Opto Sessions – Invest in the Next Big Idea

Aaron Levie, Box CEO: The Cloud, AI & the Future of Work

• Haydn Brain & Ed Gotham

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In this week’s OPTO Sessions, Aaron Levie, CEO and co-founder of Box, shares how the company has grown into a billion-dollar enterprise by revolutionizing content management in the cloud. He discusses Box’s innovative AI integrations, strategies in a competitive tech landscape, and the future of enterprise technology.

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Welcome to the show, Aaron. It's great to have you with us. How are things? Hey, good, thanks for having me, appreciate it. Yeah, everything's pretty good, how about you? Yeah, very well, thanks. And yeah, whereabouts are you guys based? We are in lovely Redwood City, California, basically dead center in Silicon Valley. So we have Palo Alto to the south of us and San Francisco to the north of us. Yeah, fantastic. OK, well, I'm going to start by speaking to your background and how you got involved with Box just to provide a bit of context for the rest of the interview. And then we'll get into Box's products, strategy, and then we'll look ahead towards the end of the interview as well. So you co-founded Box as an undergrad, I read, and decided to leave college to pursue it full time. So looking back, what were the pivotal moments and challenges in those early years that shaped? company's trajectory. Yeah, so we started Box in 2000 and basically the first couple of weeks of 2005, we kind of got the idea and we're working on it in late 2004, but really launched in early 2005. And the basic premise was at the time, which is now just 100 years ago, it was just way too hard to share files and work with information. So if you wanted to access data from different devices at different locations and work with different people, it was just really hard to do. So we had this idea of, what if you could store all the data on the internet securely and then make it accessible from any browser, any mobile device? And that was kind of our aha moment. Now, we weren't the first to have thought about it. But when we studied the market, we realized that all of the companies that were kind of trying to do this, either their user experiences were just not very modern or up to date, their tools were too expensive. So they were just hard to use from a, sorry, they're hard to get into from a pricing standpoint. And. They just didn't work that well. They weren't fast. They didn't store a lot of data. And so we kind of thought about, well, what are the mega trends going to happen in technology over the coming years or decades? You're going to have faster internet. You're going to have more mobile devices. Storage is going to get cheaper. So if you kind of take all those trends, we said to ourselves, well, there's a lot of tailwinds that should sort of drive the growth of an online service where you store your data securely. So we launched it. And it wasn't like an overnight success. We kind of have like a couple of people sign up here, a couple of people sign up there, but it was enough where we knew we were onto something. And so we just kind of kept trying to drive growth and those were the sort of early few months of the company. Yeah, and you mentioned that, you said you weren't the only people to have thought of it. I mean, it's a relatively competitive space, at least now. Maybe it wasn't back in the early days, and perhaps you can give us more detail on that. But today, I guess you've got big players like Microsoft, AWS, Google Cloud, to a certain extent as well. How does Box try and differentiate amongst that crowded landscape? Yeah, so there's about a 19 and a half year gap between those first competitors and then the ones that we have today. So back when we started, the landscape was totally different. You basically had a handful of companies that really had gotten launched in the 90s and were kind of dying off. They weren't really innovating. They weren't building modern versions of their products. So we got in this window where basically, if we'd been two years later or two years earlier, the idea probably wouldn't have worked. Too early we wouldn't have really been able to have any breakthrough innovation too late and that would be way more competitive But there was this narrow window where because we got in with the right idea fast enough We were able to kind of accelerate with these these market tail ends And so what happened was as we were scaling up? About a year and half into the company to maybe two years into the company what we realized was there were basically two types of customers to our product There were consumers that were using the product for personal use. were accessing files from anywhere. They were sharing photos. That was cool. Then there were businesses and these businesses were using us for really kind of managing their secure documents, their financial records. They were doing &A transactions on box. So they were using us as a way to really kind of share corporate information in a secure way. And so we realized on one hand, we've got these consumers. On the other hand, we have these businesses. The consumers don't really want to pay us anything. The businesses actually will pay us more. The functionality that consumers want doesn't look very differentiated. The functionality that enterprises want actually have a lot of ability to be differentiated. We can build out a lot of innovation there. So we pivoted the company early in those early days, go after the enterprise market. And that's basically been, you know, the past, you know, kind of decade and a half as a company, which is, which is being the most secure, intelligent way that enterprises can manage their, their important content. So we really want to kind of unleash. the power of your data in your organization. So you can accelerate your business. can deliver movies to the market faster. You can innovate on product designs. You can do advanced research. You can create new drug discoveries. All of the work that happens in any of these major fields is happening inside of your data and inside of your content. So that's what our platform does. And