 Welcome to JSA TV Europe together with the green data movement for this quarter's live event focused on European digital infrastructure sustainability I'm Jean-Marc Lime and joining me today is Karen Bass CEO of IAACs Acquisition and Karen, Pleasure seeing you again Always great to see you down. Always Thank you. So sustainability in the digital infrastructure most specifically data centers This is a massive topic that no matter where you go in the world people talk about it Especially in Europe. It has become tremendously big It was especially over the COVID period and also in recent months after some more widely Consumed documentaries made by some broadcasters in Europe If we're looking to investment financing investments towards sustainable data centers What would you say are the major trends defining the space this year? I think it's a really interesting topic and as you say it's becoming it's becoming the hot topic I think you have to go back sort of 15 20 years to see where we've come from as a sector And I kind of think we've if I look at a sector we we have this huge need And this need for what we do is growing every day. So whether it's data for healthcare, whether it's Netflix whether it's generative AI whatever There's this huge need for computer power and storage In the last 15 20 years as well, we've had better and better technology to deliver that So whether it's you know We got rid of certain constraints on how much computing power you can have a box or how much heating you can have around a rack All of those things have allowed us speed to market to hit this need and You can argue that actually a lot of that happened with no consequence of sustainability or no thought to stay in this Village P and that's probably unfair to a lot of people But actually a lot of it did and our focus on power was around cost and it was a selfish, you know Us as a business let's make more profit and allow our customers to make profit I think that is absolutely changing. So over the last I would say really the last three or four years Sustainability has gone from being passion product projects of people who really cared who actually wanted to save the climate and the and the planet And we've gone from true focus And I say true with a slight cynicism I think we're still in a stage where some people do this because they have to And some people do this because they really really believe in it and and I have to I have to say is a great thing actually Forced to do something good is not a bad place to be But have to is coming from the ultimate investors. So it's the LPs within the PE houses It's the LPs behind the bank or shareholders behind the banks, etc It's being forced down through the the financial system And it's really coming from all of our customers. So whether again, whether it's media customers Whether it's crypto whatever who are over customers the hyperscalers all of they all of them Sorry, I'm getting that pressure from the ultimate users and the consumers So all of that said, I think we created over the last 15 20 years this kind of hungry sector machine or animal If you like that needed more and more cash And as investors, you know the early investors into data centers almost took a risk They didn't really understand, you know, the The sector wasn't very mature as we've matured more investors have come in And and with that it's actually quite easy to go and get money. I mean, it's never easy But actually it's quite easy To go and get funding and it's almost the seller's market from a data center point of view. I can pick who my investor is Now all of that said and you put the same sustainability only you've got investors who really do care You've got data center operators who really do care And the fundamentals of any sort of you know, come back to trends in a second the fundamentals of any sector or any Partnership or any transaction to make it work. It needs to be genuinely win-win on both sides So I think what we're seeing over sort of 22 sort of last year I think a few things come together absolutely sustainability sustainability funding. So it's green bonds It's all sort of real and banks actually saying well, I'll charge you more or I'm not even going to give you Sort of a debt facility if you're not sustainable. I think that's fantastic. Again, it's that pressure and I think as a sector what's been really interesting is that we Again, we created this hungry hungry machine that needed feeding And we didn't do a mature curve like a camelback. We kind of did a giraffe Gross, you know, like a grown giraffe neck. We've gone right up there And I think over the last year or so we've sort of peaked on the top of the ear and are coming down on the head I think we're beginning to plateau And where we are and I think it's this stage now where that sustainability will become so much more of an issue Because at one day we will come down the giraffe neck or some other animal but it's Before that happens we're we're taking this shift where everyone just gets it finds themselves into the right place and the right things happening and I think One more factor that's really Important and all of this because it skews everything that goes on in the sector Is that we've got these huge be moths now We've got a real sort of polarization of size of businesses in data center, particularly so the likes of You know equinix obviously 240 or 250 data centers The likes of digital bridge who I think I've got 28 29 billion Under management whether directly or under indirectly You know just how how do you as a small player disrupt that? Can you start a new equinix? Can you start a new digital bridge? All of those things make it more complex and it