Perhaps half the reason they kept asking about the business model / trying to compare it to Dropbox was that they were trying to evaluate whether they had a potentially billion dollar + company on their hands, or a niche nice little side business.
It has been discussed in detail in one of PG's essays [1] about how it's only the big wins that matter to them these days and trying to determine whether the company has the chance to become that big is all part of the problem.
The fact that you didn't get into Y Combinator shouldn't have stopped you continuing with your idea. It is a problem that needs a solution and your solution may have ended up being a multi million dollar idea which would have given you both great success. The problem is, the start up space these days and incubators in particular are on the hunt for the billion dollar ideas - thus they can gamble on many, for the few successes to help break even.
At the end of the day, you guys seem really switched on and the effort / level of detail you went through suggests you are capable of success - just potentially you need to re apply with a bigger idea next time, after reading PG's 'Black Swan' essay to understand what they're wanting to hear you pitch.
I think ultimately the problem was centering their 'solution' around offsite backup. Most people don't see it as a solution to a real problem, something pressing, but rather as prevention that they might get around to having. Dropbox, on the other hand, solved from day one the nagging problem of syncing between devices, and went further to solve file sharing among people.
It has been discussed in detail in one of PG's essays [1] about how it's only the big wins that matter to them these days and trying to determine whether the company has the chance to become that big is all part of the problem.
The fact that you didn't get into Y Combinator shouldn't have stopped you continuing with your idea. It is a problem that needs a solution and your solution may have ended up being a multi million dollar idea which would have given you both great success. The problem is, the start up space these days and incubators in particular are on the hunt for the billion dollar ideas - thus they can gamble on many, for the few successes to help break even.
At the end of the day, you guys seem really switched on and the effort / level of detail you went through suggests you are capable of success - just potentially you need to re apply with a bigger idea next time, after reading PG's 'Black Swan' essay to understand what they're wanting to hear you pitch.
[1] http://paulgraham.com/swan.html