Exclusive Interview with Steve Douty President/CEO/Member of the Board of Directors of Nexo, Inc.
Nexo, Inc. (a private company) Disrupts the Movement of Big Data
A New Era of Information Sharing Has Begun
Last Friday I sat down with Steve Douty and to discuss the future of big file sharing, the expense and security surrounding big data in computing.
What I learned from this interview with Steve is compelling, I believe you will agree with me.
Steve, I noticed in your bio that Nexo is your seventh startup – at this point, you could probably take your pick of anything. What made you pick file sharing as your next adventure?
Sending or sharing files is a fundamental computing process that almost all of us do. It covers everything from sending my kids a photo to migrating a data center to the Cloud. It’s a gigantic market.
But what makes it so interesting is that for something so fundamental, it’s way too hard to do! And files are getting larger, we’re sharing more of them more often, security is a huge question – so, things are only going to get worse.
It’s a lot like the mobile phone market was ten years ago, when the iPhone first came out. There were so many different varieties of cell phones… even Blackberries, Treos… it was nuts, like, “Why do we need yet another phone?” But Apple wasn’t thinking “phone” – they were creating a connected computer you could carry in your pocket!
It was a very cool new way to make phone calls – which is certainly another “fundamental” – but it was so much more than that. It was an entirely new platform, and the promise of a unified future. I remember the first time I could dial a phone number inside an email message by just touching it. It’s an example of how Apple rethought the experience top to bottom.
Steve, you are telling us that Nexo is the next iPhone?
Well, that would be terrific, but I’m really trying to describe a huge market that was wildly fragmented and ripe for disruption. It’s exactly where I see file sharing today. For example, we all use email for smaller files, but it’s a painful collaboration tool and it’s really hard to find attachments after a while.
Then there are the “Boxes” – Dropbox, Box, OneDrive, Google Drive, and many others – they all have different limits and pricing and you don’t want six of these Boxes cluttering up your file system.
And now we’re starting to struggle with files that are too big even for the Boxes, so we end up FedExing thumb drives around. If you keep going up-market, there are big enterprise systems for the really huge files that are expensive and are dependent on your IT department, if you have one. It’s really all over the map. I mean, why do I have to sit there and figure out the best way to send a file? I just want to send it.
So, is this where Nexo comes in?
Yes. We’re building a completely new information sharing platform. It’s fundamentally different from the methods I’ve just mentioned in that it isn’t cloud-based. For example, instead of duplicating your files in a massive hard-drive-in-the-sky, we use a peer-to-peer technique to send files and information directly between your device and those you want to send them to.
There is no intermediate storage. You just run Nexo on your device and it interacts directly with our software running on the recipients’ devices.
It’s an order of magnitude faster than the Boxes because you’re not competing with millions of other users that want access to the same centralized cloud – we are the shortest route between sender and recipient.
And because we aren’t storing your stuff, we don’t have to limit or charge you based on the amount of data you want to send. With us, it’s unlimited. Send as many 20 MB or 20 GB files as you want. And get them there in one-tenth the time.
Also, your files won’t be sitting somewhere out there on someone else’s servers, where they are vulnerable to attack and to snooping.
But I’d say that with all of this, the best part is that we can put 100% of our focus on creating a flexible, powerful platform that goes well beyond sharing files. We’re a software company. We fold right into your operating system so that sending with Nexo is a click away. We also give you a range of access controls – like a read-only mode that really works. Or permanently deleting a file that’s been revoked from another user. There are a ton of possibilities.
Does this mean that in order to get files from you, I also have to be running Nexo?
Yes. That’s what enables the peer-to-peer mesh networking, the enhanced access controls and the real-time collaboration. It’s the same model used by Skype, WhatsApp and many other apps – including the boxes, by the way. You get an email invitation with a link, you download and install our software, and you’re good to go. In fact, WhatsApp also uses a peer-to-peer protocol, which is why they can afford to offer chat and voice calls for free.
This approach also creates a viral or network effect, because every user is recruiting multiple new users on our behalf, and so on.
So I fully understand, you are saying that you have no Cloud?
That’s right. Zero Cloud.
That points out another major difference between us and email, or between us and the boxes: we have a completely different business model. When I was first introduced to Nexo, I’d been following the Box.com IPO. Because I ran Yahoo! Mail in 2011 and 2012, I had a pretty good understanding of what it costs to deliver a cloud-based service.
Still, I did a double-take at Box’s “cost of revenues” – which primarily includes the costs of bandwidth and data centers. Today, it’s something like 30% of their revenues! I believe Google’s is more like 8% or 9%. For Nexo, that cost is 0%.
That sounds too good to be true.
I realize that, but it is true. Nexo is a simpler and far more economical approach than the cloud. We don’t need massive inbound and outbound pipes or redundant data centers, or the energy and people it takes to operate and secure them. And because we’re decentralized, we can scale massively – our software makes use of the computing power, storage and bandwidth that people and businesses already have. It just makes a lot more sense.
And here’s something else. About a year ago, we came across a fascinating report on the environmental impact of these enormous cloud infrastructures. It said that the energy used by data centers almost quadrupled between 2001 and 2015, and accounts for between 1% and 2% of worldwide electricity usage. And no matter how much virtualization or load balancing you do, you still have to build them out to handle peak traffic times – which implies that a lot of energy is used just to power spare capacity.
