Attracting Investors: What Colocation Providers Need to Know

Written By: Steve Wallage
Steve Wallage, Managing Director of BroadGroup Consulting, is the featured speaker in the Digital International Colocation Club webcast taking place March 14 at 10:00 am ET. 

BroadGroup Consulting has been focused on the colocation market for over 10 years, therefore we were delighted when Schneider Electric asked us to present to colocation providers on best practices in attracting investors. Having completed more the 30 evaluations of colocation providers for investors, we have a lot to share – the most important considerations and best practices, along with actual examples of where the project led to investment and others where the investor chose to walk away.

Will demand for colocation providers fade?

Demand is the obvious place to start and many investors are concerned that current hyperscale cloud demand will fade away or technology will evolve to make current data centers obsolete. There is a lot of innovation in the market, but users want proven and reliable data centers. And there is no shortage of drivers on demand from Bitcoin to 5G to Industry 4.0 to social media. Something we see as particularly impressive is governmental efforts and plans, particularly in Asian markets, to stimulate the digital economy and their long-term goals such as Digital India or Saudi Vision 2030.

But what investors want to know is will this specific business and financial plan work? There are many aspects to this but in this presentation we will focus on five areas; people, competitive positioning, revenue and margin forecasts, getting cloud right and future opportunities, growth and potential investor exit.

Across each of these five areas, we will provide at least three examples of what we have seen that works, and, unfortunately, what hasn’t worked.

Best Practices for Colocation Providers Seeking Investment

Take the area of cloud. We have typically seen the most success with those companies which really understood their customers, and offered services where they could offer real and quantifiable payback as well as something that was defendable in the marketplace. Examples include automated services, specific offerings such as DRaaS, and cloud offerings customized for a particular vertical market served by that company.

Examples which haven’t worked include competing against the scale and breadth of the hyperscale cloud players, offering cloud services without the required skills and experience, and not making the required investments. Examples we have seen of this include using the co-location salespeople to sell cloud services, or assuming existing co-location players could be easily upsold to cloud.

Finding out current customer and prospect views is often a critical element of our commercial due diligence work. How do they use the company today, and how might they use it in the future? What do they see as its strengths and weaknesses? How do they rate it against competitors? Such insights from customers are incredibly useful in not just analysing the company today, but assessing the success of its future strategy.

Attract the RIGHT type of investor

We will finish the webcast talking about an issue that could merit a webcast of its own; getting the right type of investor on board. We are still amazed by the variety of investors who look at the data center market, and their differences in approach. These differences include not just attitude to risk and expected return, but timing, exit strategy, interaction with their investments, and fundamental approach to the sector.

Hosted by Schneider Electric, Digital ICC brings colocation providers insights from leading industry voices on business and technology topics for colocation providers. Registration for Digital ICC events are always free. Register for this webcast.

Steve WallageSteve Wallage is Managing Director of BroadGroup Consulting. Steve undertakes strategic consulting projects within the data centre sector, as well as telecoms and cloud. For investors, as well as being a strategic advisor to many of the key investors in the sector, he has conducted over 30 commercial due diligence exercises in this market.

He has over 25 years experience in the telecoms, IT and data centre markets globally, including senior roles with Gartner Group, IDC, CGI and IBM. Steve is a regular presenter at major industry events and regular contributor to media covering the sector. He has also regularly appeared as a sector expert on business TV.

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