I’m a pretty annoying founder. I’m very stubborn and very steadfast. Sort of this is my very strongly held opinion and belief and I’m gonna run into a wall to prove it out. That has certain characteristics that can be annoying at times I’m sure both at the investor level as well as for anybody that is working with me. I’ve been able to tone it down over the years and control it more and contain it. I think it’s not causing probably as much annoyance.
You have to be stubborn and right is the key. Stubborn and wrong means new job. There’s a Venn diagram of stubborn and right and you want to be right in that target zone. I look back when when I was 20, 21, or 22 and learning this trade and there were plenty of times where I was stubborn and wrong where maybe I took too long to pivot.
My co-founder was telling me we’ve got to go enterprise probably for three to six months earlier than we actually did. What are three to six months in compounding terms? I don’t know. Maybe we’d be 20 percent bigger now as a result of if I had not been so stubborn at that stage and not seeing the information in the way that he was? That can just be sometimes an annoying pattern that people run into.
“It’s been a funny journey working remotely,” says Box CEO Aaron Levie. “A month or two into the pandemic I distinctly remembered that we actually started our company completely remotely. The move to this remote work style is causing us to realize how different managing and leading businesses and executing can be if we were able to take advantage of virtual technology more even when we go back to the office. This completely opens up a new way of working.”
Aaron Levie, co-founder and CEO of Box, discusses at the CNBC @Work Summit how remote working that was forced upon companies has actually opened them up to a completely new way of working:
It’s Been A Funny Journey Working Remotely
It’s been a funny journey working remotely. A month or two into the pandemic I actually distinctly remembered that wait a second, we actually started our company completely remotely. My co-founder and I were going to two different colleges at the time and so the whole business was run over instant messaging. Before we had Slack we had AOL Instant Messenger. Before we had Okta we had really bad passwords. We were a remote company and we started our own product because we wanted to make it so people could easily access and share files from anywhere. That was the origin of the business.
Fast forward 15 years later, we have 2,000 employees, we work in offices, we have a lot of the standard ways you think about when scaling up the company. When we had to instantly move to a remote and distributed way of working it really hit me how much of the work style that gets embedded into our companies are really actually things that just carried forward from the 20th Century when everything was analog and everything was done in person. All communication was done between people either through written communication or just a meeting.
Pandemic Opened Up New Way Of Working
You realize that when you go virtual and you go remote there is actually so much potential to be able to work in a digital-first way. When you think about a team meeting as an example, so many of our meetings are arbitrarily sized to the number of people that fit into a conference room. So it’s kind of bizarre that work just happens to be the six to twelve people that can fit into a conference room space. Certainly for software projects or a particular team that’s a pretty good logical size. But that’s not the right size that contributes to a brainstorm. That’s not inherently the right size of people that you want when you’re communicating information and getting the best ideas around how to go drive the business.
So having that Slack channel with 150 people in it that cuts across different parts of the organization we are able to get contributions from people that would have never been in that conference room previously. That completely opens up a new way of working. Think of what you now do on video and the ability to include voices and ideas from people that previously wouldn’t have spoken up or wouldn’t have had an easy opportunity to contribute to some particular part of the business or strategy or have a two-way dialogue on a really important business topic.
Real Potential That We Want To Continue
We had a meeting with all of our top 200 leaders in the company last week and that was a complete bidirectional discussion in a way that would never have been possible in person. That’s usually a person with a microphone just communicating outward to everybody in the business and not actually having it be a dialogue to get feedback. The move to this remote work style is causing us to realize actually how different management and leading businesses and executing can be if we were able to take advantage of virtual technology more even when we go back to the office.
None of this requires you to be remote it’s just sort of the remote that was forced upon all of us to the point that we are now realizing that there is actually some real potential here that we want to continue to maintain going forward.
