you know, really no pressure. No pressure. I mean, do you want to talk about military strategy or the invention of the Mac? Just let me know. Well, yeah, like I think actually, you know, Steve was really in the in the weeds on designing the original Apple II processor. So I think we are both eminently qualified to talk exactly about that. So you started Box. You've been at this for a while. You know, you've been someone who I've really admired for a long time and have been super kind as we've gone through our journey of building a company to share. You and Dylan are again this sort of founding team that's stuck together for a long time and worked on this. When you were first getting started, what was the original vision that you were trying to solve with Box? Yeah, so first of all, thanks for having me on Cloudflare TV. This is my first TV experience from a technology company. So this is amazing what you've done here. We launched a community access television network. You can actually tune into it now on Roku and on Apple TV. Oh, really? Yeah. What frequencies can I be getting this in my... So this is bordering way too much on the conversation with Woz, which is coming up about frequency. All I know is there's an app and you can download it and then you can watch it. And it's crazy. People sit and watch it all day long watching Cloudflare TV. And I'm like, okay, here we are. Listen, we got to use these Internet networks or something. So this is great. So we started Box in 2005. Really simple premise. We wanted to make it easy to access and share files from anywhere. The founding story actually, I think as all founding stories go, it's very complicated. We just get lots of people coming in and out and lots of different things. So Dylan and I got the initial idea and then I was able to convince two other friends to join us. We had actually all four of us grown up together in Seattle. So we were high school friends that had done different kind of random, maybe I don't think you'd call them startups at the time, but put up random websites that tried to make a couple hundred bucks here and there and went to college and got this idea for Box where I was doing an internship at the time using Lotus Notes. And it became really, really obvious that, okay, in my internship, we were using Lotus Notes to collaborate. At school, they gave us something like 50 megabytes of email storage to be able to share files back and forth. And so between the kind of corporate world and the education side, you just were running into problems all the time of sharing files, sharing data, working from different devices. And so we kind of looked at the market. Nobody really had built a real solution to the problem. There were some companies from the late 90s that had sort of tried to attack this. But if you imagine like trying to do data storage online in the late 90s on dial-up Internet with hard drives that probably could store two or four gigabytes of data in your data center, just cost prohibitive, way too inefficient. Internet was too slow. And you didn't even have like rich applications in your browser. So it was way too soon in the late 90s. Come 2004, 2005, you had Firefox. Internet was getting way faster. Everybody was on cable. Companies were moving to fiber. You had the cost of storage was dropping precipitously. You now had maybe probably, I don't know, something like 100, 200 million Internet users total globally. So more people could use these types of applications. And then ultimately, I think the killer use case was actually mobile, but not right away. But you could see BlackBerry is starting to take off. And so we kind of added up all those factors and said, okay, in the future, you're going to want to store your data centrally, get access to it everywhere. And so we came up with that idea and launched it in 2005. And what were you and Dylan doing like immediately beforehand? Were you still at school? Or were you? What was that? What was what was this saving you from? Yeah, oh, yeah. Well, we were we were sophomores in college. I was down at USC. Dylan was at Duke. And I was coming off of various random startup ideas that weren't working. Dylan was very studious, getting good grades at Duke. And, and so probably this more intersected with probably my timeline of needing to get out of college, do my grades. And then eventually, I was able to compel him to do the same. And so it was, so we launched, we launched the site, kind of more like a, almost a prototype that people could start using. And it just kind of took off. I mean, I took off in like 2005 terms. So, so like, we had 1000 users. And, and so that was pretty exciting. We tried to raise some venture capital in Seattle, failed miserably at that eventually. You guys are from Seattle, right? Yeah, we're from Seattle. Originally, we moved to Seattle for the summer of 2005. Between sophomore and junior year, we did, we had no, no thoughts of dropping out of college at that point. This was just more of a side project that was generating revenue. And then I think the big break was Mark Cuban decided to invest in the company. And, and that kind of got us our real, I think, serious start where we said, Okay, maybe this could be a real opportunity. Maybe this is a real business. Let's go and actually bet on this thing. Now you you started out very much it was oriented around like consumers and just people who are signing up. And then at some point, you I mean, you become a very serious, like, enterprise class solution. What was how that how that how that how did you get that religion along the way? Yeah, I think maybe like all religions, it's sort of you have all these like, kind of circumstances that collude and then one day you have an epiphany. And then that's sort of how I find that found the enterprise religion. But what, what was happening is we, we, we had a really, really good, maybe kind of first year and a half as a business where we were, you know, growing rapidly, we were scaling the business, you know, probably got to, I don't know, a million