Box’s IPO: Deja Vu?

January 23, 2015 was a big day in the cloud storage world. That was the day that Box went public, and in our industry that’s a pretty remarkable event. There aren’t too many public SaaS companies, and Box is close to our heart as they are a strong Cloud FastPath partner.

We’re definitely excited about Box’s performance so far. Shares climbed as high as $24.73 on the first day of trading, which is a 77% gain over the initial $14/share offering. They are still well above the original asking price. It’s great to see another cloud tech company flourishing in this market.

Building up to the big IPO, I was struck by a thought: that there are a number of similarities between Box and, now the granddaddy of software-as-a-service companies. I was intrigued enough to explore this a little further, check out my observations below. What do you think?

Charismatic And Talented Leadership

Aaron Levie, the co-founder and CEO of Box, started the business from his dorm room back in 2005 at USC and has grown the company to become a significant player in the cloud industry. In developing Box, he examined cloud storage options for businesses. After reaching out to several organizations to inquire about storing content and data, he saw that the data management systems of these companies were fragmented and hard to navigate. Levie saw this as an opportunity to begin a business storing documents and files in the cloud. Not long after, billionaire tech investor Mark Cuban invested in Box. In 2007, the consumer cloud storage marketplace was becoming crowded, so Levie decided to focus Box away from a B2C model, and exclusively on the B2B market. Today, under Aaron’s visionary leadership, Box is becoming a model for a modern SaaS business. It’s a platform that lots of other companies depend on for web-based file management and industry-specific content management and applications.

In many ways Levie shares a number of traits with Marc Benioff, the CEO and co-founder of Benioff created Salesforce from a rented San Francisco home back in 1999. Starting with the goal of “ending software for good” (referring to the heavy footprint of enterprise software), he was one of the primary innovators behind the Software-as-a-Service business model. As Salesforce matured, Benioff cemented the company’s position by becoming the system of record for sales and business development. He then expanded Salesforce’s reach by allowing partners and customers to build their own applications on the company’s platform.  Also a charismatic personality, Benioff has driven Salesforce from a sales-tracking software solution for small and mid-size businesses to the tech giant it has become today.

Highly Disruptive to Existing Competitors

Just like Salesforce back in the early 2000’s, Box is quickly becoming a disruptor in its industry. When Box slipped into the cloud business with its minimum viable product, the market had quite a few enterprise collaboration solutions, not the least of which was Microsoft Sharepoint. Many in the market thought that there was no way a company like Box could be successful inside such a controlled part of the enterprise, but they were clearly wrong. Box has demonstrated a pattern of success, by challenging the established model for providing business infrastructure, being intuitive, simple to use, and above all a pleasurable experience.

Rewind to the early days at Salesforce, and few people could have imagined how quickly Salesforce would eat away at the business previously dominated by Siebel, Peoplesoft, and SAP. Part of this was the way Salesforce opened up an entirely new market for CRM in small businesses and small teams. But over time, the company has obviously chipped away at the larger enterprise market as well. Today it’s a clear leader in the CRM space, and their mantra of “ending software for good” is actually a reality for any company making heavy use of cloud-based software.

Put Down By The Establishment

If  you think Box is merely a dumb hard drive connected to the Internet, you’ve got it wrong. Yet, this is exactly how many characterized Box in its early days. They didn’t understand the true value that the service offered – from how it fostered collaboration among distributed teams to the peace of mind it gave its non-technical customers. As happens in a hyped industry, the naysayers put down what they didn’t understand, and ignored what was ultimately a completely different way of looking at the market.

This experience again echoes what had to deal with in its early days. Who else remembers when Tom Siebel and Larry Ellison each scoffed at Benioff’s evangelism for Salesforce’s products and “no software” mantra? Then, too, it took quite some time for people to understand that just because a company had an IT organization that was capable of installing, configuring, and operating a large-scale CRM system, did not mean that customers actually wanted to invest resources in those deployments. While many in  the industry looked down on Salesforce as an experiment or a toy, Benioff saw things differently. He understood that a simple, affordable, enjoyable product experience could change the world of software. And, boy, has it ever!

The Beginning Of An Era

With Box, it’s still too early to tell if they will establish themselves as the new model for how we store and share file-based information. The next fiscal year will be critical for Box, and so much will depend on how they shape their story to Wall Street and of course how they execute. But if you look at the potential Box has, guided by the lessons we learned from over the last 10 years, you can see how Box has the potential to redefine not just its own market, but the very way companies collaborate and do business over the web.

Wait For The Clouds To Clear

So, how successful will Box be? Only time will tell. Perhaps Box’s impact on the enterprise data space will be as significant as Salesforce’s has been. Or perhaps there will be another company among the many players in the cloud arena that sees an opening and takes those reins. We will just have to wait for the clouds to clear!