Yes, the backup location will typically have to large enough to be able to store the entire contents of the My Cloud drive. If you have 1TB stored on the My Cloud you will need at lest a 1TB drive or backup location. Generally one would get a USB drive the same size or larger than the size of the My Cloud drive.
One could use SSH and CRON to create a more selective backup of files and folders than what the Backup/Safepont feature offers. There is some discussion on this unofficial option in the following tread:
See the My Cloud User Manual for more information on attaching a USB drive to the USB port on the back of the My Cloud.
