The Exchanges

Q years, not 20, but part of the challenge is obviously what are we going to do with this unstructured, slightly structured data, tagged, but massive, ingesting mass amounts of data that has a little bit of light structure to it, it has titles and search, and now you, it's remaking the company probably in some ways, right, where you can finally do more than text-based search across this data, right?

A Yeah, that's right. So we, we, we just, we, we lucked out. We have, we've been building a product for about three years. We just announced it called Box Hubs. And what, what Box Hubs does is, you know, traditionally you have your content organized in folders and you share those folders with people that you want to work with. Hubs creates a presentation layer where I can say, I want content from all these different folders to sort of be presented in this way to some audience. So Your sales team will have a sales portal. Your employees will have an HR portal. Your, your marketing, you know, all your employees will have access to brand assets via marketing portal. So that's hubs. We, we've been building that for three years and all of a sudden, you know, a year ago, you know, the LLM explosion happened and we said, wait a second, this is sort of the perfect scenario now where the, the, the customer is telling us what is their most authoritative set of content by topic. In a hub and you bring an LLM to that and now all of a sudden you can actually start to do more kind of question answer based, you know, like working through your data where you go to the sales portal and you say, what's the price of this product? And it's going to give you an answer instead of saying, here's the file that might contain the answer. So we think that's, that's a pretty big breakthrough in knowledge ma…

AI assessment note: “you bring an LLM to that and now all of a sudden you can actually start”

Q expert, but let's take it out a couple months, right? So you've got this data lock, right? But if my MCP is great, maybe I just grab those box files and that data, and I abstract away box. And sure, box has the data and the healthcare company. But if I can talk to it through a myriad of different levels and MCPs and everything, is it really a moat?

A I would actually argue that MCP is a thing that only enhances the underlying moat. Because data wants to be free. That doesn't mean that there's no moat around managing the data and making it useful. It wants to be incorporated in some other workflow. So for us, the more places where customers can use their data is only a net positive. We want to connect to every MCP, you know, environment that that's possible as a tool. And that just makes the continued feedback loop of having more data, at least in our environment, more valuable because, because you know that it's going to be accessible from all these other systems. So I think of that as kind of a, the analogy would be like, did APIs reduce people's modes? No, it actually in many cases made companies more sticky over time because they could be embedded into even more software, which made that even a greater level of, of sort of concentration. So, so I, I, I mean, I, I see no reason why MCPs wouldn't be just analogous to all of the, the APIs that we built over the past couple of decades.

AI assessment note: “I would actually argue that MCP is a thing that only enhances the underlying moat.”

Q And, and is it early? Is it just starting really?

A It is because if you literally look at people's vendor stack, and if you were to go interview any, any CIO of any top 10,000 enterprise, the majority of their dollars are going into brand names, That, that existed a decade ago. So that kind of tells you we're still pretty early because it can't possibly be the case that for all of the world's largest organizations, all the software that they're using is still the same software as 10 years ago when we didn't have hybrid work as the main fixture of how we operate. So something still is, is yet to completely go and, and actually change, um, and make these markets, you know, continue to evolve. So you got hybrid work. Uh, you know, everybody knows everything's going to go digital. There's literally not going to be, you know, anything other than a digital transaction. So think about all the software that has to get written To go and help every company and every industry and every size organization all around the world be able to process everything digitally. We're still in the very early endings of that. Um, and then you've got the mega tailwind and just, you know, tectonic shift of security, privacy, you know, global data privacy challenges that, that every organization is facing. So you compound those three things and, and there just have never been more tailwinds in enterprise software than right now for, uh, for this, uh, this t…

AI assessment note: “It is because if you literally look at people's vendor stack”

Q So you went from So you got pretty far spending really zero percent of your time directly interacting with. So is the learning that you would have done more?

A I would have done a lot more. Um, and I, I think we got away with it because we could be our best customer. So we were, we were sort of our own company was scaling at the rate that our customers, uh, environment sort of adopted. Um, so like when we were 200 employees, you know, our biggest customers were maybe 500 user deployments. So we kind of just knew like, okay, what is the security you need? What is the content management capability need? Um, and then, and then it started to really, the, the size of our customer started to dramatically outpace our own ability to sort of, um, you know, uh, uh, kind of, uh, assume or, or, or kind of guess what was right for them. And this is the really hard part about enterprise software versus consumer.

AI assessment note: “I would have done a lot more.”

