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Dropbox was founded in April 2007 by Drew Houston who is also its current CEO. Dropbox is an application that allows users to sync, share, and store their files in one place over the cloud. Their services consist of free and paid premium offers. By having your protected files on the internet, it allows user to access and upload their files on multiple smartphones or personal computers.
Thomas R. Eisenmann; Michael Pao; Lauren Barley
Harvard Business Review (811065-PDF-ENG)
January 19, 2011
Case questions answered:
- What are the issues in the case?
- What analysis do you have to back it up?
- What are your recommendations for the issues?
- Dropbox is not the first mover in the file sharing and storage space. What opportunities did the founder see here? What are the key elements of Dropbox's business model (i.e., target customers, value propositions, etc.)?
- Is Dropbox profitable as of June 2010? Evaluate their financial model and profitability forecast for the future.
- When he applied to Y-Combinator, what hypotheses did the founder hold about the key elements of Dropbox's business model? As of June 2010, which of these hypotheses have been confirmed and which ones discarded? Evaluate the hypothesis tests. Suggest improvements (if any) you would make to their testing process.
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Case answers for Dropbox: 'It Just Works
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Background – Dropbox, Inc.
Dropbox, Inc. was founded in April 2007 by Drew Houston, who is also the current CEO. Dropbox is an application that allows users to sync, share, and store their files in one place over the cloud. Their services consist of free and paid premium offers.
By having your protected files on the internet, it allows users to access and upload their files on multiple smartphones or personal computers.
This case takes place from the creation of Dropbox in 2007 to mid-2010, and the key players, in this case, involve Drew Houston, his partner, Arash Ferdowski, and the consumers. Houston recruited MIT dropout, Ferdowski to help out with the early stages of Dropbox and later became a co-founder and CTO. The start-up was backed by the Sequoia Capital venture at the time.
The main issue of this San Francisco-based start-up was how to come out on top amongst the other leading applications in the industry as they came in as a new entrant. Other issues included hiring the right people to create a sustainable and well-performing workforce that did well on the business aspect.
Dropbox also had some problems with keeping their product user-friendly while catering to feature requests. The fourth issue involved their marketing strategy and promotional offers – how is Dropbox going to attract and acquire new customers and convert those free users into paying customers?
The market for their single product version were consumers and businesses, but they wondered about creating a strategy that segmented their user base by creating different versions or separate products.
Dropbox was growing quickly as they gained 2 million users one month after launching their mobile phone application. This meant that Dropbox needed to keep up with their quick growth to remain on top.
They started listening to their users to make strategic decisions on target enterprise customers, user-desired product features, and distribution deals with mobile phone manufacturers.
1. Eisenmann, Pao, and Barley (2011) wrote, “The online backup and data storage services space remained fragmented and fiercely competitive in 2010. This issue refers to the tough competition against rivals like Carbonite and Mozy in a red ocean situation where Dropbox was a new entrant.
The founders knew that current solutions existed like theirs and that they were a late entrant in the competitive industry. The backup and storage field was fierce, and their competitors had launched their product in the 1990s.
If Dropbox were to stand out from this crowd of successful services, it would have to come up with a…
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