now today, while While we do compete with some of the names that you mentioned, Google, Amazon, Microsoft, et cetera, we actually primarily partner with them. So our job is to be the best platform for managing and securing content. And then we want to integrate with all the other software that you use. We want to integrate with Slack and Teams and Zoom and Office 365 and Google Workplace and WebEx and IBM's technologies and ServiceNow. So we want to be integrated everywhere. And we ultimately want to partner with all those different vendors as opposed to compete with them. Yeah, got it. And I guess your recent partnership with Amazon kind of evidences that strategy. And it allows us, I think, to talk about AI, which I'm keen to kind of spend the next bulk of the year discussing. So you've integrated with advanced AI models like Anthropix, Clawd, and Amazon Titan into Box's platform. But perhaps you can walk us through how this collaboration will actually enhance the customer experience and how it, I guess, fits with the broader strategy and the vision for AI and Box. Yeah, so we announced a partnership about a month and a half ago, two months ago with Amazon to be able to bring the power of Bedrock, which is their AI kind of model platform, into the box environment for our customers that choose to turn on sort of these relevant models. So we launched with Amazon's models, but also Anthropic. And what this lets customers do is if you're... talking, if you have a lot of documents and you want to be able to ask those documents questions, summarize information, get analytics, or get analysis from your content, we let you choose which AI model you want to use. so relevant to this is Anthropic has had some incredible breakthrough innovations. The quality of the models are very strong. The speed of the models are very fast. So with this partnership with Amazon, we can bring the power of Anthropic to our customers. that choose to turn on the entropic model. So that was the partnership with Amazon. We've worked with Amazon for almost since the founding of the company, using various cloud services from them. But this was the first major AI partnership that we had announced with Amazon thus far. Got it. And just to talk about kind of the implication for the users and particularly your kind of institutional clients or your professional clients, how do you envision kind of that AI integration transforming the way that your enterprise customers actually store manage interact with their content? Yeah, so for us, AI is basically the biggest breakthrough we've ever seen in our space. And the reason is actually very kind of practical, I guess. With structured data, this is the data that goes into a database. Think your CRM system, your ERP system, your HR system, all of the data that goes into those technologies is structured data, and it goes into a database. And so data inside of databases, like, you know, how much, what's the balance of a bank account or what do we pay this employee or what was the start date of that employee? All of that data as structured data, you know, for decades and decades, we can get analytics from that data. We can summarize that data. We can calculate that data. We can get dashboards on that data. We can do insights across our business on that data. And that's our structured data. Mm-hmm. We saw the emergence of this idea of data lakes and sort of these lake houses over the past few years to basically say, what if we could take in lots of other types of data, like data from log systems, data from analytics engines, and similarly be able to ask that questions and summarize information? Those have been kind of core to the past decade and a half of big data and a lot of those technologies that have emerged. But there's been one missing data type that really has never been able to participate in in the power of actually working with data in these very intelligent ways. And that's your content. So like your contracts, your financial documents, your marketing assets, your HR documents, you've never been able to take all of that data and summarize it or ask it questions or synthesize that data or get new insights from that information. And here's the rub. That data that I just mentioned is actually the vast majority of corporate information. If you were to basically sort of weigh the amount of size of data in an enterprise, only about 10 % of it would be the sort of data inside of a CRM system or an HR system. About 90 % of it would be this unstructured data, which most of that is your content. So it's your gigabytes and gigabytes or terabytes of contract data inside of an organization. It's your hundreds of terabytes of media. information that exists inside of an enterprise. So now AI, for the first time, lets us analyze that information, structure it, pull out the data within that content that makes it more valuable, and then we can automate workflows, we can get new forms of business intelligence, and we can fundamentally actually run our businesses differently based on the information that we have. That's what's so exciting about this particular moment we're in. Yeah, great. And I imagine that's kind of an evolving story. you're only, I guess, starting to tap that opportunity. mean, don't tell me if I'm wrong, but I guess that's going to mature over time in terms of an opportunity. yeah. No, no, please. Well, so what we did was, everybody has their kind of chat GBT moment. We had our chat GBT moment, was, we basically saw that, wait a second, while chat GBT is aimed at consumers, if you put any amount of text into the chat GBT window and you ask it a question about that data, it'll come back with a response. So once you know that you can do that, then you can do that with any amount of information. You could do it with an entire document. You could do it with parts of many documents across a corpus of information. we had this kind of, you know, aha moment or epiphany within a, you know, basically about a week of chat to me T that said, wait a second, we could do this with all, all corporate information in a secure way. And, and that led to what we, what we announced, you know, about a quarter or two later, which was box AI and box AI