CityReach International yesterday underlined burgeoning investor interest in secure internet exchanges, the bunkers that provide a secure environment in which to house the networking and telecoms equipment that drives the web, by announcing a £100m fundraising.
The warehouse style units are the internet revolution's equivalent of the dark satanic mills of the industrial revolution - and investors cannot get enough of them.
CityReach's latest investment round was led by Investcorp and included the billionaire Microsoft co-founder, Paul Allen's Vulcan Ventures. The British firm has raised around £190m since July and a flotation is likely to follow by next spring.
CityReach is operating in one of the fastest growing internet spaces. Goldman Sachs estimates that the European market for co-location and basic support services will reach $6.7bn (£4.6bn) by 2005. Web hosting will be worth a further $16.1bn.
Inevitably several internet exchange - or "internet hotel" - firms are battling to build the biggest and best centres in Europe's leading cities.
It is a race already well under way in the United States and one that has helped transform the likes of Exodus into a $27.3bn concern in four years.
By the end of 2001, CityReach plans to have 20 centres up and running in cities including London, Amsterdam, Berlin, Stockholm, Paris and Hamburg. Telecity, which is valued at £1.6bn after an IPO on the London Stock Exchange in June, is already running nine and has signed leases on properties in Paris, Munich, Brussels and Barcelona. Goldman reckons Telecity will have revenue of £624m by 2005.
Demand for data centre services is being driven by several factors. European internet growth is accelerating as the cost of bandwidth falls, more people and businesses come online and the European telecoms market is liberalised.
CityReach takes a "modular" and almost militaristic approach to construction, containerising its generators and air conditioning units at an off-site location in the Netherlands and simply dropping them into place by crane. A 150,000sq ft facility can be built from scratch in six months for around £20m.
Visitors to CityReach's internet hotel on the outskirts of Schipol airport in Amsterdam face a daunting check-in at reception. Passport identification is needed, cars are searched for bombs and visitors must pass through metal detectors. Inside, CCTV cameras cover every angle and infrared alarms are triggered if a ceiling or floor tile is moved.
Security has to be high: CityReach guarantees customers that their servers will be active 99.9999% of the time. "If the servers are down for more than eight minutes in any one year customers are entitled to claim some of their money back," said its chief financial officer, James Lewisohn.
The race to build exchanges could, however, be stalled by a lack of power, Mr Lewisohn warned. Each server consumes large quantities of electricity and has to be constantly cooled by chilled water systems.
Mr Lewisohn said that Britain could miss out on hundreds of millions of pounds of new economy investment if power firms did not themselves reverse years of underinvestment in generating capacity.
"The internet has been a toytown in the first few years of its genesis. Unless we can guarantee the internet won't fall over and connections are constant, like telephones, it will be just like CB radio."
