Former Pipe Networks chief Bevan Slattery tells – why I’m going back to the ASX with my new venture

Former Pipe Networks chief executive Bevan Slattery says he moved from his former company to new venture NextDC without even pausing for a holiday because he’s determined to capitalise on the surging demand for data services.

Data centre company NextDC is set to float on the Australian Securities Exchange in mid-December, raising $40 million to spend on state-of-the-art equipment.

The company is expected to have a market capitalisation of $80 million upon listing and Slattery, who will retain a 50% stake, says his level of personal involvement will remain high.

“To build a successful data centre you need a couple of key ingredients, and one is money. It’s harder to get money today, and the banks don’t like to lend to data centres so much,” Slattery says.

“I plan to be quite personally involved with the business, especially in building strong relationships with network providers. The two things that make data centres work are corporate clients, and relationships with content providers. I want to be involved in bringing those people on board.”

But the new venture comes just after Slattery resigned his post at Pipe Networks with virtually no time wasted in-between. He argues speed is a necessity.

“The reason I’m going straight from Pipe to this is because of the demand I see for data centres and the opportunity still exists. I really want to get working on this quickly.”

“I believe the float is the easier approach to take. There are a substantial amount of shareholders who did very well under Pipe, and I think there are a number of institutions keen to support my next venture. It’s easier than getting external equity.”

NextDC points to Frost & Sullivan research which shows that 90% of major data centres in the Asia-Pacific region are running at close to 90% capacity. Slattery says the growth of cloud-based apps and other data-intensive services only proves the need for data centres will increase.

Slattery also says he will be quite personally involved with the business, due to his own $20 million investment and strong relationships with content providers and prospective customers. And while his stake will drop to 50% after the float, he says this gives him a large amount of control.

“I’m also going to be quite personally involved because it’s all about trust and security with data centres. It’s very important, I believe, because these are my centres, so I need to be the one going out and giving confidence to people. My name and reputation are involved in this.”

Slattery says he actually planned to start creating a data centre in 2008, but was stopped when the financial crisis made it harder to gain credit for what banks perceived as a high-risk venture.

“I had approval from Pipe to do that, but after the GFC happened I was so focused on Pipe and what was happening there. I’ve wanted to do this for a number of years, and really, I’m surprised the opportunity is still in the market.”

The largest problem, he says, is capital. Data centres are extremely capital intensive due to the need for high-end, reliable equipment. Along with Slattery’s $20 million, the company has taken out a $40 million debt facility along with the $40 million it hopes to raise in the IPO.

“I demonstrated my involvement by putting in $20 million of my own money, that was the first step. The second step I think is getting the right team together, because I think having good people servicing the demand for data centres is important.”

NextDC counts former Pipe director Greg Baynton as a board member, along with the company’s former chief financial officer Robin Khuda. Symantec vice president and managing director for the Pacific region Craig Scroggie has joined as a non-executive director.

Slattery says NextDC will be targeting “anyone who needs” data services, but will especially target systems integrators and cloud-based application providers. “I think there is a lot of demand there and that is going to grow,” he says.

The company said in its prospectus it does not expect to pay a dividend for the 2011 financial year. Slattery also said he could not comment on when he believes the company will become profitable.