The Cloud

A CFO and His Company Grow Up Together

With a finance chief who's about much more than finance, an enterprise that started on a pair of college campuses is making a lot of noise in the s...
David McCannNovember 16, 2012

Dylan Smith has been a CFO for seven years. He’s now 27.

Given his age, it almost goes without saying that the company he works for is in the technology field. Actually, he co-founded it.

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In the mold of Facebook’s Mark Zuckerberg and Eduardo Severin, Smith and his friend Aaron Levie launched Box, a file-sharing and collaboration tool, in 2005 while still in college (at Duke and the University of Southern California, respectively). They had been dissatisfied with existing options for sharing files with classmates or exchanging documents with professors, so they built their own and decided soon after to commercialize it.

Box is not yet profitable, but by any other measure it owns an impressive collection of successes. The company has raised $284 million in venture funding (including an initial angel investment by Mark Cuban); its valuation is more than $1 billion; 125,000 businesses, including 92% of the Fortune 500, use its service to one degree or another; and 200 million files are accessed on Box every month.

The company, which has more than 600 employees, is in a competitive, fast-moving market. It’s vying for share with established, deep-pocketed competitors like Microsoft (with its SharePoint), IBM (Lotus Notes), and EMC (Documentum), and such newer ones as Google (with its GDrive) and Dropbox, which has about the same amount of venture funding as Box.

Box uses the “freemium” revenue model, providing its basic cloud-based software for free and charging per-month, per-user subscription fees for premium services.

Smith, who earned an economics degree at Duke University, is an interesting fellow. He’s been an entrepreneur since high school. He provided $20,000 in seed money for Box that he won playing poker online. He appeared on a 2010 episode of Millionaire Matchmaker, a reality television show on Bravo that attempts to match single millionaires with potential spouses.

He recently spoke with CFO about the ventures he’s been involved in, his passion for his work, and the opportunities that lie ahead. An edited version of the interview follows.

When did you start thinking that entrepreneurship was your calling?
Growing up I was very interested in biology and medicine, and I went to college as a pre-med student looking to be a pediatrician. But I started to get the entrepreneurial bug in high school. I started a tutoring company for middle-school and high-school students, with a couple of my friends working for me. Both doing the marketing and working with the kids were a lot of fun.

Was Box your next venture?
No, before that I set up a lofting business in college. The idea was to build lofts so students’ rooms could have a more efficient layout. I saw a big unmet need and thought it would be pretty easy to put those things together, mark them up 10x, and get the parents to buy them. I hired about a dozen of my fraternity brothers, who’d done similar kinds of work, to build the lofts and install them. That was fun too, and very profitable, not just for us but the fraternity as well. We built about 200 lofts and sold all of them.

I never worked on a technology project until Aaron approached me and we started talking about Box.

Would you characterize playing online poker as entrepreneurial too?
Not as much. But it was still looking at a market opportunity and taking advantage of it. The World Series of Poker was becoming pretty popular, and there were a lot of less-than-stellar poker players coming online. It was a good way to make some extra money.

So you’re the CFO. What do you do during the day at work?
There are three areas where I spend most of my time. First is financial planning and analysis. That’s what I love to do most: building a model and working closely with our sales, marketing, and business development leaders to think about the different opportunities we have and the right way to allocate resources.

Second is corporate strategy. Aaron [Box’s CEO], our chief operating officer Dan Levin, and I spend a lot of time thinking about the biggest opportunities we want to pursue, how to build the team, and the best ways to approach problems.

Third is working to build out the organization. I spend a lot of my time recruiting everyone in the finance organization and leaders across the company. I approach it from both a skills and a cultural standpoint.

With hundreds of millions in venture capital, buttoned-up financial reporting must be important. Are you an accountant?
No. I went through the advanced accounting track at Duke, and I understand the ins and outs of the financial statements. But I trust our controller organization on the technical side.