I guess the question is: if you can now solve certain problems without all this effort, infrastructure and cost, why wouldn’t you? That’s the essence of disruption.
You mentioned Security earlier, Security is a Key issue, tell us more.
Before joining Nexo, I started an enterprise security company. About three years ago, I had lunch with the CISO [Chief Information Security Officer] of a Fortune 50 company. He described the most sophisticated, mind-blowing array of defenses against cyber-attack that I’d ever encountered. A year later, I was stunned to see his company all over the press after millions of customer records were stolen.
The number of data breaches is accelerating, and no one is immune. Verizon’s been tracking reported security breaches since 2007 – what’s scary is that there were about 4,100 data loss incidents – where the hackers actually extract information – in 2015, which was almost double the number in 2014.
If you think about it, these huge cloud services make life easier for hackers by gathering millions of users at a single attack point. Twenty years ago, bad guys had to come after us one user at a time. That’s a lot of effort for little reward. So one of the major benefits of using peer-to-peer is that we don’t present any target larger than a single user. It’s the famous Willie Sutton argument.
Nexo uses military-grade encryption to secure files that are on your device and also in transit. Files and messages are divided up into packets that follow different pathways between senders and recipients. In addition, we can tell if a packet has been intercepted or handled by an inserted node – which is called a “man in the middle” attack – and discard that and any subsequent packet coming from that node.
To be fair, there are many applications that are perfectly suited for the cloud – it’s just that sending files isn’t one of them.
Last question – where is the world of file sharing headed?
It’s going to be a fun space. And by the way, Paul, thanks again for having us here today.
First, and most predictably, file sizes are going to keep growing – and quickly. It’s already too hard to share video files – and as their resolution keeps improving, we’re going to need a completely new approach. Plus, there will be new types of files like those containing our genome, which occupies about 110 GB. As we get more into virtual reality advertising and media, those could be larger than videos. And even common work files like architectural drawings will go beyond the capacity of the Boxes and demand new solutions. It’s already a $10 billion market, and it’s going to grow quickly.
Second, we’re going to get better at collaborating around files. For example, Nexo is going to support voice and video chat in the next several months. You can also text chat with a group of collaborators – which belong to a user-defined “Channel” – and we’re the only service that lets you have private 1-on-1 chats. By default, group chats are permanently erased after 30 days, and private chats after 24 hours.
Third, we have to stop oversharing. Any time you send someone a file, you are giving them control over its contents. I want to deliver a way to maintain control – and preserve privacy – of a file throughout its lifecycle. The problem today is that there isn’t a simple, seamless way to do it – until now. Nexo is focused on features like true screen-only access, auto-deletion and revocation, remote file locking, and even location-based restrictions.
Finally, security. Most people don’t realize that sending an email attachment is equivalent to posting it on a billboard. There is zero security, but everybody does it – because it’s so easy. Somehow, “easy” and “secure” have drifted apart – just when we need them to be synonymous. And that’s just one example.
Regaining control over your digital property – whether you are an individual or a business – requires proactive measures. I know that startups like us have the freedom to solve problems differently, remove the friction, and create a new wave of better habits.
We’re excited about improving the usability, convenience, speed, security and the economics of this fundamental aspect of computing.
Related story: http://www.livetradingnews.com/nexo-inc-private-company-disrupts-movement-big-data-12012.html#.V8cpUJgrKM8
For more information go to: www.nexoinc.com
Paul Ebeling with Steve Douty
Stephen “Steve” Douty, President, Chief Executive Officer (CEO), and a member of the Board of Directors,
Steve joined Nexo, Inc. in October 2014.
He has more than 20 years of experience in executive roles creating communications, enterprise, social media, and security solutions in roles including CEO, CMO, VP of Product Management, VP of Sales, and VP of Business Development.
Steve has worked in high tech for more than 30 years, focusing primarily on bringing innovative technologies to market.
During this time, he has created three exits for a combined value of $900 million, and an average return on equity of 1,750%.
As a key executive at BSG, he assisted in its sale to PerSe Systems for $460 million, a multiple of 6.5X revenue for a services company. He also was the lead negotiator for the sale of Hotmail to Microsoft for $400 million.
Prior to joining Nexo, he co-founded and was CEO of Smaarts, Inc., his sixth start-up venture. Smaarts delivers security solutions to enterprises using big data and real-time analytics.
Prior to Smaarts, he served as Vice President of Applications and Mobile Product Management at Yahoo!, where he was responsible for a $1 billion product portfolio including Mail, Messenger, Flickr, Answers, Groups, Connected TV, and all mobile products. Prior, he held various executive roles with LivePerson (CMO, public), Moxie Software (co-founder and unit president), Octopus Software (co-founder and CEO, acquired by Ask Jeeves), Microsoft, Hotmail (COO, fourth employee and head of products, marketing, sales, and business development, acquired by Microsoft), and Paradyne (CIO, acquired by AT&T).
Steven also spent 8 years in enterprise sales roles with Paradyne, IBM and GTE Telenet. Steve earned a B.A. in Mathematics and Computer Science from Dartmouth College.
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