Kory Gill’s “a-ha” moment came in the form of a lightning bolt that struck his Seattle home and fried his computers. In the aftermath, his wife’s main concern was whether their digitally stored family photos had survived the blast.

“What more of a sign do you need to go start this company?” Gill recalled his wife asking him, who used the scare to leave a 20-year career at Microsoft (MSFT.O) and launch his own online backup company.

Three years later (Reuters first interviewed Gill in 2009), Gill and co-founder Marius Nita – a former Microsoft colleague – are seeing some traction with Newline Software Inc, having launched the first version of their online storage product, Exact, into the market in August.

Gill told Reuters they have just closed their latest financing round – Newline’s third – to bring their total funding to $1.3 million. The money, raised from friends and family, will be spent on improving the product, growing the brand and building a new software platform that will allow Newline to encrypt every piece of data stored online, or in “the cloud,” said Gill.

The platform called OPTIC (Online Privacy Technology In the Cloud) is an application programming interface (API) that Gill hopes will give Newline a competitive advantage over much larger rivals such as Carbonite and Mozy.

“There are a lot of online backup products out there so we needed a way to differentiate ourselves,” said Gill, referring to OPTIC as an “index to encrypt data in the cloud.”

Newline is really two different companies: an online data storage service (Exact) where users store files and a software program (OPTIC) that is able to protect and archive sensitive data stored anywhere on the Web.