Hive, the new Pied Piper?
While scrolling through my LinkedIn feed, I came across a news update.
It said, 'Hive announces our €12M (USD 13M) Series A to transform cloud computing with a secure and sustainable distributed cloud.’
I was interested and followed up reading the article. I then visited the Hive's website for more information. I wanted to learn what others do and what new and innovative ideas they bring to the market.
And since it is a startup, I also wanted to learn about their (publicly stated) strategy. When someone gives you $13 million, you should have a good story that leads to billions of dollars in valuation.
What is Hive trying to achieve?
In their words — 'Your data, encrypted and secure, contributing to a community-driven cloud.'
They also say it will 'give you the power to own your data on a secure and sustainable distributed platform.'
Why would this be important? Because, 'Just imagine a digital world where your life, your memories, [aren’t] stored in some distant, impersonal server, but distributed across a global network of devices managed by people just like you.'
Considering the use of the word 'you' in the marketing messaging, one assumes that Hive is going to target the consumers or individual professionals who want their files to be stored on computers which are part of a community with a common vision of sustainable computing. In fact, Hive goes to extra lengths to describe how their solution is far more environmentally-friendly than any data center.
What is Hive's business model? How is Hive going to compete in an already crowded marketplace?
Think about Uber or AirBnB for data storage. You have a computer and you are not using all the disk storage. Why, for extra cash, don't you allow strangers to store their files on your computer? And since these strangers are driven by the same vision of saving the planet, they are not really strangers, but your fellow community members. And, when using the storage from others, you are also saving money. Up to 46% cheaper than the competition.
Yes, 46% sounds like a lot of money, but then you check the amounts.
For each terabyte of storage, you pay Hive €3.8 per month. The respective rates for DropBox, Google Drive and OneDrive (Microsoft) are €5, €5, and €7 per month.
Is Hive's premise that people — in order to reduce their carbon footprint, be part of a community, use software from an unknown company, and, as a bonus, save €1.2 per month — use this service? I have my sincere doubts.
As well, I would very much doubt I could compete with Dropbox, Google or Microsoft on price. Especially when the price for storage is always going down.
What Hive also (conveniently) omits is the actual cost of buying the equipment. Similar to AirBnB, Hive doesn't buy the computers and doesn't operate them. Hive is just providing the opportunity for you to make a little extra money from your unused bedroom. Another topic missing from the pitch is the question of network traffic. There is no such thing as a free lunch, and, as part of your contribution to save the planet, you pay for the traffic.
What happens if people leave the network (or just turn off their computers)?
Hive says: 'If the redundancy level falls below a safety threshold, the network triggers a swarm healing process to regenerate new shards, maintaining the desired redundancy ratio.'
This means that parts of your file(s) will have to be redistributed to other machines. The demand for (your) bandwidth will be sizable.
So far we covered the vision and the solution to a problem, which only a very specific group of individuals might have.
Now, let's see what a product like this has to do in order to compete. That's where it starts breaking down even more.
Hive listed Dropbox as its competition. The list of features which Dropbox has been building since 2007 is very long. Dropbox has a 17-year head start and it is also committed to use 100% renewable energy in all its data centers by 2030. I don't think that Hive, with $13 million, will be able to deliver something remotely comparable with Dropbox (or Google or Microsoft) or even compete on environmental impact. The only differentiation is Hive's community-driven cloud vs. Dropbox's distant, impersonal server.
Speaking of competition, Hive is not the only game in town. We have Cubbit, which offers a 'green' distributed cloud storage option or another 20 data storage startups with security and privacy as a value proposition. Let's also not forget all the data storage startups that tie the storage to blockchain. Yes, the market is crowded. Also we can all learn from Pied Piper how not to do distributed systems.
And we are getting into the biggest challenge of all. Hive is relying on Apple, Microsoft and Google to provide a predictable hosting environment. The technical team at Hive will be sweating every single time when any of these vendors release a patch or a new version of their respective operating systems. One single hiccup and all the Hive's customers will lose access to all the files with no recourse. The best they could hope for would be a refund of their last monthly bill of €3.8 for every TB of lost files...
Hive has about two years of runway to prove that this strategy is sound and will deliver on its founders’ and funders’ vision.
The recurrent pattern? Strategy is a set of choices. Choose well. It is hard.
PS. If you have a project or a startup and would like to chat strategy, let me know. I am always interested in hearing what others do.