Box.net Creates “News Feed” for Business Documents in the Cloud, Takes On Microsoft in Collaborative Software

9/28/10Follow @wroush

If you live or work in Silicon Valley, you’ve probably driven past the Box.net billboard on U.S. 101, near the Ralston Avenue exit (aka the Oracle exit). It says “No Hardware. No Software. No SharePoint.” A brazen dig at Microsoft, the billboard makes the point that Box.net’s system for sharing business documents works in the cloud, without requiring customers to buy their own servers or install special software such as SharePoint, Microsoft’s business collaboration and Web publishing suite.

If Box.net had really wanted to rub it in, it could have added “No cost.” The Palo Alto, CA-based startup offers a free personal version of its online service with up to a gigabyte of storage. Licensing SharePoint, by contrast, is so complex and expensive that the details aren’t even published on the SharePoint website. (You have to call Microsoft to get a price quote.)

Box.net is one of the many Silicon Valley startups gleefully pounding older enterprise-software incumbents over the head with the flexibility and viral appeal of cloud services. But just five years ago, when it was founded by high school buddies Aaron Levie and Dylan Smith from Levie’s USC dorm room with a $350,000 angel investment from Dallas Mavericks owner Mark Cuban, Box.net was just another online file sharing service, alongside Xdrive, Omnidrive, Streamload, and many others vying to help consumers and office workers offload local files to Web-based servers, where they were supposedly safer and more accessible.

Since those days, however, many of Box.net’s competitors have disappeared or imploded. To take one spectacular example, Streamload—renamed MediaMax, then renamed again as The Linkup—went out of business 2007 after permanently losing data for 20,000 customers. Meanwhile Box.net has soared, winning more than 60,000 business customers and raising nearly $30 million in venture funding from top-tier firms like Draper Fisher Jurvetson, U.S. Venture Partners, and Scale Venture Partners.

Aaron LevieSo how did Box.net grow to the point where CEO Levie and chief financial officer Smith—both Seattle natives, and both just 25 years old—feel ready for a head-to-head battle with Microsoft? And just as interesting, why did Levie and Smith decide to focus on the traditionally stodgy enterprise services market at a time when virtually all of their twenty-something peers in the world of Silicon Valley Internet entrepreneurship are building consumer-facing services like social networks, online games, and mobile apps?

I sat down with Levie recently to go through those questions and many more. While part of the message of Box.net’s Silicon Valley billboard can probably be ascribed to the youthful CEO’s brashness, it’s clear that business software incumbents like Microsoft, with SharePoint, and EMC, with its Documentum system, will have to come to terms with cloud-based sharing technology. When a 100-employee startup can come out of nowhere to win 4 million users—offering a collaboration service that requires no initial investment and can be up and running in minutes rather than weeks—that’s what you might call a game changer.

Box.net “is our file system in the cloud,” says Scale Venture Partners managing director Rory O’Driscoll, using words that must strike fear into the hearts of … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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