is our platform layer that basically brings the power of AI models wherever they come from. to your enterprise content. So Box AI is really this breakthrough for us, is be able to talk to your data, structure your data, automate workflows, and then better kind of secure and govern your data over the long run as well. And so that's what we've been pursuing for the past kind of two years. And just beyond that then, what do you see as the kind of opportunity, long-term opportunity in the application of AI within your platform? Well, I mean, we are literally just getting started. So the ideas that I'm talking about right now are going to take years and years to fully play out, fully manifest across our customer base. And what I'm so passionate about, the thing that just gets me continue to be fired up about this space is literally every day, there's a new AI breakthrough. And we have the ability to incorporate a significant portion of those into our platform. So when Google announces Gemini 2.0 Flash, instantly that's an upgrade to our AI models from working with text and working with documents or working with images using the Google platform. When Anthropic has a new version of Claude and Sonnet, instantly that accrues to our value proposition for our customers. So what I get so excited about is the rate of innovation that is happening now. the pace of innovation is faster than I've ever seen it. you know, to some extent, it's actually just very stressful because you just have to be literally nonstop in a market that is moving this quickly. But that's sort of why we got into the business in the first place. Like, this is exactly what we like to do and what we get excited about. that's why, you know, I'm really passionate. And so we just have years and years of having this kind of roll out to our customers, continuing to embed you know, more advanced capabilities into the platform. And all of it is basically comes down to the central idea, which is, you know, what if you could unleash the power of your data? What if you could truly get the insights from your information to make a better decision, to automate a workflow, to be able to grow faster, to able to find areas to save money, to be able to better serve your customers or your employees? That's what's inside of all of this information. And that's effectively what our platform delivers. Yeah, great. I'm interested to understand better than the implication for the business, the adoption of your product. Maybe there's a few kind of sub-products we could do that through the prism of. I mean, I've heard you talk about the Enterprise Plus Suite product. I think there's pretty strong uptake there. Perhaps give us a sense of the growth rate and uptake for that particular product, and then maybe give us a wider sense of uptake for the product proposition overall. Sure, yeah, so for those less maybe familiar, so we have a number of different kind of plans that customers can elect to buy into. We have a business edition. We have an individual edition for anybody listening that just wants to share their files securely. We have a free version, so you can get going right away. So we make it very easy to dot box. We have a business edition for kind of small businesses or teams or within an enterprise. have We have an Enterprise Edition for larger companies or those that want more advanced workflows and data governance. And then we have an Enterprise Plus Edition, and that's really where our AI starts to show up. So in Enterprise Plus, you get the first set of capabilities from BoxAI, which is the ability to ask questions of your documents, be able to summarize information. And we give that to our customers on an unlimited basis. So unlike other companies, we're not charging you extra for that, and we don't have any limit caps. We want to make it so if you want to talk to your documents, you can do that all day long. That's within the enterprise plus plan. What we just announced though, about a month ago at our customer conference is a new plan called enterprise advanced. And what this does is basically brings even more of our intelligence capabilities and automation capabilities in the box with more advanced AI features as well. And so that plan is, will be rolling out in the next couple of months. And that has even more advanced capabilities. But fortunately, we actually have already gotten the majority of our customers into Not a significant majority, it's an early majority so far, of our customers into the Enterprise Plus plan. It's about close to 60 % of our customers now have Enterprise Plus in terms of by revenue size, not by number of logos. And we want to get that number to be even higher, so we're working to make sure that we're constantly getting more customers into Enterprise Plus. then now with Enterprise Advanced, we have another sort of tier of service that we can get customers into, which is going to be great because... we can offer even more value for our customers. Yeah, got it. And give us a sense maybe of your customer base. is it typically kind of larger institutions, SMBs? Give us a sense of the kind of audience mix. Yeah, so we have 115,000 customers, which means that we have everything from a brand new startup that's working on some game changing technology to a new law firm that, or, you know, maybe not even new, but just a law firm that might be on the smaller side, all the way to the world's largest enterprises. And so, and everybody in between. So we work in, we work with some of the fastest growing technology companies. We're proud to have been early at the Ubers and the Spotify's and the Airbnb's as they were scaling up, all the way to some of the world's largest companies as well that use us to power how their businesses work, like the GE's of the world. And so what we're most excited by is the fact that we get to work with so many different customers of all sizes and be able to power how they do their work together. Yeah. Okay. Fantastic. Yeah. That helps to make the, the kind of, audience mix less abstract, suppose. I'm interested to hear some of those larger, larger businesses as well. I've, I've got a couple of, new stories that, you know, I, in my research prior to the call