Bitcasa CEO: Unlimited storage “a wildly money-losing proposition”

The past couple of weeks have been stormy, to say the least, regarding streaming storage startup Bitcasa and its decision to nix its “infinite drive” unlimited storage plan in late October. The move angered some of Bitcasa’s infinite drive customers who were told they had around three weeks to move their data over to the startup’s new Amazon servers or face having their storage deleted.

This led to a disgruntled [company]Bitcasa[/company] customer launching a tentative class-action lawsuit against the company, claiming Bitcasa did not give its users enough time to migrate their data. The lawsuit ended in Bitcasa’s favor with U.S. District Judge William Alsup ordering the plaintiff to shell out $99 for an additional month under Bitcasa’s new pricing plan if he wants more time to move data. However, financial details unearthed in the lawsuit painted a bleak picture for the startup.

In an interview with Gigaom, Bitcasa CEO Brian Taptich explained that removing unlimited storage was not a pleasant experience but a necessary move for the company to get its finances back on track. Bitcasa simply could not afford to keep unlimited-storage users as customers; one user who was storing 82 terabytes of data was costing the company around $3,000-$4,000 a month, he said.

Bitcasa CEO Brian Taptich

Bitcasa CEO Brian Taptich

“It’s not fun to stare at your earliest and largest users in the eye and say ‘we just can’t do it anymore,’” said Taptich. “It’s a terrible feeling. You wish you could subsidize those [customers] forever.”

While the company launched with the “audacious goal of eliminating the hard drive” and providing unlimited storage, the reality was that it was “a wildly money-losing proposition,” said Taptich.

Bitcasa’s own encryption technology also added to the problem by preventing the company from seeing which data belonged to the appropriate user; this led to a ton of data building up on the startup’s servers even though some users might have stopped using its services.

“When it came to time to migrate, we didn’t know what to migrate,” said Taptich. “I don’t know what’s in there or what’s not.”

Now, Taptich claims Bitcasa’s revamped infrastructure, which is part of the startup’s [company]Amazon[/company] server-migration plans, allows the company to know when data might be tied to inactive accounts so the startup can do a better job of cleaning out its orphaned data.

When asked how potential users can be assured that Bitcasa will still be around in a few years given the company’s financial troubles (the legal documents stated that the court-ordered extension was “likely to push Bitcasa into bankruptcy within weeks, if not days.”), Taptich said he couldn’t comment directly on financial specifics due to the pending legal case. But, he said the company has an investor base that is “incredibly” supportive.

Additionally, removing the unlimited storage accounts “fundamentally changes the model” and is saving the startup cash, Taptich said. Bitcasa is also apparently seeing more traction with enterprise developers who want to use its service as a way to build out products without having to manage the back-end cloud storage, he said.

“The roadside is littered with the carcasses of people who’ve tried fixed-fee all-you-can-eat services,” said Taptich. “And we aren’t trying to be one of those failures.”