Dropbox: success from failure

Every year thousands of entrepreneurs will have another great idea that is sure to take off and bring in millions of customers. However, most of these great ideas will turn into another business failure. But, in the case of Dropbox, it is multiple business failures that eventually created a huge success, giving hope to millions of budding entrepreneurs.

With 300 million users, the file sharing ‘Dropbox’ is certainly a success, estimated at a value of $10bn. But it didn’t happen immediately and was preceded by a few failures. So, what is the secret to success in this case? The co-founder of Dropbox, Drew Houston, said that it is all about providing something that customers want. In the case of Dropbox, customers are crucial: the more people use it, the easier it becomes for others to use it too, as it allows file sharing on a much larger scale. Perhaps here we have a case of network externalities.

With Dropbox people would tell their friends about it and collaborate. So when you go into work and work on a project with colleagues you recruit them in essence to become Dropbox users because you’re all working on a project together.

No doubt there are many other examples of businesses that have proved a success after several failed attempts. Providing customers with what they want, at the time when they need it is clearly a key ingredient, but so, it appears, is business failure. The following article from BBC News considers the rise of Dropbox.

Dropbox and the failures behind it BBC News, Richard Taylor (1/7/14)


  1. Customers are clearly crucial for any business to succeed. How can a new entrepreneur find out if there is a demand?
  2. Why was timing so important in the case of Dropbox?
  3. Given that customers can actually use Dropbox for free, how does this company make so much money?
  4. What are network externalities? Explain them in the context of Dropbox.
  5. Drew Houston says that ‘distribution’ is another key ingredient to success. What do you think is meant by this and how will it help create success?