dollars of revenue or something recurring revenue, all consumers, maybe after two years or so. And, but eventually, we basically started to stall out and mostly strategically where, where you had Google and Apple and Facebook and all these consumer players basically saying, we're going to give away storage for free for everybody. And it was in the form of online photo storage and email file sizes going larger, and then G drivers being rumored to launch. So we were like, holy shit, like our whole business is dependent on us being able to upsell people to buy more storage and, and to use the product more. So we felt like that was going to be a real constraint on growth. And then conversely, we looked at the enterprise market and, and realized that actually in enterprises, the amount the cost to the storage was not really the big driver, it was the need for security and workflow and better ways of managing data at scale. So you actually could build a defensible value proposition for just like software, and building lots and lots of innovative features that nobody else had, or you could do better, especially you're kind of riding this tailwind of more mobile, more cloud, more collaboration happening. So, so eventually, even though I resisted, I actually was the most resistant of the founding team to pivoting. And it became pretty obvious, eventually, that we really had to do it. And so then just one day, it just sort of snapped of like, okay, consumer is not going to work, let's pivot the company, we're going after the enterprise. And, and, you know, credit to some really early employees, our fifth employee was very, very charged up about this. And, and one of my other co founders, kind of, you know, fully convinced me that like, we have to be an enterprise company, this is the only way to survive. And it's funny, his only, it's funny to think back, his only experience in enterprise at the time, because he was probably 20 years old, when we pivoted, his only experience was he had a IT consulting business in high school, where he would go to kind of three and four person companies and help them with their their routers. And so it's like that, when he said enterprise, like, he was thinking, like, you know, that's like a company, and like, we just got to sell to those people. And, but eventually became obvious that, okay, there's actually a really big opportunity, 10s of billions of dollars get spent, if you can go sell the businesses of consumers. What's so and so how did you figure? Because again, I like we forever we talked about, oh, we're selling to enterprises. And, and, you know, it was like, yeah, they spend $10 ,000 with us or something. And there, when you really start to sell to real enterprises, it is a fundamentally different, different animal. Where'd you? How'd you? How'd you learn that? Yeah, well, I, I would say I probably, frankly, never really had to learn it. We, we, we hired really, really amazing people that kind of came with that. And, and I mean, probably in the first four or five years of the company, I spent almost exclusively all my time on product. And just how do we build the right product for the market? How do we keep tuning the product, and then we had a really strong head of sales, head of marketing, you know, other functions that really kind of built the initial flywheel of the business model of, you know, build out a sales team, how do we go serve our customers? What's the pricing model? And I was honestly more on the receiving end of a lot of that strategic development. And just, you know, fortunately, at least enough times making the right call on what we should go do. But it was really the teams that were that were developing that. And my job was, I saw my job as mostly, you know, make sure we've got the right product in the market, build up a strong culture, and then they continue to kind of put, you know, fuel, fuel the fuel the fire in terms of, you know, how many sales reps, how do we build out the engine from the go to market standpoint. So, so I, you know, it's interesting, because I think there's always there's sort of this founder myth of like, you have to personally go close the first 20 deals. I just, we didn't do that. We had a wait, I saw my job as product. And then we had a really good, you know, team that could go out and actually go generate customers. But in terms of, you know, from a from a perspective, especially as you as you pivoted more to the enterprises, and you had requirements for the product, that were very enterprise specific, it was that data that just sort of came back to the sales team. And it was like, boy, in order for us to close, GE, we've got to, you know, we've got to add this user control or that or like, where did it have that feedback loop come work out? Yeah, well, I would, I would love to make it sound really like sexy and strategic. And, you know, we had a framework, and there was a five point scale. And, and, as you know, maybe you were way more thoughtful than we were. But we so that the moment where we probably had the greatest flywheel was, was when we were, we were maybe 150 to 100 people, we all go, we could all work on one floor. And we had sort of sections of the floor dedicated to work. So we had one section, there was the sales org, one section was the CS or one section of the marketing or one section that was product and engineering. And you would literally, if you could almost visualize an actual flywheel, you would have people from sales calls, going back to engineering a product and saying, Hey, I just talked to this customer, you know, we have this these problems with our permissioning model, or our access controls, or our reporting, you know, what would it take to go build that, and then somebody would hop on a whiteboard, and they would go do that in real time. And so that sort of speed of that feedback loop of we would talk to a customer, figure out what they needed. And then there was this one key moment where, where, where was, you know, I think, fortunately, strategic, where we would basically have to