Q And I know maybe this is an obvious question, but it might shock people, uh, that, that listen or watch. Is this the world we're going to be in forever? This world where everyone's just got to be more efficient than we've been in years. It puts pressure on sales comp. It puts pressure on marketing budgets, or you think things will reflate a little bit across, across assassin cloud.

A I think, I think it would be, it would be healthy if they didn't reflate too much. I think it would be healthy if, if they looked like when you and I were, were doing this and it was like, you know, you were, you were trying to get a six to eight X multiple. Like that was, that was fantastic. Like, and, and like the only problem with the, the, the market is just like the moment that the market sees something that's growing 50 or a hundred percent, they just, they get, they get overly excited and they instantly Jack it up to 15 X, you know, multiple or 20 X for multiple. And in some sense, it makes sense because you're, you just, if you can just, you know, extrapolate out two extra years, then maybe you're willing to pay that extra dollar for that company than, than the other, than the other investor is. Um, but ultimately when you do that indiscriminately across categories and across software companies, you get, you get these bubble dynamics. And I think, I think where Wall Street kind of got it wrong is, is they were treating literally all software the same. Again, indiscriminate of, of what's the gross margin? What's the, what is the, you know, contract value size? What is the renewal rate of that company? Is, are they doing five or 10 year deals or are they on monthly billing? And like all these things end up sort of compounding over time one way or another, where service no…

AI assessment note: “I think, I think it would be, it would be healthy if they didn't reflate”

Q Well, that, you know, it is interesting. Everyone needs, everyone needs a wedge. A, a 10 x feature, right? And so that, that, that ism, that trite ism of a, a feature versus solution is pretty stupid if you've been out in the field, isn't it?

A It's, ah, it is because the, the, you know, your, your, your, especially incumbent competition is always trying to deposition you as a feature, and, um, but, but the, what they don't realize is, you know, hopefully what you're building behind the scenes, and I think the thing that, that I look back on is, um, ah, as maybe one of the biggest lessons of this, of that journey, Is architecture matters more than almost anything else you can imagine, uh, in that journey. Because if your feature is then completely disconnected to the next feature, and then thus the next feature, then you really aren't on your way to building a platform. Uh, and so we, we made a bunch of, now in retrospect, kind of lucky, fortuitous decisions in our platform architecture that were not intentional. We just, we just lucked out that we made them the right way, and then eventually they started to become much more intentional because we knew that we were building a platform, but, um, One of the small things that you really actually, it's worth paying attention to even when you're just three people in a garage.

AI assessment note: “It's, ah, it is because the, the, you know, your, your, your, especially incumbent competition”

Q Even now. Yeah, it spends a year for Box to get through that, right?

A Yeah, CR Financials. So, you know, you spend a lot of money, Because not everybody buys this stuff on day one. So for sure. So you have to spend a lot of money to invest in working with these customers. And so for, let's say a year, all of the time around auditing, testing, selling, marketing to GE is unprofitable. And then, and, and then we're just, you know, praying every night that that GE, um, you know, kind of comes on board and agrees with our strategy and, and then, and then converts. And so, um, so we've done a lot of that work now. For a large number of enterprises. So if we can hopefully save people on, on that time and energy and instead let you focus on, um, building a world class mobile application or a world class, you know, workflow application, um, then, then, you know, hopefully, uh, we can actually drive way more innovation in the enterprise. So that, that's our, that's essentially our, uh, our, our platform model and our, uh, our API model right now.

AI assessment note: “for, let's say a year, all of the time around auditing, testing, selling”

Q I mean, you sat in the middle of the team, as I remember, like really in the pit with all the developers or wherever you are, right?

A I still do, but it's just, I'm in the office now, unfortunately less, less frequently. So, so, um, but for the first seven years, um, and, and this was, I mean, part of this was just consistent with our sales model. It was an inside sales model, Um, and, uh, and the people we were talking with really didn't demand a, an in-person meeting. Um, so, so we could kind of accomplish that, but, but actually I, I was, uh, rarely even on the phone with customers. Um, the, our, our real customer interaction was driven by our, our first set of, uh, head of sales, our first kind of set of sales individuals and, and sales team, and so I was super product focused. And then we had a sales operation. And, and, you know, we would meet, you know, almost daily on just like, hey, what are you hearing? What's going on in the field? What, what are customers asking for? And then we would, we would, you know, through, through, um, uh, you know, any means necessary, try and try and build the kind of things that, uh, that, that we thought were going to be important for these customers. And, uh, and, and that really worked up to a certain stage of, of, of, of customer, of customer sort of, Um, uh, kind of credibility.

