A year later, the 26-year-old was standing on stage (in his typical electric orange sneakers) in front of 350 customers and press at his company’s first annual conference, BoxWorks, held yesterday in San Francisco. He had just turned down a buyout offer worth more than $500 million. That evening, Box.net hosted a party where the entertainment was one of his favorite bands from middle school, Third Eye Blind.
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Like Steve Jobs, Marc Benioff and Mark Zuckerberg, Levie is part inspirational leader and part visionary. More to the point, Box.net is part of a new wave of startups that are bringing new ways of thinking into the enterprise, borrowing from Apple’s consumer playbook. For instance: make something simple, easy to use and insanely useful, something that you would have never realized you needed, but can’t live without today. It’s a totally different way of working than most enterprise technology companies.
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“In the last 10 years, it feels like something fundamental is changing, consumer computing is leading the industry,” Andreessen Horowitz co-founder Marc Andreessen told VentureBeat. (Andreessen Horowitz is one of Box.net’s investors.) “Consumers get the hottest mobile devices years ahead in advance before adoption in the enterprise.”
Box.net was started in 2005 in a garage by a bunch of University of Southern California students. It has since gone on to capture the attention of investors and massive companies. The enterprise-focused cloud storage provider went from five-figure revenues in its first year to millions by the time it closed its first round of funding from Draper Fisher Jurvetson in 2006 and more than $10 million by its fourth round in February, 2011, Meritech Capital managing director George Bischof said.
Today, the company has more than 7 million users and 77 percent of the largest companies in the world on the Fortune 500 list have deployed its service in some form. Box.net just closed an extension to its most recent funding round worth $50 million that includes its existing investors — including Draper Fisher Jurveston, Andreessen Horowitz and Meritech Capital, all Facebook investors — and also a new investment from Salesforce.com. In total, the company has raised more than $130 million in funding.
“We were kind of kicking ourselves for not getting in earlier, but they were below our revenue threshold,” Bischof told VentureBeat. “We met a year before, and we saw it had the potential to be one of those mega-spaces that affects everyone.”
And half of the $130 million is still in the bank, Draper Fisher Jurveston partner Josh Stein told VentureBeat. The most recent round is an extension to its fourth round of funding, which had already brought in $48 million. Box.net is gearing that funding toward infrastructure costs and opening a third data center to run alongside its existing two centers to manage the load from its new customers.
Now, using all those new enterprise applications is basically a prerequisite for an investment by Andreessen Horowitz, Andreessen said. Every company funded by Andreessen Horowitz in the past year has used Box.net to some extent, along with a mishmash of the other enterprise 2.0 applications like Google Docs and Workday, he said. Most of the time they are either free to try out — in the case of freemium apps like Yammer and Box.net — or are dirt cheap.
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A traditional software company approached Levie earlier this year with quite an offer. At the time, the company was valued at around $550 million, venture capital data provider VC Experts analyst Justin Byers told VentureBeat. That’s a pretty attractive valuation and potential offer for any entrepreneur.
But Levie has said he has much higher aspirations and decided to turn down that offer. While ambitious, it always feels like he’s very candidly aware of the competition and at any time has a secondary and tertiary plan to outmaneuver them. You can see it if you talk to him about the business: he has a cool awareness and understanding when speaking, compared to his usually uncontrollable energetic demeanor.
“When you think about the size of the market, we are one percent of the way to the cloud,” Levie said. “Any interruption in that plan would have been selling ourselves short.”
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Normally an offer as large as the one Levie faced would get an investor’s attention. It’s their business to invest — preferably early — and bank on a big payout. But Box.net’s investors told VentureBeat that they were fine with letting Levie turn the offer down. Investors from Andreessen Horowitz, Draper Fisher Jurveston and Meritech Capital all independently confirmed the deal with VentureBeat and said they gave Levie free rein to make the call.
“Absolutely, we were okay with it,” Stein said. “We want Aaron to go as big as possible, it’s rare that you find an entrepreneur that has the energy to see a project through to the end.”
It’s a dangerous call to make. Some startups that have soared quickly to large valuations, such as Chatroulette, have ended as complete flops. If a company turns down a sweet offer, then fails, investors look bad and so does the entrepreneur. But Levie and his investors said they were confident that Box.net could continue to grow at a blistering pace.
Box.net doesn’t fill a particular niche. It’s enterprise-grade storage that can plug into just about any application, like enterprise social networks Chatter and Yammer or Salesforce.com’s customer relationship management software. Levie told me earlier his plan for the company is to serve as a back-end sharing service that anything can tie into. To do that, the company has formed partnership after partnership with existing enterprise applications, including Salesforce.com’s Chatter, a partnership the company announced Wednesday.
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“Literally any employee across any vertical — sales, IT, management, whatever — can find some kind of use for Box.net,” Forrester analyst Rob Koplowitz told VentureBeat. “It’s basically a very elegant (Microsoft) Sharepoint in the sky.”
A fiery young CEO
When you ask his investors, they all emphasize their faith in Levie and his founding team. Levie is a bit like a Tasmanian devil at times with an uncontrollable amount of energy. He speaks rapidly and he doesn’t pull punches when cracking jokes about Microsoft. When he speaks he gesticulates furiously, flinging his arms and hands around (and making it difficult to shoot photos). Even while sitting, you can tell he’s having trouble staying still. Whenever I see him, he always seems to have a coke or some kind of sugary beverage in his hand — as if he needed any more energy already.