sort of kind of just, you know, either answer true or false, or at least have a gradient, which is like, is this something that every customer is eventually going to need? Or is it something that's a one off? And is it something that's going to impair the user experience? Or is it something that is actually just a very logical thing you would put in place? And then, and then sort of where is this on the order of priority of unlocking other business versus just this one deal right now, even if other customers eventually will need it? You know, is this the is this really the next thing that we're going to need? And so you kind of added up a few of those things, which is like, what's the user experience consequence? What's the total amount of demand? And then what's the right order of prioritization? And we put that into, you know, a cauldron, which was basically a whiteboard. And, and then you just pop out which features you have to go build. The real hard part was when customers would ask for things that didn't meet those criteria. So, so for instance, if it's a one off, or if it impairs user experience, those two things were kind of almost instant rejections, you know, from our, from our very, very highly strategic algorithm. And, and we would go work with the customer. And in some cases, we could convince them to just not need the feature. In other cases, we could actually sort of brainstorm without a better solution to the problem that would kind of work at scale for other customers. And so that was more of that. That was that kind of, you know, those days were very much about kind of agile co-creation with your customer base, which is super exciting. What I mean, it feels like we all go through this same journey. It's like this shared pain. I wonder if there's a, you know, enterprise ready as a service, like, could you just take because it's, I mean, we've all it's all it's like, Oh, you know, SAS 70, I guess we need to do that. Right. And, and so, you know, I wonder, I wonder if we could all just kind of take these learnings and, and offer it as, as a, as a, as a, you know, JavaScript framework. It's great. That's a great Cloudflare product. So I'll let, I'll let you handle that one. There you go. I don't, I don't know that we're as far along that journey as you guys are. But, but, but appreciate that. What's what are the parts of your job that you just that you love? Yeah, I mean, you know, it's in the weirdest way, the, the pandemic has almost been the, the kind of like, it's almost been like chutes and ladders of like, of like, kind of startup evolution. So I feel more like I did in 2005, than any other point in the journey of this company, because it's just me, a computer screen and colleagues. And, and so it, you know, very much back in 2005, we would just be on instant messenger chatting back and forth, what's the next thing we have to build? You know, how should we go after this market? And so we've kind of come full circle 15 years later, to that way of working. And I think the most fun, you know, thing for me today is that I still get to, you know, be highly involved in product strategy. You get to, you know, try and try and sort of, you know, that, that, that, that really kind of fun area between science and art and kind of predicting the future, which is like, what are some trends that are happening? What are customers looking for? Where does our product not work? Well, how do we go build sort of for where the world's going? And, and that's, that's the thing that I'm, I'm most excited about this job. It's I think why we're all collectively in, in technology, to some degrees, you're, you're, you're kind of inventing the future, while also sort of following along with, with where the future is going. And, and that's, that's the part that I find most exciting. It's, you know, I, I, my, my wife is, is, is starting a company and it's actually been really, I think remote has been really hard to, to start from scratch because that being in the same room and the energy that, that, that creates is, is, is one thing. So it's interesting to hear that, that this actually feels a little bit like that, that initial startup experience. What do you think the future of remote work is? Like, this is something that, you know, that we've chatted about a bunch over the last, over the last six or seven months. Do you, do you think, do you think we all go back to the way it was? Do you think we do, are we giving up offices forever or what's, what's what does that look like? Okay. So, so while, while to me, it has been a journey back 15 years, I, I do personally miss the office. I think, but I, I sort of get my, my energy usually feeds off of just sort of being able to see a bunch of pockets of the business. What are people working on? What, what's going on? You know, I've, I've been able to replicate some degree of that and it's, and it's, you know, probably been annoying to some people because now I kind of like, instead of it just being like, what people can I bump into and walk by now, it's like 2000 people that I can instantly chat with. And so, and so like all parts of the organization, like what the hell, where'd that come from? So, so that part is beneficial about remote work, but I do, I do miss, you know, kind of working with people in real time in person. Founder, CEO is chaos agent, right? Exactly. Is it, that's, and it is, it is amazing there. It's, there are certain things where it feels like, you know, we, we have never been more, more productive as a company. Although again, it does, there's a, there's a, there's a bit of chaos to this. That's, that's that. So, so you miss it. Do you think as an industry, we, we, what, what, what is, what is five years from now, does it look more like it does today or does it look more like it, it did you know, eight months ago, nine months ago? Yeah. I mean, I, I mean the probably, I mean, I'm, I'm, I'm, so if you imagine the spectrums as everything's remote, which it is today and prior, let's say 90% of things were in offices, I'm going to give you