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

9/28/10Follow @wroush

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the companies that brought the first PC-based file systems to the business world. “We think it’s a huge trend, and that five years from now everyone will have their files in the cloud, because it’s easier.”

O’Driscoll, who joined Box.net’s board after Scale led the startup’s $15 million Series C funding round in April, is actually a pretty typical example of a Box.net user. He says he uses Box.net’s iPad app to keep up with the required reading for the venture firm’s Monday meetings. “We get a package every weekend of all the business reading we have to do before Monday,” he says. “And what I found is that I can just upload the documents to Box on Friday, so I don’t even get the paper package anymore.” (Maybe printer and copier makers need to worry about Box.net, too.)

Levie says he got the idea for Box.net midway through college, which he calls “a point in time where you have a lot of mobility…You’re moving between the classroom and the library and your dorm room, and there’s a lot of data exchange between your computer and all the people you’re working with on projects.” Levie would exchange files with his classmates via FTP or e-mail, but it was all pretty inefficient. For online file storage, there were dot-com-era holdovers like Xdrive, but they were expensive. Levie needed a project for a marketing class, and he started talking about the sharing problem with Dylan Smith, who’d been his high school classmate in Seattle and was now studying at Duke University. “We decided to build a service that would make it really easy to share and manage information online,” Levie says.

The two dropped out of their respective colleges and used savings from previous ventures, along with $11,000 from Smith’s online poker winnings, to start hiring engineers. One of their gutsiest and most rewarding early moves was to cold-call billionaire Mark Cuban to invite him to invest in the idea. Recently, Cuban has had two cameo spots on the HBO series Entourage, and in one of them, he invests in one of the characters’ businesses. “That was really weird to watch, because we also got an angel investment from Mark, but ours really happened,” Levie says. “So I feel like I was on Entourage.”

2005 was the perfect time to launch a cloud storage company, according to Levie. “You had this lull [after the bubble burst] where there were a lot fewer companies being started in 2003 and 2004,” he says. “But starting in 2005, 2006, and 2007, there was a huge ramp-up. Fortunately we were in the early part of that.” That meant the company could get its story out without a lot of competing noise.

The idea that knowledge workers should have online spaces dedicated to documents sharing—their “boxes”—caught on quickly. “As soon as we launched the free version in 2006, the problem wasn’t getting the first 1,000 or 10,000 customers, it was how to we manage scaling up for hundreds of thousands of new users a month,” says Levie. The “free” part didn’t hurt signups—Box.net’s early users were mostly non-paying customers. (Now the company charges $9.95 per month for individual accounts with up to 10 gigabytes of storage, and $15 per user per month for business accounts.)

While many of Box.net’s early competitors have disappeared from the map, there is a thriving, closely related market for online backup services like … Next Page »

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

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