I'd, I'd heard about and just interested in your take and how they kind of fit into the, the long-term strategy for, for Box. I mean, let's start with, a recent acquisition, AlphaMoon, AI powered intelligent document processing technology. company. The way that the news story sold it was that they were broadening your intelligent content management model perhaps, but maybe to make that a little less abstract and give us a better sense of how that acquisition helps your strategy. Yeah, so the Alpha Moon acquisition basically is, think about if you were an enterprise and you had 100,000 contracts. And in each contract, you have the amount that the contract is valued at, the due dates for the renewal event, certain clauses or sort of risk items in the contract. So you have all these contracts and it has all that information in it. It's very, very hard or expensive to have a human go through each contract look at it all, take out the data from that contract and put it into a system that that just is very time consuming. So AlphaMoon, this, technology that we acquired built an automated system to do that, where it goes through lots and lots of contracts using AI and pulls out data from those contracts that puts it into a database where you then can sort and filter and search and run analytics on that information. So that was this AlphaMoon technology that we acquired that was being developed in parallel with BoxAI. whereby we were able to use our backend technology that we've been building with BoxAI and then we can bring the AlphaMoon technology in to offer really a new experience for interacting with those intelligent kind of document processing workflows. So it's gonna be incredibly powerful for large enterprises, mid-size enterprises, small businesses, anybody that wants to get intelligence from their content and their data. Got it. OK, yeah, interesting to hear the kind of integration or the combination of BoxAI and AlphaMoon. Interested to understand how that actually works. Another recent news story then, your appointment of Samantha Wessels, I'm going to pronounce that as Box's EMEA president. So does that give us an indication of your kind of ongoing interest in the European market and your plans for that market? Yeah, I mean, we're, we care deeply about the European market. You know, I think what's, what's, what's interesting about being in the enterprise is at the end of the day, a, enterprise in the U S in France, in the UK, in Japan, you know, they, they generally, by and large want the same thing. They, they want to grow faster. They want to be more efficient. They want to have strong cultures that enable their employees to do great work. You kind of take each of the things that an enterprise really wants to do at the end of the day, and they tend to be pretty timeless, and they transcend geography and industry. And so our software has and will continue to be very relevant for businesses globally. so Europe is an area that we want to continue to double down on. We have a strong presence in the UK. a growing presence in France and Germany. There's a number of other countries that we're starting to consider growing in as well. But broadly, we are investing in Europe quite a bit. Yeah, got it. And my next question is about kind of security and compliance, and particularly with the kind of newfound kind of reaching capability you've got with this AI integration. I guess the kind of question of compliance and sensitive corporate data and the security of that data becomes ever more important. You mentioned several jurisdictions there as well. I imagine that there's nuance in terms of how you handle that in each region as well. Talk to us about how you're kind of solving for that complex problem. I mean, basically the biggest problem that you have in being, especially a global enterprise is you have to deal with the jurisdictions, data privacy jurisdictions that only kind of compound and are only getting more complex over time. So our job is to sort of abstract that complexity from you. So you don't have to worry about it as an enterprise. You can really entrust a lot of that complexity into our platform where we can keep your data secure. We can keep it private. We can make sure that... that is adhering to the local privacy and kind of data privacy laws that exist. We take this through the lens of industry as well as geography. a European bank probably looks different from a US healthcare company. And so you need to be able to kind of have a two by two of industry and geography to deliver on these data regulations. But it is an area of huge differentiation for us. Yeah, I on that point of differentiation, just keen to dig into that again. you know, with so many large tech players in this space, you know, obviously, this isn't necessarily a focus for them that, you know, the companies we mentioned at the start, Microsoft, Google, Amazon, etc. They have other interests beyond this. Is that kind of part of your your power at Box? The fact that you are so specialized in this particular space? Talk to us about how that helped. so our power and actually it's funny. So have you read the book Seven Powers before? So I'm a big fan of this book and certainly anybody doing investing, I would highly recommend the book. So it's called Seven Powers. And basically it's this idea that companies can optimize for different competitive differentiators. that they can kind of, you know, hold on to and get better and better at over time. And the book kind of lays out, you know, seven different discrete, you know, sort of powers or competitive advantage dynamics. And so there's sort of numerous ones and every company kind of feels like they have, you know, maybe more of them than fewer and ultimately it's a kind of a spectrum. So, you know, there's obviously one on things like network effects. You know, that's a very obvious one that we're familiar with. But there's, there's also a lot of value and this kind of combines a couple of concepts, but there's a lot of value in being a company that has a greater specialization or, or deeper in a particular domain than your competitors. And for us, one of our core advantages competitively is that we go deeper in content. And