“Snowflake is a very disruptive enterprise software company actually going out and going public larger than Google did,” says Box CEO Aaron Levie. “It’s a profound statement about the power of the cloud and the scale of these opportunities. We would not have anticipated ten years ago an enterprise software cloud company that doesn’t exist in 2010 going public at $60 or $70 billion. These markets are enormous and the opportunities for disruption only continues.”
Aaron Levie, CEO of Box, discusses how the Google-sized Snowflake IPO illustrates the “power of the cloud” and how disruptive it is to the past way of doing business:
Move To Digital Adds Tailwind For Cloud Companies
Certainly, the macro market is very volatile right now (for cloud and tech IPOs). You’re going to see a dynamic range of prices both on the day of an IPO and the subsequent trading (for companies like Snowflake). We’re going to have a lot of different narratives about did people leave money on the table, did stocks go down or up in any of these kinds of trading periods.
The broader macro thing that we’re seeing is that these are companies that in many cases were founded seven, eight, nine, ten years ago. They’ve now reached a scale with even more of a tailwind right now because of this move to digital. These are companies going after incredibly large multi-billion and multi-tens of billion-dollar markets um that have a tremendous amount of growth going forward in front of them.
You’re just going to continue to see this IPO pipeline. Over the past decade, we’ve seen dozens if not hundreds of very disruptive enterprise software companies emerge and get funded and really be able to reach scale.
Snowflake IPO Shows Power Of The Cloud
I remember Google having this jaw-dropping valuation and game-changing and historic IPO in terms of its scale. Then you have Snowflake which is a company that is not necessarily known by consumers generally. But it’s a very disruptive enterprise software company actually going out and going public larger than Google did. It’s a profound statement about the power of the cloud and the scale of these opportunities. For Snowflake to be as big as Google a lot of other things would have to happen in terms of their portfolio.
The size of these companies and the markets they’re going after are so enormous. We would not have anticipated that five or ten years ago if you had said are you going to see an enterprise software cloud company that doesn’t exist today, back in 2010, going public at $60 or $70 billion? I don’t know who you’d be able to find that would say yes to that. These markets are enormous and the opportunities for disruption only continues. I think we’re just going to continue to see more and more companies go public.
We Didn’t Feel We Left Money On The Table
It’s great that there are lots of different ways to do an IPO, direct listings, and more of a traditional IPO. It’s fantastic that the market supports different approaches. Now you have SPACs in the mix as well. We went public with a fairly traditional approach. Our stock went up by 70 percent or so on the first day of trading. We didn’t really feel like we left money on the table. We were happy to be public. We got great investor support. Some of these things are easy to look at in retrospect. You don’t often know the sheer demand for a new public offering at the start of the IPO process. Some of this ends up being easy to to to be able to comment on after the fact.
From an entrepreneur and from a company and corporate standpoint, your biggest priority when you’re going public is making sure you can educate investors, building a strong set of support in your IPO process. Sort of incrementally leaving 10 or 20 percent of financing on the table is not usually the most important factor that you’re focused on. Maybe it should be which is again why it’s great to have these different points of view out there.
“We have been thrust into remote work without a lot of the preparation and in some cases underlying infrastructure, data security, or underlying cloud platforms,” says Box CEO Aaron Levie. “What we’re finding, and certainly at least for the organizations that have had the ability to adapt successfully to this environment, is that there are better ways to get work done.”
Aaron Levie, CEO of Box, discusses how the pandemic has thrust companies into remote work and this will move enterprises toward a hybrid workplace:
We Have Been Thrust Into Remote Work
We have been thrust into remote work without a lot of the preparation and in some cases underlying infrastructure, data security, or underlying cloud platforms. What we’re finding, and certainly at least for the organizations that have had the ability to adapt successfully to this environment, is that there are better ways to get work done. Now that we’ve moved to this virtual way of working there are a lot of situations where we used to have to do business travel. Being able to quickly hop on a Webex or a Skype call or a Zoom session is actually much more efficient to be able to have that conversation.
