Drew Houston explains how he built Dropbox with the AARRR! Framework

“We had a lot of competitors who built things that were reasonably functional, but they didn’t get distribution right. And they didn’t get virality right.”

How’d Dropbox get it right?

Drew recalls using Dave McClure’s “Startup Metrics for Pirates: AARRR!!!” framework to run the company in the early days.

The gist of the framework is to measure and constantly improve five core metrics: Acquisition, Activation, Revenue, Retention, and Referral.

The first example he gives is Activation:

“Users come in. Oh my god, 4 out of 5 who signed up don’t put a file in their Dropbox or install a client. What’s going on?”

As Drew partially explains in the clip, they went on Craigslist and offered $40 to anyone who'd come in for a 30-minute usability test. They asked these people to go from a Dropbox e-mail invitation to sharing a file with another email address.

“Zero of the five people succeeded. Zero of the five even came close.”

This stunned the team. So they made a list of 80+ things in an Excel spreadsheet and sanded down all of the rough edges in the experience. Their activation rate climbed from there.

“Really paying attention to all the steps and the viral engine and tuning that as much as possible,” as Drew explains, was crucial.

For the Referral step of the framework, Dropbox used a combination of organic virality (users sharing files with nonusers) and incentivized virality (free file storage for each person you refer) to achieve exponential growth.

For initial user acquisition, Drew famously created a viral video demoing Dropbox and shared it to Digg and Reddit to build the initial waitlist.

“It was inspired by some of the stuff I saw in the late 90s and early 2000s. PayPal had an incentive referral bonus. I had the idea for the DIgg and Reddit video based on a book called Guerrilla Marketing, which was like, How do you do marketing and get users when you have no money?… A lot of the dots were connected from things I had read over the last several years.”

Full video: Y Combinator “Drew Houston : How to Build the Future” (Feb 2017)

More popular advice from Drew Houston

Drew Houston on handling negativity and criticism “You simultaneously have to have thick skin and be able to tune negativity like that out. But you also have to have thin skin if your customers or team aren’t happy and respond to it… it’s a weird dynamic that you’re going to have to handle, but I think it starts with getting some perspective that you will always face negativity and criticism from some people.” (full article).

Dropbox founder Drew Houston on why great distribution beats great products. "Many people in Silicon Valley like to focus on building products that are, in the famous words of the late Steve Jobs, "insanely great." Great products are certainly a positive, but the cold and unromantic fact is that a good product with great distribution will almost always beat a great product with poor distribution." (full article).

Dropbox founder Drew Houston: “Nobody is born a CEO. You learn it.” “Your job as CEO changes every six months, every year, every couple of years. Just nobody tells you that… Nobody is born a CEO. You learn it. And the challenge is you just don’t know what your blind spots are. The chessboard is a lot bigger than just building a good product.” (full article).