Data centers are so 20th century.
That’s the idea, anyway, at Symform, a Seattle data-storage startup that uses extra space on its customers’ hard drives to create a virtual data center online.
The company was started by a pair of ex-Microsofties, and last year hired former DocuSign CEO Matthew Schiltz to handle the next stage of its growth. And in a market crowded with names like Amazon Web Services, Box, Mozy, Carbonite, and many more, that means some sharp-elbowed competition.
Symform’s technology has always stood out in that very crowded field. Most storage companies aggregate a ton of data center capacity and make money by charging for storage and related services. Symform, on the other hand, uses the Internet to corral the equivalent of a data center by storing data in slivers of available space on a bunch of people’s hard disks.
So, if you join the network, you’re also asked to let Symform use some of your available disk space to pack away a tiny piece of encrypted data from someone else.
That’s a pretty intriguing idea, and it’s been enough to attract around $16 million in venture investment, from the likes of WestRiver Capital, OVP, and Longworth Venture Partners. Symform also says it has attracted tens of thousands of users in 150 countries.
But in a market chock full of competitors offering relatively similar services, competition often comes down to price. And, at the same time, a network like Symform’s works as a competitive business only when it gets a huge amount of users.
That brings us to today’s announcement that Symform is lowering prices for its storage service, with a new fee structure that could mean free storage for some customers. If a customer contributes twice the amount of storage space that they use, they can store their own data for free—Symform calls this paying with “bytes” instead of “bucks.” Users can also buy storage on the network, at a rate of 15 cents per gigabyte.
Schiltz says research and tests with customers show that users are enthusiastic about the idea of much lower prices, even if that means contributing more space than they use. I guess that makes sense when you think about how inexpensive raw storage capacity is on a one-off basis.
“The economics do not make sense for the user if you think about buying a 2 terabyte disk drive for $80, and then paying someone $500 a month to back it up,” he says, citing per-gigabyte prices from competitors like Mozy.
So how can Symform make money if it’s giving away storage? It’s following the freemium model that is being employed in so many Internet businesses. If you can build enough of a user base, there are many more options available for a business to make some revenue—particularly on support, in this case, but potentially including other options that haven’t been rolled out yet.
And it’s got to work that way, since early customer tests have left Symform expecting that most of its users will pay for their storage by offering up disk space rather than paying per gigabyte.
The endgame here is growing the amount of online data storage. As it stands, Schiltz says, many businesses use a “lifeboat” approach of backing up only their most critical data because of the expense.
“So let’s say you have a terabyte of source data. You try to find a way to only store 100 gigabytes or 200 gigabytes in the cloud because it’s so expensive,” he says. “We think that fundamentally, you should back up and store all of your data in the cloud. Our customers agree with that—they just need better economics.”
