Six startups to watch
07 November 2013 | Kavit Majithia
As operators continue to look at ways to innovate, startups across the globe are crying out for hefty carrier investment. Capacity looks at six startups to watch.
Broadband group Hyperoptic has gone from strength to strength in the UK after being founded in 2010 as an ISP, with the startup receiving a £50 million cash injection in May this year.
The investment – made by veteran businessman George Soros – will further increase the company’s aim of providing FTTH services in the UK. As well as expanding its network, the company will now also target corporate customers and introduce an internet TV service.
The startup was originally founded by university friends Boris Ivanovic and Dana Tobak, with the view of increasing infrastructure for broadband in the UK. The two entrepreneurs had money to invest in the business following the successful sale of another startup company, Be Broadband, which was sold to O2 for £50 million in 2005.
Soros’ investment increases the company’s capital available by more than six times, with a business strategy in place to cover 500,000 homes in three years, covering 30 British cities.
At present, Hyperoptic covers 20,000 homes, with a business model largely centred on covering a large area to provide fibre services, while ensuring that economies of scale justify the level of investment.
It has taken the UK infrastructure market by storm since its launch, as the company claims to offer consumers internet speeds of 1Gbps – 10 times faster than packages from behemoths BT and Virgin Media. Hyperoptic differentiates from BT by offering direct access to the home, whereas BT’s superfast broadband upgrade provides the final connectivity link through traditional copper phone lines, which reduces internet speeds.
It appears that Soros and his private equity fund Quantum Strategic Partners has been impressed by the infrastructure effort. Could Ivanovic and Tobak be tempted by a second buyout?
Canadian startup wireless operator Public Mobile is aiming to establish itself as the fourth-largest player in the country, after receiving lucrative backing from two private equity firms in June this year.
The company – which is competing with Mobilicity and WIND Mobile in the highly competitive wireless market – has constantly been touted as a consolidation prospect with its rivals, particularly after the country’s industry body was accused of showing bias to the top three players in the market; TELUS, Bell and Rogers Communications.
Public Mobile, Mobilicity and WIND Mobile subsequently withdrew from the industry body, the Canadian Wireless Telecommunications Association, in April this year.
Public Mobile has been backed by New York-based Cartesian Capital and Thomvest Seed Capital – owned by a member of the Thomson family – since the controversy, and it could well provide the platform for it to become a larger player.
Thomvest has now reportedly become the controlling shareholder in the company, and its fortunes have dramatically changed from the start of the year. CEO Alek Krstajic has said he would like to buy out both Mobilicity and WIND Mobile in a bid to provide a more credible market challenge.
Public Mobile has struggled to turn a profit since its launch, when it invested $52 million in Canada’s spectrum auction, but its recent private equity backing will last until it is cash flow positive, which could be by the end of 2014. Thomvest is also an investor that is renowned for sticking around.
With 250,000 subscribers, the company largely operates in the greater Toronto area, areas of southern Ontario and in greater Montreal. Unlike its rivals, Public Mobile has no restrictions on its spectrum ownership or the radio waves it operates.
Krstajic also reportedly has plans to bid on 700MHz spectrum next year, to build out faster networks, while the company’s CEO is also looking to acquire spectrum in Quebec and become a true player across the national market.
Global Applications and Platforms
Australian operator Telstra has joined the growing number of carriers looking to take on the OTT players at their own game. At the start of the year, the company launched Global Applications and Platforms, a software startup it hopes will be a major revenue driver over the coming years, as it looks to offset fixed-line business losses.
Tasked with developing mobile phone applications and services for consumer and businesses, the unit sits under Telstra’s innovation, products and marketing division, but also unusually still operates as a startup company. This is so the company can leverage the broader organisation’s resources, while ensuring it remains nimble and free from the incumbent’s bureaucratic ways.
Heading up the company is executive director Charlotte Yarkoni, who previously held senior leadership roles at EMC and VMware. Yarkoni also brings experience with cloud-based applications from her time in the US with AT&T. Telstra has made clear it wants Global Applications and Platforms to eventually have an international presence.
“Importantly, it will have global accountability, drawing from the best in the world and tailoring solutions for the local market and abroad,” says Kate McKenzie, group MD, innovation, products and marketing, Telstra.
