It’s hot in here

According to IDC, the current estimated market size for cloud storage is $23B. It is projected to grow at 13% every annum and reach $38B by 2017. Those are some pretty enticing numbers for any venture capitalists looking to cash in on their next big exit. Box recently just raised $125M in equity financing, bringing the total valuation of the company past $1B. Back in 2011, Dropbox raised $250M at a whopping $4B valuation from some very prominent VCs (e.g. Goldman Sachs, Benchmark Capital, and Greylock Partners). 2 years later, it is again seeking $250M, but at double the previous valuation. Other “smaller” start-ups are also getting in the game (e.g. Egnyte, SugarSync, Nasuni just a few). Beyond the start-up scene, Tech giants such as Google, Microsoft, Amazon and Apple all have their own cloud storage service and are marketing them aggressively to consumers and enterprises.

Are people crazy?

So…what’s the big deal? Isn’t this just file storage? Take Dropbox for an example. Why is it worth $8B when it just stores a bunch of files online? To be fair, file synchronization is a very difficult problem to solve, and Dropbox has found a very elegant and seamless solution. But VCs invested at a $8B valuation, which means they are expecting a $80B exit 5 years from now. Dropbox, as popular as it is, won’t be worth that type of money just because it has figured out a better way to sync files online. To understand its worth, you have to look beyond file storage.

Thinking beyond file storage

Right now, when you think of Dropbox or any of its competitors, you associate them with storing document files such as Word and Excel, as well as Media Files like photos and music. But those are only a small portion of the data we generate and store. There are many different and interesting types of data that Dropbox can store in the future (e.g. personal information, financial data, application configuration files, and application state etc.). Imagine if those data can be accessed from any device by any application that has permission:

• What if Dropbox can store all my online credentials and completely eliminate the need for password?
• What if Dropbox can store my personal data so whenever I change my address, my bank, utility company, and ISP provider will all know to update it automatically.
• What if Dropbox can store my travel itinerary and that data is synced to other travel service providers. This way, if my flight is delayed and I can’t make my connection, the airline would automatically get notified and book me on a different flight. Similarly, the taxi I booked to pick me up at the airport will adjust its pickup time based on my new schedule.

The potential impact that real-time interconnected data can have on our lives is enormous. I think 5 years from now, devices and clients will become less important. However, the data they generates and how accessible they are across devices and applications will be far more interesting. Rest assure, the change is coming. We are already seeing some evidence of this shift with Dropbox’s Datastore API and Google’s Drive Realtime API. I can’t wait to see what’s next.