We have a lot of situations that Box internally and with our customers where normally you might be collaborating with five or ten people in a meeting inside of a conference room. Now you can move that to a Slack channel and actually communicate with maybe 50 or 100 people on that same project. You’re actually building a much more inclusive organization with way more people that can be engaged and involved in your ultimate vision and what you’re executing on. We’re seeing actually some really positive ways of working in this environment.
The Future Is A Hybrid Workplace
Any tech company and any company globally really wants to get back to some version of normal. We certainly want offices to open up as quickly as possible. We want to make sure that we can see our colleagues in person. But I do think that there’s no going back from this new virtual way of being able to stay productive. The future is one of a hybrid workplace where you go into the office for some experiences and purposes and then you’re also going to be able to have much more flexibility and be able to work remotely. The digital workplace is what’s going to then bridge those two worlds together.
By and large, cost savings is not the main factor of why you’ve seen so much excitement around remote work or more workplace flexibility. If you can be just as productive from your laptop on a Slack channel and over a Zoom call but you could then be in any place that you desire as opposed to being in a 60 or 90-minute commute each way and paying way too much for real estate. For those of us that live in Silicon Valley, this is a very expensive real estate market. So if you could have better flexibility and be able to have a little bit more space and you can stay just as productive, wouldn’t that be a better way of working?
Lot’s Of Reasons Why Offices Will Still Exist
What companies are realizing is as they want to actually give that choice out to their employees. They can still run very productive organizations. We at Box have been able to drive as much innovation in this environment as we have in an office environment. We want to make sure that we’re creating that type of flexibility for employees. That being said, there are a lot of benefits to being able to work in an office with your colleagues.
For younger employees that are just integrating into the workplace for the first time you want to get to know your colleagues and you want to be able to be a part of maybe a more than just a business community. You may actually want to be able to build your business network through that experience. Also important is mentorship and being able to make sure that you’ve got more camaraderie. There are a lot of reasons why offices are still going to exist in the future. But digital technology is going to afford companies to have way greater flexibility no matter which route they choose.
“We are firing on all cylinders right now even though it’s a very dynamic environment,” says Box CEO Aaron Levie. “One of the great ironies probably that we’ll look back on is that the industry that is focused on selling digital technology spent so much time in the physical world trying to sell that technology. You can do remote selling over a video conference, over Webex, or Zoom in many cases just as easily as you could in person.”
Aaron Levie, CEO of Box, discusses how tech companies during the pandemic have discovered that it’s more effective for them to sell remotely using all of the technologies they have developed rather than relying so much on physical meetings:
We Are Firing On All Cylinders Right Now
We were super happy about the Q2 that we just announced a couple of weeks ago. We were able to beat on revenue estimates and the guidance we gave on revenue, on EPS, on operating margin, and we also delivered strong billings and cash flow performance. We also raised our guidance for the full year on revenue as well as our operating margin targets for the full year.
We are firing on all cylinders right now even though it’s a very dynamic environment. Obviously, the broader macroeconomic environment still remains a challenge in many sectors. We are seeing growth at this time and we’re seeing a lot of our enterprise customers continue to expand with us as they go and drive broader digital transformation initiatives.
Great Irony: Tech Industry Learns To Sell Digitally
One of the great ironies probably that we’ll look back on is that the industry that is focused on selling digital technology spent so much time in the physical world trying to sell that technology. We’re seeing is that customers want really great products. They want those products to be delivered efficiently to them. You can do remote selling over a video conference, over Webex, or Zoom in many cases just as easily as you could in person. The other benefit is you can now reach more customers in a single day or in a single week.
As an example, we have our customer conference happening tomorrow. We’ll have about 25 000 registered attendees to that event which is three or four times larger than what we would have in the physical world. We’re able to reach more customers and we’re able to have more conversations. We’re ultimately able to support our customers right now with our technology which is helping them move to the cloud and helping them secure their corporate data. It is also easier to collaborate securely across enterprises and then ultimately integrate with all of their applications.
