In an era where AI is rapidly commoditizing traditional software businesses, the most promising opportunities lie in combining software efficiency with real-world services. While tech headlines focus on the latest AI breakthroughs, traditional industries, often overlooked by software talent, present untapped potential. One such industry is the physical storage space industry – a decidedly unsexy business that's been around since ancient times, yet remains as essential as ever. Unlike digital services that risk AI disruption, you can't digitize your furniture or holiday decorations. This creates an interesting opportunity: bringing the now cheap, but high-quality software efficiency to a business that will always need atoms, not just bits.
While many traditional industries are ripe for software modernization, physical storage stands out as particularly compelling. Not only does it have natural defenses against AI commoditization, but it also shares many characteristics with the SaaS business model that tech investors have come to love.
The Current Analysis
Let's compare it to the economics of SaaS businesses – the darling of the tech industry for the past two decades. SaaS companies like Salesforce report operating margins of 3.3% GAAP and 22.5% non-GAAP in FY23, Zoom at 5.6% GAAP and 35.9% non-GAAP in FY23, and Microsoft at 35.6% GAAP after factoring in all operating costs including sales, marketing, R&D, and corporate overhead. These numbers tell a story of businesses that, despite their "software margins," spend heavily to maintain growth and fight competition.
For storage businesses, we need to be careful with comparisons. Public Storage's operating margin was around 50.88% in 2023 after including all corporate expenses (source)., which is competitive with the high-end margins of mature SaaS companies like Microsoft.
What makes this particularly interesting is the cost structure: while SaaS companies spend heavily on R&D and customer acquisition (Salesforce spent 44% of revenue on sales and marketing in 2023), storage businesses maintain strong margins with minimal marketing spend and virtually no R&D costs. Their primary expenses are property maintenance and staff, which remain relatively stable year over year.
What's even more compelling is the stability of these economics over time. While SaaS companies face constant pressure to innovate and spend more on customer acquisition, storage businesses have demonstrated remarkable resilience. During the 2008 financial crisis, national self-storage occupancy rates experienced lows but remained above 82%. In 2020's pandemic, the self-storage sector was one of the few real estate segments that maintained steady revenue and margins. This stability stems from the fundamental nature of the business – people's need for storage tends to increase during both economic expansions (more consumption) and contractions (downsizing). Compare this to the current SaaS landscape, where companies face a double threat: rising customer acquisition costs and increasing pressure from AI commoditization.
The Opportunity
The opportunity becomes clearer when looking at MakeSpace, a notable attempt to modernize the storage industry. Founded in 2013, MakeSpace raised over $133 million in venture funding trying to build a "tech-enabled" storage company. Their vision was compelling: replace the traditional self-storage model with a full-service solution including pickup, photo cataloging, and on-demand delivery, all managed through a mobile app. By 2019, they had expanded to 31 markets in North America.
However, despite the strong growth and significant funding, MakeSpace was eventually acquired by Clutter in 2022 – likely a less-than-ideal outcome for investors given the quiet nature of the deal. Most people might look at this as evidence that modernizing storage doesn't work, but I see it differently. MakeSpace's story is a classic case of venture-scale overhead meeting a business that needed capital efficiency. They built impressive technology and achieved significant scale, but the high burn rate from rapid expansion and heavy operational costs ultimately proved unsustainable.
The mission here, in a post-AI world, is to build MakeSpace 2.0 with a fraction of the overhead. Modern development tools and AI-powered automation can deliver the same (or better) customer experience at a fraction of the development cost. The beauty of storage is that it's not a winner-take-all market – you don't need venture scale to build a highly profitable business. A focused, capital-efficient operation could generate millions in stable profits while being immune to the AI disruption facing pure software businesses.
If you look at any storage company website today, you'll still see landing pages that look like they're from the 90s – no price transparency, just phone numbers and quote forms. The industry is ready for modernization, but it needs to be done with capital efficiency in mind. As an indie hacker and software engineer, I believe building a modern storage company with today's tech stack is as safe of a bet as they come.
In my next post, I'll break down the specific technical and operational approaches I'm planning to take. The goal isn't to reinvent storage – it's to bring much-needed modernization to an industry that's proven its staying power.
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