like the cop-out answer, which is somewhere in between. I, you know, we'll see where, where it veers and maybe there'll be like dimensions that we haven't even thought about to get out into the mix, which is like, okay, you know, what, like we don't like, you know, when, when you shift it's two or three days off, two or three days on, how does that, you know, kind of impact the way that we work? And there's other, you know, new dimensions to, to the work styles that evolve. I don't have any really, this is not an area that I have a strong sort of like long-term kind of market view on other than just the stuff that, that we're interacting with customers day-to-day. I know that, I don't think there's a single customer I've talked to in the kind of hundreds of the pandemic that think that things are going to go back to what they look like. But equally, I would say it's a very small minority to think that it remains like it is now. Yeah, no, it's, it's, it's interesting that the, the question that we're sort of struggling with is how much is why what's working right now working because everyone's in the same boat. And if all of a sudden you have some companies that back and some that aren't, like what, what becomes the equilibrium over, over the long-term? And it's, I was, I was hoping that you were going to commit to something specifically, because then I could just at least say, well, Aaron at Box says this, so. I've just been saying that Matthew at Cloudflare is saying this. So this is, hopefully people eventually will learn that we don't actually know what's going on. We just hear small bits of information and then say that the other person is doing something. What's a, what's a fun story that when you kind of think back on sort of days that, I mean, maybe it's you and the original founding team or others that, that you don't, that, that people wouldn't know, but that sort of burned into your memory of, of, of memories of building the business. Oh, shoot. I mean, there's a, there's tons of those memories. I think there was, there was, you know, I probably, I probably skimmed over the journey to our business model pivot, but there were days where, where I'll give you two examples of, of, so, so the, the real kind of, I think like codification of, of our, our, you know, vision and, and where we kind of came from was it was four of us that were living and working in Berkeley. And then we eventually moved to Palo Alto and we, we all lived in my uncle's garage that was renovated to, to at least like, like have some beds. And so the structure was, I slept on a yoga mat. One of my founders, co-founders did a pullout bed. Another did the top part of a bunk bed. And then somehow Dylan got an entire room to himself. And by room, you know, it's like, was it chosen by poker tournament or something? I mean, like, I think it was how much money you would give into the business. So he had given like $12,000. So he got the room. And, and so the, the, like those days were just absolutely kind of crazy because everything was a blur. You, you work 24 seven, you know, your only break was to go to, there was a famous hotdog place in Berkeley or, or, you know, you just, like, that was our only break. But, but what would happen is, is it was almost like, and we were all on different sleep schedules. Cause we had to, we had to like watch the, we had to like monitor the site. Cause like, like there wasn't like, like real-time alerting back then somehow, I don't know. So like, you just like would wait for customer emails and downtime. But, but there was this configuration pattern where, where whoever was like the, the, the two or three people that were up the latest would usually go brainstorm business strategy ideas. So you might wake up the next day and the strategy, we like, we have an entirely different idea for like how we're going to make this company big. And so there was a journey of, you know, six or 12 months of that. And, and we, we had, we had some, was it usually the same people staying up late each time? I think it actually always disadvantaged Dylan realistically. So he, he went to bed early and, and, and usually woke up early, but, but there was always just a dynamic where you like, you know, the, the, I don't know, you know, obviously debatable of, you know, how, how much to, to pull from the story. But, but it's, you know, we, we probably put too much, way too much kind of credit to like, oh, people just had this brilliant idea. And it was like massive from day one. It's like, no, like we, we had a really big problem we wanted to solve. That problem happened to be universal. We didn't know how the hell we were going to get it to the world, how we were going to monetize it, what it was going to look like. And so I, I it's, it's been interesting because I think if you look at our business plan from the first day we started the company, like we're doing all of the things in that business plan, but the journey to get there is like nothing, like we could have predicted him lots and lots of rollercoasters, you know, throughout that. Do you, do you still have the yoga mat? I hope that thing was like lit on fire. So that's good. So the other thing that's, you know, I, again, is you talk about things that are either, they're fun or scary. And then, you know, it's, it's interesting that like, I think back on some of the, the sort of fondest memories at Cloudflare and they're almost all born out of some sort of adversity, you know, something terrible happened. It sucked at that moment, but then, but then, you know, the, the camaraderie and the teamwork and everything that comes together out of that is, is such a, it's such an interesting, it's such an interesting thing, which, which begs the next obvious question, which is, you know, you, you became a father recently. My wife and I are thinking about starting a family. Any, any, any advice? Oh, wow. Any advice? I, I'm, I'm the last person that should give any kind of father, fatherhood or parenting advice. But what I will say is it's been an absolute blast. And, and