Box CEO Aaron Levie: Digital Selling Helping Tech Firms Prosper
“We saw very strong enterprise growth in the last quarter,” says Box CEO Aaron Levie. “We grew our number of big deals, which we measure as deals above $100,000 in transaction value, by 60 from Q1 to Q2 of this year. We’re happy about the momentum that we’re seeing in the business. Right now we are all hands on deck on supporting our customers and their digital transformation strategies and hopefully really enabling them to have a more secure and more seamless way to work in this environment.”
Aaron Levie, CEO of Box, discusses the company’s continued growth and progress in supporting customers with their push toward digital transformation:
Driving Better Balance Between Growth And Profitability
We’re very happy about the quarter that we just put up. We are stabilizing the growth rate with 11 percent revenue growth. We had nearly a 16 percent operating margin for the quarter. That’s been a trend that we’ve obviously been driving for the past year or so around really driving a better balance between growth and profitability. We improved our guidance on both revenue growth and profitability for the rest of the year. We guided to about 12 to 13 percent operating margin for the full year (FY21) and so we do think these results are sustainable.
Obviously, we want to be able to continue to drive them going into next year and beyond. We’re very happy about the efficiency of the business right now as well as our ability to go out and serve customers and help them power a new way to work in this very very you know dynamic landscape.
All Hands On Deck With Digital Transformation
The first couple quarters of the year we had to step back and figure out in this economy and in this market what could we do to best serve our customer base. In some segments, we had to lean in to make sure that we were better supporting our customers. In other segments, we saw more growth because in spaces like financial services, healthcare, life sciences, and the tech sector there’s still a tremendous amount of economic growth occurring. So we had to do a little bit of a reset in some of our segments, especially the SMB segment. and we’re seeing really healthy pipeline for the second half of the year.
At the same time, we saw very strong enterprise growth among these customers. We grew our number of big deals, which we measure as deals above $100,000 in transaction value, by 60 from Q1 to Q2 of this year. We’re happy about the momentum that we’re seeing in the business. We do expect that we’re going to continue to drive growth coming into the second half of the year. Right now we are all hands on deck on supporting our customers and their digital transformation strategies and hopefully really enabling them to have a more secure and more seamless way to work in this environment.
Need Better Interoperability Between Technologies
In the enterprise segment, you deal with similar questions (as consumer-facing companies do with anti-trust). How do we ensure long-term that you have interoperability between our technologies? If I put my data into one cloud platform will I have the ability to make that data work with other applications from other cloud technologies? Whether or not there needs to be oversight that’s obviously going to be a big question for the government.
What I do think across the industry we do need to continue to work on better standards. We need to drive better interoperability between our technologies. I can say confidently that companies like Microsoft and Google and others are working on making sure that we have greater interoperability between our technology stack. We work with companies like Slack, Zoom, Salesforce, and others to make sure that we have that interoperability as well. But there’s still a long way to go to really create a seamless experience for the broader customer base out there.
No Precedent For The Type of TikTok Deals Playing Out
Aaron Levie: I don’t understand business anymore, but this is very fun to watch.
This is obviously a very strange environment (in reference to TikTok deal rumors). I don’t think there’s been a precedent for this type of acquisition playing out ever. Especially in the back of the antitrust element, you don’t have the logical acquirers of this type of social media technology at play. All you really have are these interesting configurations of maybe not the most classic acquirers of a social tool. This is causing a lot of questions on what is the long-term strategic nature of these deals.
This is especially true for companies that don’t have a strong advertising business model or might not have some of the same demographic within their customer base. That being said, all of the players, whether it’s Larry Ellison or Satya or Doug at Walmart, these are all incredibly smart and savvy business people. I’m sure that behind the scenes there’s quite a deal of strategy going on but it’s certainly fun to watch play out.
Box CEO Aaron Levie: All Hands On Deck With Digital Transformation
The digital transformation which has been powering the growth of many technology companies in the US is now starting to drive growth globally according to Box CEO Aaron Levie. He says that Box has a global opportunity where multi-national enterprises want to drive the same digital transformation that has been happening in the US.