then there's a flywheel effect because, because we're deeper in content, we learn the next set of use cases that a customer has before any of our competition. We can build that into our platform for that particular set of use cases. And then we can continue to stay ahead of the competition because we're already ahead of them. We learn faster and then we get ahead of them even further. And so all we think about is content. That is the only thing that we spend our time thinking about. So we think about how do we make content more secure? How do we automate workflows around it? How do we make it better to share and collaborate on? How do we make it better to be able to manage at scale? So we are religious. and relentless on being the best platform for managing and working with all of your most important content as an enterprise. That's what gives us a huge differentiation and huge competitiveness in the market. Yeah, I mean, just to follow up on that, are you able to be more kind of nimble than some of these kind of behemoths in the large attack space? Well, we definitely are and I'd say it's a critical factor in any kind of insurgent or disruptor business is you have to move faster than your competition. If you're not, then you really lose one of your core, one of the just the core systemic advantages you have as a startup is to be able to move faster than the more kind of bloated or bureaucratic organizations that you're competing with. so in our case, we sort of have to balance both moving faster, but then also again, still being more specialized than the bigger companies we compete with. Yeah, got it. Okay, well, I want to finish with two questions first, just kind of to get a better sense of how this translates into financial performance. So let's start there. And then I'm keen to just look ahead and get your kind of wildest kind of anticipations about where this industry heads next over the next five, 10 years, but let's start with the financial performance. So I think Box recently surpassed 1 billion in annual revenue on the trajectory towards 2 billion. At least that's why I saw referenced in a report I read before the call. So what What are the key kind of growth drivers, milestones you're focusing on to achieve that next level of scale? Yeah, certainly it was a milestone to get through the billion mark. And as we kind of plot out a path to two billion, it's actually kind of in the conversation that we just have discussed, is this idea of you always have to work backwards from customers. So what do customers need in the 21st century as an enterprise? You want to be able to use your data, the information in your business to grow faster, make better decisions, automate more workflows, be able to save money where possible, but frankly, mostly grow and be able to better serve your customers. And all of the ways of doing that can be driven by how you work with your information. What's the speed at which you can collaborate to make a better decision? What's the level of insight you can get from your data to make a better decision? How do you automate a workflow so you can spend time on more valuable things in your business? So all of that ability is tied to how we work with our information. And so if you want to accelerate progress as a business, you want to deliver more product, have more breakthroughs, have a better advertising campaign, onboard your employees faster, so much of how you're going to do that is going to relate to how you work with your information and your data as an enterprise. So you start there and you work backwards from, okay, what's the customer need right now? So our path to get into 2 billion is how do we build even better tools, better platform capabilities that make what I just said more possible faster for more customers? So that's essentially our strategy. So we want to build software that helps companies take advantage of their data to accelerate their businesses and unleash the power of this information. So you're going to see us drive more and work full automation, more in advanced AI. more in data security and compliance, more in our open platform and our APIs that connect to other systems. We have to make sure that we package that in such a way that customers find it very easy to come on board, where they sort of, make it so easy to just sign up and start using the service. So we always want to package up all of this innovation and easy to get into packages. That's why we have this Enterprise Advanced Plan. And then we have to continue to expand. We have to expand into critical verticals. We have to expand into critical geographies, as we just talked about. And those would be the kind of major vectors of growth over the next few years. Yeah, fantastic. Well, to finish on, as I alluded to a moment ago, just keen to understand what you think the next big idea in this space is going to be. And perhaps it's an evolution of a theme that we've already talked about, but, you know, five, 10 years down the line, what should people look out for in this space? I think the power of AI agents is probably the singular biggest thing we should be watching out for in software, which is basically what happens when software moves from a tool you use to make your work a bit more efficient and to help you do your work. to technology you use to get work done for you. And that's gonna be an evolution of software. But instead of me using software as a person to take data from a contract and put it into a system, those days are basically over. I want an AI agent to go do that for me. I want an AI agent to go and automate my procurement process. I want an AI agent to go automate my client onboarding workflow. That's effectively where we're going. And over the next five to 10 years, the companies that can deliver AI agents to execute those types of business processes and workflows in their relevant domain, I think those will be the ones that get ahead of others. Yeah, yeah, absolutely. Well, I think that's a fascinating insight to end on and something for our retail investors to look out for. And that just means you say thank you very much for joining us on the podcast, Aaron. It's been a pleasure. for having me. Good to see you. Take care.