June 16, 2008

Michael Fisher, CEO, ElephantDrive

1/BR: Please give us some background information about your company, such as how it was founded, by whom, how long have you been around, where your headquarters are, how many branch offices you have etc.

ElephantDrive was founded by me (Michael Fisher, CEO) and Ben Widhelm, our CTO.

One afternoon in early 2005, Ben and I were looking at digital photos of his then 6-month-old son when Ben realized that the pictures were not backed up anywhere.If the laptop went away, so did all evidence of his son’s first months. We quickly went to the web in search of a simple, effective, and affordable online backup and storage solution and found very disappointing results.Immediately, we decided that there was an opportunity to build a better solution– one that would not only enable simple and reliable online backup, but also provide easy access, sharing, and publishing for users.

Ben and I began working together in 1999, and since then have collaborated in the online games space at iWin, Uproar, and Flipside.These properties were ultimately acquired by Vivendi Universal’s Net USA group where I was SVP Operations and Ben was CTO.

ElephantDrive is headquartered in Los Angeles, CA.

2/BR: Is your customer base primarily in the US, or is there a significant international presence as well?

Most of our business is generated in the United States, but we have a substantial user base from other territories.Germany, Australia, the United Kingdom, and India stand out.

3/BR: What are your top selling account packages, and why are they enjoying so much success?

We offer three different self-service account types: Open Edition (free), Home Edition, and Professional Edition.

At the moment, the Home Edition account is our top seller as a result of the explosive growth in the quantity and value of digital assets in the household.When the growth is combined with the recognition of just how fragile a container a home computer or external hard drive can be, you get some pretty active demand.The basic Home account covers one computer and the Home Plus covers up to four.

That said, the Professional Edition (which was launched at a later date) is accelerating even faster in recent months. SME’s aren’t just discovering this need– they’ve had it for years but are realizing that there are finally affordable and effective online options.

4/BR: What makes your company and its service different from others?

Two things separate us from the pack: a superior product and superior technology. On the product side, we’re a complete data solution for the real problems of most users and made it as fast as possible. And on the technology side our patent-pending storage management systems allow us unparalleled flexibility.

I’ll elaborate:

Most of the companies that we find ourselves up against in the minds of our customers are too one-dimensional. They offer only one piece of the puzzle. For instance, some firms have excellent backup software. Simple. Effective. Quiet. We think that’s great, but without allowing users to easily access that data–  browse, search, upload, download, and share–  we think they are only offering half of a service. To provide a truly compelling experience, you need to deliver a simple, effective, and quiet backup tool that seamlessly integrates with anytime/anywhere web access and data management tools.

You’ve also got to be careful not to over-reach. Some firms are so concerned with having a feature that’s cool enough to appeal to bleeding-edge bloggers that they lose focus on providing a rock-solid experience to their end users.

Most importantly, it has to be fast.Users get very frustrated when they perceive a system as operating slowly. We’ve focused a great deal of our development effort on ensuring that we have the fastest transfer mechanism on the market.

On the back-end, we’ve architected a system that can dynamically incorporate new storage repositories and services and intelligently allocate space across them. When objects are accessed, our system can identify the optimal repository or service from which to retrieve the file when it is stored in multiple locations. Even though our users never see this in action, we’ve abstracted all this complexity away from them, they benefit enormously from our ability to take advantage of the latest and greatest breakthroughs in storage cost, security, and speed without having to do any significant reconfiguration. This is all part of our Storage Virtual Network Operator system, and it allows us to dynamically shift between storage media and services.

5/BR: One of the biggest concerns of online backup users is data security and privacy.How have you addressed those issues?

Our number one priority is the security and privacy of our users– data, and we rigorously apply a core set of classic security principles. For anyone really interested, please check out our security overview at https://www.elephantdrive.com/help/faqs/data_security.aspx.

The most frequently asked security question has to do with how we ensure that data cannot be read by unauthorized individuals.Every object is encrypted using the NSA approved Advanced Encryption Standard before it leaves the user’s computer.A user can opt to use keys provided by ElephantDrive or personal keys–  if they select the personal keys option, not even the whole team at ElephantDrive with help from the FBI can crack it (of course, if you lose your key, we’re equally unable to help you). Next, we decouple the meta-data (information about the file) from the encrypted file contents, and deliver both over an SSL secure channel to the ElephantDrive datacenters.The meta-data and contents are then stored separately on redundant devices managed by different personnel.

Lastly, we build trust with our users by providing a great service, being responsive to customer inquiries, and partnering with world-class brands like Amazon and Intel.

6/BR: How has the online backup business evolved in the past few years, and how do you see it further evolving?

The last few years have produced fundamental changes that make the online backup business not just a viable opportunity, but a virtual certainty. There are more digital assets, the files are worth more to users, and they are as fragile as ever.

Perhaps more importantly, broadband access has finally reached a penetration level that allows most users to have access speeds that will support a pleasant experience. This has helped create a tipping point in the adoption curve for the online data services. We’ll see yet another huge step forward when fiber speeds start to reach the home and small office, and when WiMax is fully deployed.

Over the next few years, the trends are only projected to improve.There are likely to be handful of big winners in this space, but the size of the addressable market combined with the speeds now available is luring new entrants even now.

7/BR: Whom do you consider your main competitors?