Aaron Levie, Box CEO, discussed on CNBC how the digital transformation is key to driving Box’s growth globally.
Digital Transformation Driving Global Growth
As our business gets more seasonally loaded toward the back end of the year as we sell to larger and larger enterprises. That’s what ultimately drives a much higher billings growth outcome in Q4. We continue to move up-market serving larger enterprises like major top ten banks, pharmaceuticals, life sciences companies, as well as the federal government and global manufacturers. That’s what’s driving that surge in Q4 billings and growth rate.
We have a global opportunity where large enterprises, especially multi-national enterprises, want to drive the same digital transformation that we’ve seen in the US. That means everything from changing their business processes to collaborating and working in new ways which leads them to need platforms like Box and other technologies. We are seeing incredible growth in markets like Japan, Canada, Australia, and throughout Europe.
Our Partner Model is Critical to Our Success
We are working with major partners like IBM and other system integrators to be able to reach and enable customers. We are working with technology partners like Microsoft, Google, as well as a much broader ecosystem including companies like Slack, Okta, and others, to ensure that when customers want to modernize their IT environment Box is the system of record for the data and content that they work with.
Partners are core to our strategy both from a technology standpoint to ensure that customers have an integrated experience with their information technology investment as well as helping us actually reach those customers from a distribution and sales standpoint. Our partner model is critical to our success.
We Are Building a Fundamentally Open Platform
Our fundamental belief is that in the digital age enterprises are going to need a platform to help them secure, manage, govern, and drive the workflows around their core business information. That is what the platform is that we’re building. Whether it’s financial documents, digital assets, a pharmaceutical company with their drug trial information, or an ad company with their ad campaigns, we want to be the platform that helps them manage and secure that data.
We will have to work with technology partners like Microsoft, Google, IBM, and others to ensure that the technology that they’re investing in can link to the data that customers store within Box. We are building a fundamentally open platform and whether that is linking up to the artificial intelligence or machine learning technology that IBM, Microsoft, Google, and others are building or the common applications that we use every day we want to ensure that Box can connect to all of those applications so that you can have one source of truth for your data but integrated everywhere.
Box CEO Aaron Levie says that the IBM-Red Hat Deal showed what the underlying value of incumbent technology companies like Salesforce, ServiceNow, and “hopefully Box” is potentially worth.
Aaron Levie, CEO of Box, was interviewed on CNBC about the impact of the IBM-Red Hat deal on Box:
Red Hat Deal Puts IBM in a Great Position
Red Hat is a leader in commercial open source technology which is really the future of computing in any real IT environment or software development and IBM now has one of the world’s best companies in the open source space and the multi-cloud space.
I think it puts them in an incredible position to help enterprises that are moving to a multi-cloud environment be able to run their data centers and run their operations, whether it’s in the cloud or on-premises and a hybrid model for the future. It puts IBM in a great position.
IBM-Red Hat Deal Shows Increased Underlying Value
This is obviously an incredibly bold move on the part of Ginni (Ginni Rometty, CEO, IBM) and the rest of the team but one that I think we will look back in five or ten years and say that was a very defining decision. IBM is a great partner and we obviously want to root for their success but we partner with probably the majority of software and technology companies in the industry, so our job is to be interoperable and integrate with all the major technologies our customers use.
What the (IBM-Red Hat) deal showed was that the underlying value of some of these significant players is in many cases worth a lot – especially big incumbents. I think in general, companies like Workday, Salesforce, ServiceNow, and hopefully Box, we’re trying to build industry defining companies that will last quite some time.
Becoming a Core Part of the Technology Stack
I think, in general, when you think about enterprise IT, enterprise IT buyers are making long-term investments in the future of their technology architecture. It’s very sticky and there are massive modes in the technology that are being built out and if we do our job and continue to innovate we will become a core part of the technology stack of how the future of all enterprises operate.
That’s why these deals end up actually looking pretty good in hindsight when you can see how powerful these platforms are.
