Dropbox shutters Mailbox, exposing the perils of mobile app acquisition

By Jacqueline Lee

Developer perils

When Gentry Underwood developed the Orchestra To-Do app, he wanted to end the use of email as "a terrible to-do list." Yet despite praise from the likes of Jack Dorsey, CEO of Twitter, Orchestra never built a lasting user base.

Even Orchestra's power users, according to Underwood, remained trapped in email. "Eventually," he told Lifehacker in 2013, "we realized the best way to tackle the problem was to transform the inbox."

Orchestra secured $5 million in Series A funding from Charles River Ventures and SV Angel in November 2011. A year later, Underwood's team premiered Mailbox, an iOS email client that re-envisioned the Gmail user experience. Mailbox premiered as a wait list beta, a novel move in 2012 designed to hedge against rapid scaling. Over 1.5 million people signed up in the first few days, and Mailbox opened to the world in February 2013.

One month later, Dropbox acquired Mailbox for $100 million and made Underwood head of design. For a while, he was the toast of Silicon Valley, praised for Mailbox's innovative user experience and featured in multiple magazines. But once Mailbox became part of Dropbox, the file-sharing company seemed to lose interest in Underwood's IP. Internal development all but stopped while other email clients like Yahoo Mail, Outlook and Inbox by Gmail incorporated Mailbox's features.

In June 2015, nestled deep in an article about Dropbox's difficulties, Bloomberg Businessweek reported that Underwood was no longer head of design. On December 7, Mailbox announced plans to shut down on February 26, 2016. Underwood said little to reporters, choosing instead to retweet grieving Mailbox fans and share cryptic articles suggesting all was not well at Dropbox. His rise and fall exemplifies the wild, anything-can-happen life of a mobile app founder.

'You Have to Become Comfortable With Discomfort'

Matt Scovil is co-founder and CEO of Medefy. It's a developing iOS and Android mobile app, combined with a Web app, designed to help consumers find low-cost healthcare. Using the Medefy app, employees enter the name of a medical procedure into a search field. The app then delivers cost estimates, incorporating information from the employee's health plan, to help employees select the lowest cost providers in their areas.

Scovil declined to how Medefy obtains pricing information, saying only that pricing is algorithmically derived based on data from public and private sources. Employees can also search by provider to research a doctor's overall fee structure.

Scovil says his passion for Medefy's mission drives him to persist, despite the startup world's ups and downs. "Someone could create a superior product tomorrow in their dorm room. You face company-ending decisions all the time."

Watching a beloved product go bust is a risk of acquisition, but Scovil finds that staying openminded about Medefy's future helps him remain emotionally resilient. "When you're being acquired, you have to be under the very literal understanding that anything could happen to your IP," he says. "Whatever they tell you -- and you hope it doesn't happen that way -- but the contract will say they can do whatever they want."

The Founder's Dilemma

Founders like Scovil create apps to solve a logistical or societal problem. In Medefy's case, the problem is health care price transparency; in Mailbox's case, the overflowing inbox. They hope their solution leaves an imprint on the world, but they have no guarantee it will last. They also face understandable pressure from investors, for whom acquisition is often the safest and most favorable outcome.

"We're investors and would like to actually have the chance to make a fair return on our very risky investment," says Edward C. Goodwin, president of Connecticut-based Angel Investor Forum. "Our investments in startups are very illiquid and generally we get a positive exit via acquisition or rarely by an IPO."

Pressure to sell doesn't just come from investors; it also comes from peers and the media, where founders feel pressured to be more "Shark Tank" celebrity than independent warrior.

"I guess it's more attractive for the general public, as it includes huge amounts of money and dramatic stories of deals almost not happening," says Alari Aho, founder and CEO of Toggl. "Consistent growth and solid revenues of independent businesses are often overlooked, mistakenly."

It's Okay to Take the Cash

An app's post-acquisition future depends largely on the direction of its new owner. For Dropbox, the future led away from email, which meant dropping Mailbox for good.

According to The Verge's Silicon Valley editor, Casey Newton, Dropbox turned away from email and chose to focus on its collaborative document editor, Paper. "Email requires collaboration around communication, a Dropbox weakness," Newton reported. "Documents require collaboration around content, a Dropbox strength."

Leandro Rzezak, Learning Chair at Entrepreneur's Organization, said via Quora that entrepreneurs like Scovil, Aho and Underwood often wonder whether to take the money and leave their app's future to chance.

The decision, he says, comes down to whether they have enough money to grow their core product alone and how much the acquisition price could change their lives. "Fast-paced change, high volatility and risks are more significant [in the mobile app market] than in most other industries," Rzezak explains. "The same ability, confidence, and risks you are weighing on to grow this app will be equally applied to find and scale your next business."

Additionally, Rzezak says an upgraded lifestyle could last even if current and future projects go bad. In other words, Gentry Underwood might have lost Mailbox, but he's $100 million wiser.

Image source: iStockphoto.com