Our biggest competitors are the falling cost of external hard drives and getting the word out regarding the benefits of online solutions. Disk prices are falling so rapidly that some users are convinced that buying more storage and dropping it in the homes is the best answer. Our job is to educate them that with us, they aren’t buying a set of disks,  rather, they are buying an expanding suite of services, professional expertise, and geographic redundancy.

Of course, we also know that there are number of companies we compete with even with users who are already interested in online backup. The other CEOs you’ve interviewed are each at the helm of a competitive firm – Carbonite, NovaStor, IDrive, DataDepositBox, etc., as well as AOL’s XDrive and Mozy are all on our radar.

8/BR: Large companies like Microsoft and Google have started to offer online storage solution?Do you fear them?How can you compete with such formidable adversaries?

Both Microsoft and Google have made some noise about the space, but neither really scares us with posturing.They have highly developed existing products that they need to focus on, but if and when they launch a service that is really in this space we will certainly take it very seriously.

That said, we’d much rather partner with them that compete.Our hope is that one or both will follow Amazon’s example and launch a raw storage service like Amazon’s S3.We are big consumers of their service and would love to be able to evaluate and potentially integrate a similar offering from another major web enterprise.

9/BR: There has been a great deal of M&A activity in the industry during the last few years [such as Xdrive being acquired by AOL, Microsoft acquiring FolderShare, Iron Mountain acquiring LiveVault, and Seagate acquiring eVault, EMC acquiring Mozy, and Symantec acquiring SwapDrive (Backup.com)].What is your strategy?

Our plan is to continue to grow our subscriber base and expand our feature set.We evaluate corporate development opportunities as they develop, but we’re focused on building the best possible technology in terms of speed and performance.

10/BR: Are there any new products/services you are developing that will soon be available?

Yes, we are about to release version 1.0 of our TrunkDrive product (it’s been in beta for the last couple months).It is a separate program that allows users on both Macs and Windows to map a drive directly to their ElephantDrive account.Another newly released feature is the Secure Sharing Services, which will allow users to share specific files and folders with others.

Most importantly, however, is our new Stampede Protocol.It is the fastest transfer methodology we’ve found anywhere and the plans for the next version (even faster) are already in the works.

11/BR: How many subscribers do you have? How much data is under management?

Sorry. We don’t share that sort of information yet.

12/BR: What is your annual revenue?

Sorry, again. Not for public disclosure.

13/BR: How does your proprietary technology compare to the proprietary technology of your main competitors?

It’s difficult for us to comment on the internal operations of other companies, but we can describe the innovations we’ve made that are most exciting.

As I mentioned earlier, we believe that most features are pretty easily copied, but that core technology is where you can create sustainable advantage.When you apply the right strategy and team to the architecture and design, you build a better system.Our patent pending SVNO architecture and the performance enhancing transfer protocol we’ve developed give us distinct advantages over the long term.

14/BR: What the most regrettable mistake that you or your company has made in the past?How would you handle that mistake if you were given a second chance?

We’ve made some mistakes, but have no regrets.I think the only thing we would do differently is to release our first beta product sooner so we could have started to accumulate user feedback even earlier in the process.It turns out that the users are always right, and the sooner you can get them involved in the process the better.

15/BR: In the future, say five years from now, do you think the cost of online storage will remain as it is today, or will it go significantly cheaper?For example, to back up a 1 GB file?

I think you’ll see the continuation of a process that is already evolving where you don’t pay for storage by the GB. Several of the players in the space, including ElephantDrive offer unlimited storage plans. I think that pricing will be determined by level of service–  customer support, uptime, speed, and features–  and not by amount of data stored. Since we are already helping to create pricing pressure on many of our competitors, this is likely to be much more significant for their models.

If we do our job, and continue to innovate and improve, we’ll be able to curb the natural pricing pressure.

16/BR: What are the greatest challenges facing your company today?And what are your biggest accomplishments so far?

The biggest challenges we face are stemming from the large amount of “noise” in our space.Because the market opportunity is so large, the online backup space is becoming more and more attractive to entrepreneurs who are all fighting for mindshare. Additionally, some of the players are likely to engage in some irrational behavior that can impact our own efforts.

Our biggest accomplishment has been building our business and technology to its current state without taking any investment.It has put us in a great position given the recent interest in the space.

17/BR: Can you tell us about your servers?Where they are located, how many backups you perform, if server room is controlled for humidity, temperature, and whether there is backup power?

ElephantDrive employs technology professionals who are specialists in preserving data. Not only do we continually monitor and backup our systems, but our servers are located in secured facilities with redundant power supplies, a cooling system to keep all servers at the optimal temperature, safety systems to guard against earthquake, fire and floods. There is physical security which includes 24-hour security officers, controlled access of everyone in and out of the building with biometric hand geometry readers. Even the exterior walls are bullet-resistant.

But we don’t stop there, because we replicate across geographies. This means your online storage is safe in undisclosed locations from the Pacific to the Atlantic, making your data completely catastrophe-safe.

18/BR: Any other news about your company you would care to share?

Nothing at the moment, but keep your eyes peeled for press releases.

19/BR: Now that we know about you, we want to ask you about us.As you know BR is the ONLY website providing information about the top 25 online backup companies on a monthly basis.We have close to 400 backup companies listed in our directory.How can we improve our website?

You guys are doing a great job of aggregating information about the relevant players in the space and educating consumers.

I think the best thing you can do is to encourage the community to contribute content, reviews, recommendations, blog commentary, etc.

Thanks very much for taking the time to speak with me. I really appreciate it.

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