I, this, this is maybe if there's, if there's been one bright spot amidst obviously a pretty tragic circumstance, this has been the one positive is there's almost no other situation where I could spend as much time with, with, with Max. Just because, you know, even those minor things of like, you have a work meeting that runs an hour over or a customer dinner that, that you got to deal with, like that, that could, you may, you know, miss an entire day with your, your kid. So it's, it's been amazing every single day being able to spend time with him while he's at this particular age, which has just been a blast. So, so I would say my only advice would be, you know, certainly try any configuration you can, where you get to, you know, spend the time with, with, with your kid. Was it, was it inevitable that you were going to become an entrepreneur or if, if, if Fox hadn't worked, what was, what was, what was, what was your backup plan? Oh, no, no. I, I, I don't think I could have been hired to do anything. So I, I think I, I was probably simultaneously unemployable or at least only temporarily employable before, before, you know, I probably had some major, major spat with a manager or something like, I, I'm not the kind of person that, that you want reporting to you. Just, and does that change how you look at, at any of your team members? Are you, do you, you think, are you thinking, I don't know, is that, like, does that give you more or less patience for people, I guess? Oh, no, I just wouldn't want to hire anybody that was like me. So I, I would avoid, I would avoid my personality like the plague. So I'm very thankful that anybody's willing to, to tolerate me. Well, I, I, I think that the, you know, one of the things that, that, that, that I, that I admire, and I think a lot of people are, is, is you are maybe, maybe the best in the world at, certainly as a CEO at Twitter. What, what, how do you do it? Like, do you have a Twitter writer for you? You know, how many, what percentage of the day is, is, is composing, you know, clever tweets? Well, these days, now that you've had a, I've had a computer in front of me all day long. It's, it's been hard to, it's been hard to get away from. I, I do, I do actually miss, that's the one, that's a, that's another downside of, of, of this mode of working. I miss when you could like literally be off the Internet for like an hour. Like, just like you went to a meeting and you're just like, we're in the meeting and you don't know what happened to Trump in that hour. Like, I should, I, you didn't see what was going on on the Internet. So that, those days are over. At least, you know, pandemic plus election season has been chaos for me personally. But, but I would say I, you know, on Twitter, I think it was probably just, I think I'm just unfortunately the manifestation of a, of a, of a person that grew up on the Internet that unfortunately never got rid of the, the habits of being a teenager on the Internet. So I am, I think at heart a troll. And, and so I just bring that to, to Twitter. Do you have, and is it, is like your draft folder just full of, of kind of half composed tweets and you iterate and iterate on them like a comedian? Or is it, is it, are they, like, what's the time between conceive of the idea and the tweet actually, you know, is online? I'll just, I'll, I'll leave it at this. I found that the longer I spend thinking about a tweet, the worse it is. So, you know, Twitter has a certain zeitgeist sort of moment to it. And, and if, if it doesn't come out, then it's not worth pursuing. You're, so you're in the Bay Area now, and you guys are based there. Are you, are you bullish or bearish on the Bay Area? Is there a, what's, what's, what's the center between a bull and a bear? You're, you're, you're, you're just, you're, you're, you're, you're, you're, you're, both shorting it and going along. I don't know. I'm fully hedged. I, you know, I, I think there's reasons to be bullish and bearish. Basically, I think that, that you should be bearish on, on price of housing. You should be bearish on, on the wildfires. You should be bearish on, I would say actually those two major things. I mean, certainly there's some, some ecosystems where there's like concerns about taxes and other things, but I think in general, the bigger, bigger concerns is you could bring down housing prices. This place would be a lot more affordable. And if I don't have any understanding of the science, but if you could somehow solve the, the, the forest fire issue, then, then that would certainly help. I'm bullish because I just think that I think that the concentration of, of still, you know, incredible talent people from all around the world that want to come to a place that is, you know, really thinks about innovation, the amount of capital, the amount of companies I still on a daily basis and hearing about new startups that are specifically starting their company in the Valley. And I'm sure that there's more companies than ever before starting outside the Valley. So, so I'm, I'm also bullish on the global market for ideas and businesses as well. So I think it's going to be an, I think, I think we should end the era of Silicon Valley being so concentrated on a relative basis, but in absolute terms, I think you can still bet on Silicon Valley kind of going forward. Yeah. I think that, I mean, and maybe one of the, you know, silver linings of this is, is that you are seeing housing prices come down. I mean, rents are down in San Francisco, 20% in the last, in the last six months. So, you know, maybe, maybe it becomes slightly more affordable. We have about 30 seconds left. And the one thing I think we, we share in common is we both, we both love magic as a, as a kid. And so do you, do you still practice or at all, or any, any, any, any tricks up your sleeve? Let's see here. I try and have a, I try to have a deck of cards hanging around every now and then. I appreciate it. Stay safe and, and keep doing your thing and really appreciate you coming on board. All right. Peace man.