Data centre provider NextDC, the cloud venture run by ex-Pipe Networks chief Bevan Slattery, has just completed yet another capital raising only months after it said it wouldn’t need any more money, as it continues to pursue rapid expansion.
Slattery has defended the company’s actions, saying it needs to build quickly (the founder has previously explained the requirements of data centres means they will naturally require quite a lot of capital to get started).
The expansion comes as millions are being poured into data centres by major companies including HP and, according to some rumours, Amazon, which are moving to invest in cloud-based technologies as demand grows among both corporates and SMEs.
Telsyte research director Foad Fadaghi says these data centres are long-term investments, and the need for capital is a natural requirement.
“It takes time to build these data centres, and often they can be completed at a time when the market is acting soft, and so forth. Data centres are really a long-term investment.”
“There aren’t going to be any quick wins, but as the market picks up again, we’ll see many companies that have built data centres execute their strategies.”
NextDC announced this morning the $50 million raising had taken place, allowing it “to successfully undertake its expansion and growth programs as recently announced to the market”.
Slattery said in a statement that the company will have over $150 million equity and $95 million in cash, to help support its current data centre projects in Sydney, Melbourne, Brisbane, Canberra and Perth.
However, earlier this year Slattery told the Australian Financial Review that “it’s absolutely not our intention to do any capital raising for some time… dilution is something I’m very mindful of because I’m the one being diluted the most.”
Slattery was contacted this morning by SmartCompany, but no reply was received before publication.
NextDC now has nearly $100 million in cash, but is not yet profitable.
However, Fadaghi says investors simply need to wait, as the benefits from these types of large investments will take years to materialise.
“In the past we’ve seen a lack of capacity, and now we’re going into maybe a phase of excess capacity for hosting. It’s very interesting, but it’s a long-term investment.”
Long-term investors are going to benefit from that, rather than just looking for a quick win. This is one reason why many companies contemplating data centres are actually holding back, thinking it may just be a cyclical thing.”
Fadaghi says it makes sense for NextDC to be raising capital to complete their strategy, saying that “the only problem is that it takes time to build them.”
“What we’re seeing here being built is a consequence of what happened in the past two years, when it was a real lack of capacity.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
