Ruling gives irked Bitcasa users more time to move their data

If you want to hold onto your Bitcasa infinite-drive data long enough to move it somewhere else, you’ll need to pay Bitcasa $99 for an additional month, according to an order from U.S. District Judge William Alsup on Wednesday.

The case boiled down to plaintiff Shawn Romack’s claim that the three-week timeframe Bitcasa gave users to move or lose their stuff  wasn’t enough time.

[pullquote person=”court filing” attribution=”court filing”]A court-ordered extension was “likely to push Bitcasa into bankruptcy within weeks, if not days.” [/pullquote]

Bitcasa cannot be happy about this given that it claimed it already took a big financial hit due to a court order earlier this week that pushed back the data-deletion date for just a few days. As part of its revamped storage infrastructure, the startup wanted to move all of its customer data to new [company]Amazon[/company] Web Services storage servers, but because of the court order, it had to pay to maintain its old servers in addition to the new infrastructure.

While most of the financial details were redacted in the public court documents, The Recorder, a legal newspaper, was at the hearing and reported that Judge Alsup said Bitcasa was losing $67,000 a day because of the court order.

Bitcasa has apparently been burning through cash since its inception (it raised a $7 million series A round in June, 2012 and a $11 million series B round in November, 2013) and now appears to be on shaky ground, according to a court document detailing statements the startup wanted redacted.

According to that document, complying with the court order and losing money each day was seriously jeopardizing the company; a court-ordered extension was “likely to push Bitcasa into bankruptcy within weeks, if not days,” the document stated.

To top it all off, the startup said in the filing that it has “no new venture funding in sight.”

At the root of these problems is the financial outlay Bitcasa has to make to rent its AWS cloud servers  while also keeping its previous unlimited-storage plans running on other infrastructure, the company wrote in a court filing that outlined its case.

A couple issues emerged over time with Bitcasa’s two key-selling points: a low-cost unlimited-storage plan for $99 a year and its “zero-knowledge” encryption technology “which makes it impossible for Bitcasa or third parties to know what particular data resides in a particular user’s account,” the document stated.

As the amount of user data piled up on Bitcasa’s rented AWS servers, the company realized that its encryption technology made it impossible to determine whether that data actually belonged to active users as opposed to former customers. Essentially, the company had to rent out AWS servers in order to maintain data it had no idea was linked to paying customer accounts.

From the filing:
[blockquote person=”court document” attribution=”court document”]Like the overwhelming majority of start-ups in Silicon Valley, however, Bitcasa’s vision soon collided with reality, and in particular, the very real costs of storing its users’ data. Several problems emerged. First was the problem of “garbage collection.” By design, the company’s advanced encryption software gave it no visibility into the files owned by any particular users. Unfortunately, this left the company with no way to know if particular data was owned by any active account and, thus, no reliable way to delete orphan data. Thus, over time, the company was paying to host an increasing amount of junk data.

Couple that dilemma with the fact that Bitcasa suspected that some infinite-drive customers were flooding the service with “staggering volumes of data,” it’s clear Bitcasa’s AWS storage costs have been enormous and not sustainable for the startup to operate without a significant business overhaul. The company claimed that “one Infinite user, in particular, used Bitcasa to store 82TB of data—enough space for 28.7 million photos or nearly 42,000 movies—singlehandedly costing Bitcasa approximately [Redacted] or more per month in server storage fees.”

In October, Bitcasa told its users that the company was upgrading its infrastructure and they needed to migrate their data to new servers. Doing so would basically allow Bitcasa to start afresh and wipe out all that excess data it had to pay for on the old servers.

Now that Bitcasa doesn’t have to maintain those old servers, the company will save some cash, but as the court documents show, it’s going to take a lot more for the startup to regain the momentum it once had when it launched.

Regarding the news, Bitcasa provided Gigaom the following statement via email:
[blockquote person=”Bitcasa” attribution=”Bitcasa”]Yesterday, U.S. District Judge William Alsup rejected Plaintiff Shawn Romack’s request to extend the initial temporary restraining order entered on November 13, 2014. We are pleased by the positive outcome and continue to believe that the suit is without merit.

In our legal papers, we highlighted the risks of incurring an ongoing cost of $67,000 per day to comply with the court order — an extraordinary burden for any venture-backed company. Now alleviated from that uncertainty, Bitcasa can move forward with its planned transition, which sets the stage for profitable growth. Bitcasa’s management team and investors, which include Horizon Ventures and Pelion Venture Partners, continue to believe in and support the company’s vision. [/blockquote]