AI assessment note: “I still do, but it's just, I'm in the office now, unfortunately less”

Q What about today? Um, customers versus prospects. How, how, what is, how much do they trick the CO into spending his time with each other? How do you balance the two?

A It's actually more that, uh, yeah, I, I, I trick myself into it. So I am, uh, I, I am willing to talk to anybody interested, remotely interested in moving their content to the cloud. So, uh, so I, I, uh, I, like, you know, 90% of the time I'll leave some Zoom call with a prospect and be like, that deal's gonna close next week. We got this. And it's like a year and a half later. Um, it's like, okay, finally we're closing it. So there's a sort of optimism that, uh, that refreshes on a daily basis, um, uh, as a, uh, as a founder, but, um, so a lot of time spent, uh, with, uh, with customers, but you know, we, we've definitely shifted. So we have a 100,000 companies on the platform. So that means, you know, almost by definition, the vast majority of our bookings and revenue are going to be from our existing install.

AI assessment note: “So a lot of time spent, uh, with, uh, with customers, but you know, we, we've definitely shifted.”

Q But then more to bigger customers, outsized growth, right? So, what's changed at Box as you go more enterprise at eight hundred million?

A Yeah, so, you know, it's interesting. Um, I'm, I've, I've decided that, like, I don't need to get any points, um, for the, the thing I'm about to say, um, but I do want to be remembered, um, As, as, as still having this as a core part of the strategy, but I, I just don't care to talk about it that much. Um, a lot of, like, like, a lot of founders will come to me and they'll be like, how did you do enterprise sales at the beginning? And I'm like, I was like, I didn't, we didn't, like, we have always been a freemium product-led growth company. We just stopped talking about it because it's just like, like, it's just not that much to talk about at some point. So, so these numbers are super important, but they don't come Just because we do these, you know, super big enterprise deals all the time. They come because we have instrumented every element of our product to be self-serve freemium and viral. And then we have an enterprise sales team that goes and works with customers to turn those deployments into much more strategic relationships. And that was the, that was the balance that, that we lucked into early that we made the bet on. And it just, that's a flywheel that if you can get humming, almost just, you know, takes care of itself. Uh, so, so our model is, most of our upsells of, of customers are, the customer has already deployed the software, they're already using it, and it'…

AI assessment note: “we have always been a freemium product-led growth company. We just stopped talking about it”

Q lucky and you work incredibly hard, right? Does box, what percent of Salesforce customers does box have, right? I mean, after all these years, it's not like 10%. Maybe it is accidentally, right? But not, not through Salesforce as a lead source, for example, right? So maybe, so I think The interesting question is, can people make millions of dollars off of Box now, uh, as a lead source, right?

A Yeah, this is a great question. So, so this, this, um, what we realized was we had to begin to dimensionalize our customer base a little bit differently if we were going to go accomplish that. So, so the, and, and I think, I mean, actually, maybe just show of hands, who is building an application that has an industry focus or industry orientation to it? Ok, so, so just, that was just, ah, and then who's building something that is more function based, job function based? Ok, interesting. Then who, who's everybody else? Just products for a hundred percent of the user base, the customer base. Ok, who's doing something that, that is universal, every employee in the whole company could use it? Okay, cool. Alright, so, um, so what we realized was, was depending on which category you're in, there are different economic, ah, values that we can- Absolutely. That we can drive, right? So if you're building a deep industry workflow, you actually could make more money from that customer than we can. Um, if you're building a job function app, then we have to find a way to, to get that job function app to the right, to the right part of our customer base. And if you build something universal, then, then we, we have to figure out how do we kind of go to market together, you know, across the entire customer base. So we built this thing called Box for Industries, um, last year, which is what we,…

AI assessment note: “depending on which category you're in, there are different economic, ah, values”

Q vision, it, it's, it's still evolving now for this platform, right? Are there one or two things, and we'll, we'll actually look at the platform on the next slide, and maybe I'll flip to it, except I can't go back, so I'm, I'm cautious, but are there one or two things you wish you'd done earlier on your platform, looking back, that you would have pulled, pulled them down earlier?

