By being "better" than the (FOSS) competition, even if only for some narrowly scoped use cases. Maybe there is a market for privacy products that allows you to make some money. They seem to be focused on privately storing and sharing documents and other files. What FOSS competition is there that just works? Signal and matrix have very limited UI/UX for that use case, and they also severely limit file sizes (100 MB I think, which is nothing if you share a 4K video of the family singing Happy Birthday for grandma). Signal also does not really work on desktop, and not at all without a phone. What else is there? dropbox and google drive and amazon fail on the privacy aspect, mega.nz is too shady both in history and in current business practices. Most other competitors do not really have sharing or fail the privacy bit, and the other open source "apps" usually require you setting up some infrastructure, which won't work for most people as they lack the skills to do so and/or motivation to go through the hassle of maintaining such a setup[1].
They also try to be kinda snapchat with self-destructing file shares. That this is impossible at the very least thanks to the analog hole is a given, but at least they mention that and mention how they intent to fight it (by using watermarks to discourage people from screenshots, etc). They seem to overstate their capabilities in their main marketing material, tho. They are a bit sparse on the details and very "marketingey" - which is understandable given the target audience of this campaign - but they promise a proper white paper and open source (not necessarily free) code soon.
All I see is that they have a kickstarter for a measly $150K, not really VC funding? So "make a profit for investors" might be a kind non-goal at least for now. It doesn't sound like they aim to be the next unicorn, just to be sustainable and maybe eventually make the major investors their money back and then some.
I wouldn't call this thing "fishy". It has a high likelihood of failure in the market and/or not quite delivering on the promises, sure, but that's true for all early startups. But they might come out with a real product valuable enough for some niche of people to pay for it and sustain it.
The Smarter Every Day guy also put his reputation on the line. He doesn't seem stupid enough to back complete vaporware or worse, grab the money and run. His reputation is likely more valuable mid to long term than the $500K (of $150K they asked for).
My personal guess: it will fail to be big (the space is too crowded in "good enough" apps, and they will have a hard time building enough network effect that their "sharing files" mission requires), it will fail to deliver everything they aspire to deliver, but they will deliver something that a niche of people will like and use. If that will be enough to sustain the thing... maybe not. They kinda have to go as a freemium app, like lastpass or mega.nz or protonmail to even have a chance to build up momentum, or find themselves some "sugardaddies" and "sugarmommies" as signal did or mozilla did (tho the latter is in trouble now thanks to the codependence - as well as bad management). They could even become a mega or even a dropbox competitor. Or they will fail to acquire enough users and fade away or have to pivot to a secure and private file management/backup solution, and still face a lot of competitors.
[1] Obligatory: https://news.ycombinator.com/item?id=8863