For the time being, however, the company will be built from the bottom up over the next three years, leveraging the skill sets of existing employees while bringing in some new talent. The company has no small task ahead, as it is charged with unearthing new opportunities in the software layer.
“Telstra is moving from providing mobile and internet services to encompassing applications and integrated services. This new software-defined world presents many opportunities, not least the ability to move faster,” surmised McKenzie.
NxtGen Datacenter & Cloud Technologies
Bangalore-based IT infrastructure service provider NxtGen Datacenter & Cloud Technologies received a timely boost of $8.8 million in funding this summer from Intel Capital, the global investment and mergers & acquisitions (M&A) arm of Intel Corporation.
The funds will enable the startup to complete its much-anticipated high-density data centre in Bangalore, which is now expected to be operational by March 2014. The company claims the facility will become the first data centre in the country designed specifically for the cloud, and according to sources has secured 20MW of power for the Tier II site, offering 12kVA per rack.
Bangalore is well positioned to capitalise on growing demand for data centre and storage services in India. The market used to be dominated by the likes of Tata Communications, Airtel and Reliance, but large corporations are increasingly looking to outsource the storage of basic data.
NxtGen Datacenter & Cloud Technologies was founded by the present MD and CEO AS Rajgopal in May 2012. The startup focusses on delivering a central IT platform as a service to enterprises, and is said to provide full-spectrum data centre and enterprise cloud services from its own high-density data centre facilities and deploying centrally managed, on-premise data centres at customer locations.
The company already operates a cloud-based data centre in Bangalore and is thought to be launching more in India, the Middle East and Sri Lanka. It is also said to be eyeing expansion into south east Asian markets.
Expanding at a considerable pace, the startup also extended its enterprise cloud across multiple platforms this September, including hosting enterprise applications, e-commerce, gaming and movie delivery.
Wayra does not operate as a traditional startup company, but the Telefónica-owned initiative looks to promote startup investment in markets it operates in, particularly in the telecoms and IT sectors.
It has just announced that entrepreneurs have secured investments totalling just under €30 million since the programme launched in April 2011, and operates in 12 different countries across Europe and Latin America. These include Argentina, Brazil, Chile, Colombia, Spain, Mexico, Peru, Venezuela, the UK, Ireland, Germany and the Czech Republic.
Serving as a “startup accelerator”, the programme has attracted 295 companies so far, with 274 still in business. Telefónica has made an investment of approximately €9.4 million in the companies, with €20 million raised in funding rounds from other investors.
The company is looking to develop companies that fit the Silicon Valley image in markets where it is present, and Wayra chooses a number of companies to take forward in a rigorous selection process.
Wayra provides a range of resources to ensure that startups are successful, and those that are taken forward are often provided with financing in exchange for a 10% share for Telefónica. The company also provides management, technical expertise and places to work.
One of its most recent investments has come in the shape of a company called Taskhub. The technology startup provides a range of mobile services, predominately for outsourcing, with Telefónica claiming it is exactly the type of company Wayra was formed to develop.
Martin Harriman, head of Telefónica Digital, UK and Ireland, believes companies like Taskhub could be integrated into the operator’s worldwide business.
“[It promotes] more mobile services that take the carrier away from being a simple ‘dumb pipe’, and instead [it becomes] a provider of innovative technology and services to its users,” Harriman says.
As carriers continue to look for ways to innovate, the carrier “startup accelerator” may become still more popular in the near future.
News of Orixcom’s official launch was exclusively broken by Capacity at the Capacity Middle East conference in March of this year.
The company has been set up by the former du EVP for investments (special projects), Andrew Grenville, in order to tap into growing demand for efficient international access to, from and around the Middle East and Africa.
Headquartered in the UK and with an office in Dubai, the company is said to offer a range of services to its customers, including global Ethernet, IP transit, IP exchange, co-location and virtual PoP.
Grenville was inspired to launch Orixcom on the back of the Datamena project, which was established by his former employer du and data centre partner Equinix in October last year. Serving as a carrier-neutral international transit and content hub, Datamena could usher a new era of connectivity between international carriers and enterprises in the Middle East.
By June, Orixcom had joined Datamena’s customer ecosystem, allowing the company to connect with its partners and customers though the UAE-IX.
“Orixcom is enabling its customers to be part of the transformation of the UAE into an international digital hub,” says Grenville.