MediaMax/TheLinkup death spiral dogs Nirvanix

The "cloud" start-up Nirvanix (DEMO 08) is talking about this week isn't its usual "Internet storage is the future" rap. Instead it's a shadow cast by the meltdown of the company from which it sprang, Streamload (DEMOfall 05), which ceases operation Aug. 8 under its new name - TheLinkup.

Firebombs and misinformation lobbed from the blogosphere have shaken investors, Nirvanix CEO Patrick Harr, and TheLinkup, Inc. CEO Steve Iverson, who espouse different perspectives about the meltdown of an online storage service that will leave about 20,000 paying subscribers without their digital music, video, and photo files.

Blogging this week Nirvanix responded to a year-long tirade from often-anonymous bloggers with its own post disavowing responsibility for losses.

Meanwhile, Iverson and TheLinkup's only other employee John Hood, who manages customer support, have spent a hellish past 12 months answering angry, sometimes abusive, subscribers and bloggers as the duo tried to salvage their broken and broke San Diego company.

"I have gone through multiple experiences in past of building and turning around companies but never like this with firebombs from anonymous people with the express intent to take us down," Harr said.

This meltdown is peppered with hard-learned lessons.

"This is such a bad year," Iverson said. "We made a mistake and users have the right to be upset. Just as many free users are upset as paying users."

It began in 1998 when Steve Iverson, now 32, was an undergraduate student at Pomona College in California studying adaptive data compression algorithms that could squeeze big digital files down to a size affordable for an Internet storage service company. Then the concept was new and companies weren't positioning online storage as"cloud computing" as they do today.

After his college graduation, Iverson founded and self-funded Streamload and evangelized online storage for digital audio files before MP3 players were popular.

Streamload's promise attracted angel investor and computer software entrepreneur Charlie Jackson, whose FutureWave Software went on to become Adobe's Flash. The company chalked up four profitable years, Iverson said. With Jackson as chairman, by August 2004 Streamload had secured US$1.2 million from lead investor Windward Ventures as well as the Enterprise Technology Fund and his hometown - San Diego. That year Iverson was a finalist for Ernest & Young's entrepreneur-of-the-year award.

A year later on the DEMOfall 05 stage, Iverson introduced Streamload's MediaMax product as "a suite of ultra-high capacity online services that helps you manage, share, and access all the files and digital media in your life." Back then as "the world's largest online media center," the MediaMax product aimed at Apple and other companies offering Internet file storage. From 2002 to 2006, Streamload garnered accolades from a handful of technology magazines for innovative products.

But by December 2006, when Streamload's product - MediaMax Version 4 - was available, the 20-person company was losing money and facing more competitors offering free online storage.

With Iverson's blessing, Patrick Harr, former CEO at Preventsys and an entrepreneur in residence at Enterprise Partners Venture Capital,was recruited in January 2007 to raise money and help Streamload adapt to new market conditions, said Dave Titus, an investor and on the board of both Streamload and Nirvanix.

Streamload's storage system was large and complex. In 2006, it was managing more than a petabyte of files (equivalent to roughly one million gigabytes) and the size of its user database along had grown to five terabytes, Titus said.

During Harr's first 60 days, he assessed the situation. Dragging Streamload down was the cost of maintaining nine years worth of data files from free or inactive accounts that brought in no money but cost to maintain, he said. Also troubling Harr was the "abuse" by some of Streamload's non-paying customers using the free storage for illicit files like pirated music and pornography. The FBI received several warrants to search Streamload's files including one after Harr joined the company, he said.

While doubting the viability of Streamload's