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You are here: Home / Edge Computing / With New Backers, EdgeConneX Ready to Be a Builder and Buyer

With New Backers, EdgeConneX Ready to Be a Builder and Buyer

By Rich Miller - August 24, 2020 Leave a Comment

With New Backers, EdgeConneX Ready to Be a Builder and Buyer

Cabinets inside an EdgeConneX data center. (Image: EdgeConneX)

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In today’s data center industry, scalability is measured in size and speed, but also in economics. EdgeConneX CEO Randy Brouckman believes his company’s acquisition bv EQT Infrastructure will deliver benefits in all of those metrics.

The acquisition, which was announced last week, features many of the familiar elements of data center M&A – including the chance to monetize a major success story and deliver a return for investors. But is also reflects the changing landscape for digital infrastructure, with large global investors leading a movement to industrialize the delivery of data center capacity.

This trend is being driven by large players like EQT, which has the financial strength to offer advantages to even an experienced player like EdgeConneX.

“The good news is that our strategy has worked really well,” said Brouckman. “We intend to do more, and do more faster. I think this capital is going to allow us to do a few things that we hadn’t been able to do before. We’ll be able to be a little more proactive on land banking and power banking, so we can do more planning with our customers.

“I think this also gives us an opportunity to be more active in strategic acquisitions,” he added. “Our growth has principally been organic. That’ll still be the majority of our growth, but where it makes sense, we will take advantage of some acquisitions.”

Those deals could provide entry into new geographic markets, or “customer diversity” to gain strategic partners. EdgeConneX has always worked closely with its largest customers, including content providers and cloud platforms, and typically lines up an anchor tenant before commencing a new project.

“I don’t think you’ll see us speculatively building data centers,” said Brouckman. “That’s not who we are. We’re going to continue to focus in on location-sensitive data centers, and the cloud and content-enabled ecosystem.

Leading on The Edge

EdgeConneX has been a leading player in edge computing, building data centers at key network “pain points” closer to users to improve performance – solving the “Netflix problem” for network operators. It designed its facilities to support high-density racks and operate without on-site staff.

The company’s streamlined construction methodology, which allowed it to deploy 25 data centers in less than two years, has helped the company build a healthy business with hyperscale operators that covet accelerated speed-to-market.

EQT is an infrastructure fund based in Sweden that has been an active investor in digital assets, and hopes to accelerate the growth of EdgeConneX. The deal with EQT begins a new chapter in a journey that has focused primarily on data centers in regional markets. As its name implies, EdgeConneX had edge content delivery in its DNA, well before edge computing was the new hotness.

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“I remember when we got going back in 2009 and 2010, and we were preaching about the need for the edge, and there weren’t many believers back then,” said Brouckman. “Now it seems like everybody has copied our website and calls it a new idea. But there’s only one original here.”

Although there are now more competitors, there is also a larger market for edge services.

“It’s all about bringing these things closer to the eyeballs closer to the enterprises and where they’re using it,” said Phillip Marangella, Chief Marketing Officer for EdgeConneX. “You can’t (deliver low-latency performance) from a distance anymore. Our model – what we have built in the US – will certainly be replicated around the world. It’s a huge upside opportunity.”

Why Capital Matters, Now More Than Ever

That’s where capital helps, and EQT’s financial strength can make a difference.

“The speed with which we can enter markets is probably going to be accelerated a bit,” said Brouckman. “I think this is going to give us the firepower we need to get in front of some of those rapid expansions. Some of the North American markets that used to be small markets have become big compute centers. Think about Portland, think about Phoenix, think about Atlanta.

“Working with EQT will afford us the opportunity to turn some of those ‘edge’ markets into those larger, more substantial campuses,” he said. “You’re going to see us able to better fulfill those. Demand is outstripping supply in many of the markets we’re in – and frankly, in some of the markets we created.”

Much of that growth is driven by hyperscale operators. EdgeConneX has been successful in the hyperscale sector, but these deals have also become more competitive, especially with large infrastructure investors who can provide cheaper capital and supply-chain expertise. Having a large infrastructure fund as a backer ensures a level playing field.

“We thought it was the right capital for this time in the growth of the industry,” said Brouckman. “I think to be to be competitive, both in organic expansion as well as in our strategic acquisitions, it would be tough to compete using non-infrastructure capital. There was no reason not to be more competitive.

“We have the right cost of capital focused on digital infrastructure, and EQT understands the data center space, the fiber space, and the tower space,” he added. “They truly understand all the elements of digital infrastructure.”

Living on the Edge, Globally

EdgeConneX has always been location-sensitive, and that focus will continue and extend to new geographies.

“Outside of the US, it is absolutely clear to me that the edge is expanding quickly right now,” said Brouckman. “You’ll see us entering new edge markets in both South America and Europe in the not too distant future. I think the untapped opportunity for us has been Asia. It’s been on our radar screen, but it takes a takes fresh investment to get there and do it properly. That is obviously a very large market we have not yet penetrated.”

While there are new opportunities, most things about EdgeConneX will remain familiar.

“It’s going to be the same leadership team, the same employees, supporting the same customers,” said Brouckman. “Hopefully we’re able to get them to more places, going deeper into more markets, so that they can get closer and continue to create better user experiences for their customers.

“We have fresh, enthusiastic capital, with a fund that understands digital infrastructure,” he said. “That’s a special place to be.”

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Tagged With: Edge Data Centers, EdgeConneX, EQT, Infrastructure Funds

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About Rich Miller

I write about the places where the Internet lives, telling the story of data centers and the people who build them. I founded Data Center Knowledge, the data center industry's leading news site. Now I'm exploring the future of cloud computing at Data Center Frontier.

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