Even with his energetic quirks, he seems to be a shrewd enough business person. That’s a good thing for his company, too, since the space is still hyper competitive with many new cloud computing companies emerging. Box.net was hardly the first company to its hand at online storage. But that pivot to the enterprise — which the company has flaunted in its branding relentlessly — was a product of Levie’s awareness and vision, Stein said.
Draper Fisher Jurveston, one of the company’s earliest investors, took a gamble on the company back when it was still geared toward consumers. After switching to a more enterprise-focused strategy, the company has spread like wildfire. 63 percent of Fortune 500 companies used Box.net in February 2011, which rose to 73 percent by July and 77 percent as the company announced on Wednesday.
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“When your batter is knocking out home runs, you don’t mess with his batting stance,” Koplowitz said. “They made the right call. Levie’s the right guy for the job and he can probably take it as far as he wants.”
Whenever you ask Levie if the company will start including typical consumers in its marketing strategies, he says his company is focused exclusively on the enterprise. It’s obvious that Box.net has some consumer-facing potential. Students, for example, could use it to share assignments and bands can use it to collaborate on songs. Box.net’s even working to pre-load its software on Samsung and Motorola tablet computers, which are as popular among consumers as they are in the enterprise.
Still, Levie has no interest in pursuing consumers.
“People don’t want to lock down content in the enterprise, they want to be able to do whatever they want with it,” Levie said. “Sure, consumers can use it, but there’s always going to be much more potential for something like this in opening up the enterprise and opening that content up.”
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That kind of mission should sound at least a little familiar. Facebook chief executive Mark Zuckerberg unveiled Facebook’s new Open Graph at its annual developer conference. It’s the company’s goal to connect just about everything on the Internet and make it easy to share content. It’s the same mission Box.net is hoping to complete, but in a completely different area. After all, it’s not like Zuckerberg is out there parading Facebook as an enterprise solution.
The similarities between Zuckerberg and Levie don’t stop there.
“We have a thing for fiery CEOs in their mid twenties, I guess,” said Bischof, who has also invested in Facebook.
In July, Box.net announced that it would host a conference in San Francisco called BoxWorks. The conference was aimed at promoting its cloud storage and online collaboration technology, while touching on some major enterprise cloud topics. Done right, a conference like this can be way more entertaining than the word “enterprise cloud topics” might suggest. And Levie’s company is hardly the first to host an enterprise-based conference. Oracle has OpenWorld, for example, and Salesforce.com has Dreamforce.
The conference felt like a coming out party for the company, one Box.net employee told me at the event’s after party. Indeed, having the industry clout to legitimately host a conference and attract attendees from across the country is a significant milestone. Some of the largest companies in the world use conferences as a way to unveil new features and get a feel for how big their customer base is.
Levie certainly played his part well. He seems thrilled to introduce new things to his customers. He’d leap on stage sporting some sweet orange tennis shoes (from Zappos, one of his favorite sites, he’ll tell you). And though he’ll say he usually sticks with Puma-style shoes, he has a new color every time I see him. He’s part Zuckerberg in enthusiasm. He even has his own “one more thing” moment, just like Apple chief executive Steve Jobs. At the end of his keynote speech, he unveiled a deal with smartphone and tablet manufacturer Motorola, and gave away a Motorola Xoom tablet to each BoxWorks attendee.
He pulled a similar stunt with Samsung Galaxy Tabs at a press event in February. But the whole act was completely improvised on stage, Levie told me later that evening. You probably wouldn’t have guessed. The whole event seemed a like a well-orchestrated episode of Oprah, but with a few more awkward nerds in the crowd.
“To be able to get up in front of 500 people at 26 and be that poised, that’s not normal,” Stein said. “He’s a special guy, it takes a special entrepreneur to go that big.”
Salesforce.com, a decade old and one of the top customer relationship management software providers, puts on a massive conference in San Francisco each year called Dreamforce. The company spares no expense, either: Rock group Metallica will be playing at the conference this year and former President Bill Clinton was a keynote speaker in 2010. It’s glitzy and feels a bit like the mayhem that’s present at consumer-facing trade shows like the Electronic Entertainment Expo.
BoxWorks was certainly smaller. There were maybe between 300 and 400 people at the event, not thousands. It didn’t have the dozens of reporters that Dreamforce or OpenWorld typically attract. It didn’t have a massive show floor with giant displays and booth babes. But the pieces were there, and given that Oracle and Salesforce have a few decades on Box.net, it might be better to give the younger company the benefit of the doubt on this one. BoxWorks was a one-day event, but the company already plans on expanding it to three days next year.
But not to be outdone, BoxWorks ended with a concert by Third Eye Blind, a band that holds a special place in Levie’s heart, he said. Rather than stand up on stage or near the front of the crowd, he stood off to the side by himself. He’d dance periodically, but he was checking his phone most of the time. Maybe he was entertaining another buyout offer.
He only broke his cool and leapt into the crowd for one song: “Semi-Charmed Life.” It’s one of the band’s hits from back in the 90s, and was his favorite song back from old middle-school dances.
I asked him how he managed to snag a major band for an event like this.
“Just gotta pay enough, man,” Levie coolly replied with a grin on his face.
[Photo credit: Matthew Lynley, final photo courtesy of Box.net]