In January, Dropbox received financing from Blackrock valuing it at $10 billion. But are you really surprised?

At the most recent count, Dropbox had 200 million users – that’s 10 times what they had in 2010.

And if you wanted to learn how to build a billion dollar company, then Dropbox is a great one to model…

Here are a few lessons you can learn from their success:

Find The Pain

Drew Huston, Dropbox founder and CEO, tells the story of how he first came up with the idea for Dropbox…

He was about to board a bus from New York to Boston, and realized he had forgotten his USB flash drive – which, of course, had all of his important files on it….

A vivid image of his USB flash drive back at his apartment went through his mind…. It was a painful experience realizing that he wouldn’t be able to access any of his course work, and wouldn’t get anything done on the bus trip.

If he was experiencing this kind of pain, he thought others might be as well. By paying attention to the success and demonstrated demand for other online storage services, he saw the opportunity to improve the model through simplicity and more forgiving data requirements.

So, without much delay, he used that bus ride to break out the code editor and start designing the first version of Dropbox.

For entrepreneurs, this story has an important lesson: solving a pain can be a real opportunity for those willing to take action.

Note: this video was posted Oct 19, 2012 –
the company has grown since then, but the story is just as fascinating.

Be Committed to Self Education

Drew Huston is an MIT engineer. This meant he was fully capable of coding the software for Dropbox, but much less confident about how to build and manage a billion-dollar company.

In order to learn more about things like marketing and management, he needed to educate himself. In Huston’s estimate, that involved reading a lot of books. A lot of books.

While reading books (without formal guidance) as a form of education may have its limitations, it certainly gave him the essentials he needed. As Drew noted:

“Reading a book about management isn’t going to make you a good manager any more than a book about guitar will make you a good guitarist, but it can get you thinking about the most important concepts.”

Which reminds me… have you ordered your copy of The Predictable Profits Playbook yet?

Growth Hack the Product to Market Itself

One of the smartest growth tactics, built directly into Dropbox, is the product’s ability to market itself.

The company accomplishes this by giving incentives to its users to recommend the Dropbox to their friends and family. For every person that a user refers, they receive an additional 500MB of storage space.

The referrals alone increased Dropbox signups by 60%!

This is not the only reward Dropbox offers to its user for taking a marketing action…

They also provide free space when users connect with their Facebook account or follow Dropbox on Twitter.

And even better for Dropbox… offering that additional storage space isn’t even that expensive – especially compared to the costs of acquiring a customer through traditional marketing channels.

Make Sure Your Customers Use The Product

A personal recommendation from your users is some of the best advertising you can get, but customers are only going to talk about your product if they actually use it…

To ensure that people understand the value of Dropbox, new users get 2 GB of free storage when they open an account.

Those users then have an option to upgrade to the Pro account for $9.99 a month, giving them over 100 GB of space. Providing that free account helps customers get over any initial objections to price.

Dropbox also ensures that customers understand the full value of the product by rewarding additional storage space for completing their “Get Started” guide.

Leverage Other People’s Experience

Drew advises following a path of success that has worked for other entrepreneurs, and recommends leveraging other people’s experience and knowledge whenever possible…

His first step was to join the tech incubator Y Combinator, which provided Huston with access to the connections he needed, as well as mentorship from experienced tech entrepreneurs.

He also took venture capital in early on….

Not only did this provide the company with the funds necessary for initial setup and growth, it also gave Huston access to some of the smartest minds in the tech industry.

Dropbox then moved from Boston to Silicon Valley. In that hub of tech companies, Huston could spend his time around like-minded individuals and share in their accumulated knowledge.

The Insiders’ Club is my way of providing a similar hotbed of ideas for small business owners and entrepreneurs.

If you’d like more insights on estimating your business worth, check out this related piece on how to value a business.

Dropbox shows that if you want to build your own billion-dollar company (or even just a successful one), it starts by finding a big, unsolved problem. The next step is providing a better solution than any other company offers – then lead the race with strategic thinking and damn good marketing.

What are some ways you can incorporate Dropbox-like strategic thinking into your own company?

In your corner,

Charlie