Aaron Levie has a business degree from USC, but your degree from Duke is in economics. How have you gone about learning business, per se?
A lot of it is learning on the go. Both Aaron and I are voracious readers. And being here in Silicon Valley, through our investors and other connections we’ve been able to sit down with a lot of talented COOs, CFOs, CEOs, and other entrepreneurs who have been down a similar path. We certainly haven’t gotten everything right, but we’ve learned a lot.

And much of what we’re doing, putting the freemium model inside enterprises [in conjunction with] the rise of mobile technology and tablets, no one has seen before. Some of it is just forming a thesis with good reasoning behind it, then going out and testing things to see what works.

Have there been any times along the way when you thought Box might benefit from having more experienced people in the key leadership roles?
We’ve been pretty thoughtful in building a strong leadership team around Aaron and myself. Dan Levin is a great example. He was at Intuit for six years, running all of its small-business products, like Quick Books. That was a company with a few thousand employees and $700 million in revenue, so he’s seen scale. And we have people who have been talking and selling to CIOs for 25 years.

We know we have a lot to learn in order to go from where we are to a multibillion-dollar public company. But our board has basically said to me, “If you want to take this company public, here’s what we need to do, and we have confidence that you’ll be able to get that done.”

Give us the elevator speech on what exactly Box does.
Collaboration between people, teams, departments, partners, and customers is key to almost any business. More often than not, at the heart of collaboration is some form of content or business information contracts – proposals, creative briefs, videos, graphics, photos, designs, invoices, scope-of-work documents, and so on. Our vision is to provide a simple way to help employees share, manage, and access the content they need to get work done anywhere, anytime, and on any device.

Just a few examples: Proctor and Gamble uses Box so employees across the company can share documents and information. Electronic Arts uses Box to coordinate launch campaigns for new games internally, as well as with external partners and agencies. And Amylin, a pharmaceutical company, and St. Jude Medical Devices use Box to give their geographically dispersed sales teams easy access to up-to-date product information on iPads and other mobile devices.

Where you are on the path to profitability?
We’re pretty singularly focused on growth at this stage. Profitability and positive cash flow are not a near-term focus, though we are on a path to get there with the cash we have in the bank. We’re investing big to establish and maintain a leadership position. We’re growing north of 150% this year on the revenue side, and we’ll do that next year as well.

Do you have various product lines?
It’s really one product with a couple of different tiers: business and enterprise. The latter has additional security and you can do more things with it, but the core technology is the same. We try to keep it very simple for our customers, without additional modules laid on top. Our opportunities are more around building the channel – getting into new verticals and geographies.

What differentiates you from your competitors?
We’re seeing GDrive and Dropbox more in the SMB space. All three of us have pretty similar technology, but we built ours with the enterprise in mind. There are about 2,500 companies in the United States with 5,000 or more employees. We’re actually going after a larger market than that, though. What we’ve built for large enterprises flows downstream and provides a pretty powerful experience to the underserved mid-market and even SMBs.

Thinking about your future career, do you see yourself first as a finance person or an entrepreneur?
I see a future in finance, as it leverages a lot of my strengths and allows me to have a big impact on the direction of the company, tying the strategy to the execution. But I see myself primarily as an entrepreneur/operator, and at some point a nonfinance role could be appealing – as long as it enables me to have that same impact.

Do you take advantage of the lifestyle opportunities for young people in Silicon Valley, or are you one of those guys who’s locked into the job 100 hours a week?
More the latter. I’m more or less settled down, with Box of course, and I’m engaged as well. I do try to take advantage of the weather and the food, and I stay active physically, cook, and hang out with friends. So I’m not always at the office.

But we are working long hours. There’s always a sense of urgency, given how competitive the market is and how many things there are that we can be doing. The nature of what we’re doing is so interesting that I’m very happy with my work-life balance, even if it’s not one that would work for most people.

We see ourselves in a category with Salesforce and Workday, revolutionary companies driving a better way of getting business done. Because of the size of our opportunity, how fortunate we are to be at the forefront of a lot of technology trends, and being plugged into a network of other CFOs and mentors, Box is where the vast majority of my time and energy go. And I wouldn’t have it any other way.