A Yeah, I think there was, um, I, I think, uh, yeah, I mean, Every, I, I just say as a general statement, every feature that today is, or, or product that today is performing well, I wish I had done earlier. So, so I, there's like unlimited given, right? Yeah. So like, like I wish I could do a lot of that faster. Um, you know, sometimes you have to find your way of which products are, are working and, you know, I'd say every maybe year we have two or three bets going on in the business of, of new areas of innovation and some years, All of them work. Some years you look back and you say, okay, only one of those worked, or, or maybe we even skipped a year of, of, of actually kind of that, that type of value that we want to drive. But in general, you know, you're always sort of planting a few seeds, um, and then, and then while you're working and incubating the, the, the ones that you planted the prior year. And so today, you know, data security is a big area. Workflow automation is a big area. Uh, we're now, um, uh, thanks to your inventions, uh, we're now doing a lot more in e-signature. Um, so we appreciate, uh, all, all the, uh, the, the wars that you had to fight before us on, on that front, but, um, so we're gonna have multiple pillars of, of, of, you know, new capabilities, all on one platform, and then integrated together, and then offered as APIs to, to anybody else that wa…

AI assessment note: “every feature that today is, or, or product that today is performing well, I wish”

Q Is that late? I mean, obviously Box is doing great, but thinking about it and learnings is.

A It's hard because you're always, you're, you're, you're, I mean, this is like the age old sales, like, Segmentation challenge. Do you do territories? Do you do size of company? Do you do verticals? And it's just, you're always kind of the matrix of, of complexity. So, so you have to be able to get enough value from your customers to be able to, to in, in any given territory to be able to start to even specialize on verticals within those territories. Um, so, so we actually were, were, I don't think we were late or early. We were sort of appropriately timed relative to the impact it would have on our business. So, so, and, and the, the, the key distinction is so, Um, in crossing the chasm.

AI assessment note: “I don't think we were late or early. We were sort of appropriately timed”

Q do you, Just one question. I'm curious about that. So you, so you've talked to all these institutional investors. Is there room for another 10 box like IPOs? Is there enough appetite out there to do another? Is there just other check? Obviously they can write. There's huge amount of institutional capital, but for SAS, right? Is there enough appetite for 10 more IPOs like box this year? You think?

A Uh, well, that would be probably dangerous for me to answer. So what I would say is, um, what I would say is, is that there's, uh, plenty of room For, for companies that are benefiting from this, this very clearly secular change toward cloud and mobile. And if you've built a significant business on the, on the, on the back or benefiting from that, then there's, then there's maybe room, there's room for a hundred. I mean, it's not, I don't think there's any particular, um, kind of, you know, limit to the appetite. The, the investors that are betting on this thesis are realizing that Um, you know, so in our space, what we do is, and this is the, the singular most misunderstood part about our businesses that, um, is that people think we're in the storage business, and we, we buy storage, we buy hard drives, or else we can't store your data, but what we sell you is an application and a service and a platform, and so the, the, the significant difference there is actually when you look at our architecture, storage is one layer, but there's also a security layer, there's a content management layer, there's a search layer, there's a, there's a data loss prevention layer, and the big, Um, the big disruption in our particular space is that, is that maybe, you know, as an end user, you use Box as an easy way to share and collaborate around files, but actually, as an enterprise, you're sav…

AI assessment note: “then there's maybe room, there's room for a hundred... so in our space”

Q buffer for 15 to 20% for services, and then there's another buffer, and we'll talk about platform, 15 to 20% for the other crap I have to buy to make that product actually work, right? Integration. So, so, So I wanted easy to use product all, but it's, you're an idiot to not take that 20% or whatever the number is. What is it for box? I, I don't remember.

A Right now it is far less than that, but it's actually, it's actually been a bigger priority for us because it goes towards solving that problem, which is, which is, okay, we, we've got this, we've got this great customer. They are deploying the product, but why don't we have an active conversation and strategic conversation with every one of their IT architects at all times On how can they be using us more? And how do we make that not be a, uh, any kind of trade off decision for us? Right? Like, because normally if they're not paying for it, then you're going to have to say, well, how do we balance all of these? How do we balance all of these customer success managers time with all of these customers? If, if, if we can have a partnership with GE where they're, they're actually, um, they're actually funding the ability to find all these new use cases. That's actually a great partnership for both of us. So, so I would say that That the CEO, if you're, if you're having to be responsible for that 250 to a billion, um, uh, then, then you might, you know, might want to just also just look at investing in some other areas, but I'm gonna, I, I still am pretty balanced with my time.

AI assessment note: “Right now it is far less than that”