Storage space is no longer a viable business model for file storage startups

As one of the most competitive cloud micro-markets, file storage SaaS has grown considerably over the last few years. In 2015, venture capitalists recognised startups in this field as lucrative investments, so it’s unsurprising that the number of companies aiming to meet the demand for cheap storage space keeps growing.

However, most of them are bound to fail mainly due to the inability to compete against giants such as Microsoft, Google and Dropbox.

This is particularly the case with startups that based their business models on storage space offering, which has long stopped being a true differentiator. With Google’s 15GB of free space on one hand and Dropbox’s mobile device promotions (of up to 48GB), it’s clear why startups that intend to stay in the game need to find an alternative way to compete in the market.

Beyond Syncing: Saving data directly to the cloud

One of the most innovative launches the file storage market has seen in the last few years is probably Upthere, a new cloud computer that aims to revolutionize file syncing. With data synchronization as one of the major game changers in the way data is shared and stored online, the next generation file syncing may only be a step further. Namely, instead of data synchronization, the company started providing its users with the opportunity to save their files directly to the cloud.

In a recent interview with The Verge, the founder of Upthere and former VP of software engineering at Apple, Bertrand Serlet expressed his skepticism regarding businesses whose primary offering is file storage. He points to the fact that cloud storage is only getting cheaper and those who hope to sell it need to include additional features to their offering.

With Upthere, the key difference is in the fact that users will be able to save massive amounts of data that don’t depend on their local storage capacity, which will facilitate data storing, sharing and organizing. Now, of course, there are always the problems of internet connection for end-users and server maintenance for the provider. Yet Upthere could be said to have found a unique way to get its share of the cloud computing market.

The unused potential of encryption

The cloud space has had lots of discussions and a great number of solutions aiming to enhance file security both at rest and in transit. So far, numerous enterprise-ready solutions were launched, but none of them seem to have found the way to reach end-users to and offer them a safer way to safe files in the cloud.

An example of a successful strategy in this respect might be pCloud, a service that offers multiple security layers for their users’ cloud files. Its unique value proposition is Crypto, which is a paid add-on service that enables people to encrypt only specific kinds of files, while others can be stored for free in the 20GB storage space.

As suggested by Serlet in the interview quoted above, “There was no one who did what we envisioned, so we started from scratch.” This is exactly the approach all file storage startups need to keep in mind when choosing a viable business model. Therefore, instead of storage space that gets larger and cheaper, they should focus on some other critical issues that keep growing parallel with the evolution of cloud computing.