means actually the smart money and a lot of the Initiatives come from those big players and therefore again, they have the benefit of that They also have a huge responsibility to do good for the whole sector and for the planet But there's quite a lot of things to Sorry, not a concise Especially about the the the newer players That's quite interesting because the ones that we've been that we've been seeing being born in europe recently Their strategy really revolves around just pure green power And that's their big differentiator and they can start afresh. They don't have to retrofit facilities They don't have anything like that. They just start afresh. I'm talking about you got start camp is in portugal You've got hyperco in finland And there's of course knowledge massive example of all this but hyperco is the newest one Over there. So that's this kind of thing. Have you heard of green shushing? green Shushing No It's so this was something I learned from paul hastings at ptc So green shushing because I think it goes Kind of in line to what you're saying about the giraffes and then starting to plateau and come down Where all this money has gone towards Sustainability I'm making sure business done green But there's been a lot of over promise and and the deliverance And now operators are starting to shush a little bit the non-results that they have Do you think that's kind of what's happening With your analogy as well or I think maybe in some places I I can see why that would be because especially people have good intentions and so they announce great things But actually execution is always harder than you think So I suspect that is happening in some places to your point in in the smaller businesses You can start from scratch and it's easier. You're not retrofitting But you know in in the days of 15 20 years ago, you could start data center business with five million Quid, but you can't do that now That's great. Not even trust lady. You know, let's go you gotta go. Well, let's go straight out there with half a billion or a billion It's it's different players the market's very different and therefore for me those leaders the big guys have got a lot of responsibility Um, we're saying that there's a lot of capital out there We are still in a position that we can kind of choose who we want to um to get the money from and who we want to give hands to um How long do you think that the the data center space has left? Um in a position like that because that's quite a good position to be and I'm sure it's not something that you have in hospitality and office to the real state It's it's very different markets though, especially after covid How how long do we have until we go into something a lot more complicated to navigate? If I had the real answers to that, I think I'd be a billionaire because that's a crystal Sadly not and uh, I'm saying you know, we work so it's a very uh Useful example of hospitality and office books Um, who knows? I mean, I think the big disruptors like the big disruptors are years away so quantum We'll disrupt us at some point, but it's not tomorrow. I think we're still in a evolution not a revolution I think that's going to be a while And I think actually the nearer term risks for businesses, whether it's financial whether it's about sustainability, whatever actually I think we We as a sector are maturing the organizations are maturing to park the new players in a moment the risks from that are And over almost too much adrenaline So if I'm an investor and I've got 20 billion 10 billion 30 billion to um deploy I'm I'm gonna have pressure to deploy I'm gonna make decisions that are a bit quick And I might deploy too much in too many places and not actually have the time or resource to make sure those businesses Are performing to really get those teams up to to scratch And as an off and similarly as an operator, I might deploy in a location like kind of regret a little bit afterwards Um, and I think also as we get bigger we get a little bit more complacent Um, you know, you kind of think we're we are a resilient sector That's why investors love us and we're proven now, you know, we're 20 30 years in But it's easy to say that risk won't happen and you know that risk review it just becomes a tick box and Oh, yeah, the debt will be fine. And actually I think we Every board needs to sit back every six months a year get an external challenge to what they're doing and say, you know Have you thought about this or you know, by the way, there's a big bear behind you and you've not even noticed um And I think and and sort of slightly more and coming back to sustainability and Us as leaders of the world and doing good things for all our stakeholders I think there's a complacency in a sector if you if you remember from your studies the Maslow hierarchy of needs Um, where you know, it's all about you've got enough food and then you've got security, etc The top of that triangle is self actualization Which is about being the best you possibly can And I think a lot of our businesses are at the top of the triangle. They're not in survival mode. They're absolutely up there and the bad side of that is you end up navel gazing you spend a huge amount of time looking at logos or You know making your sustainability policy nicer But actually they've got the resource and the ability to really go out and do huge amounts for Yeah, not just sustainability, but education diversity and inclusion effort social mobility Yeah, but it's funny that you said and I won't go into specifics of it But we have seen a lot of power points becoming a lot better um It's by power points I also mean there's a lot of internal consumption at the moment as opposed to consumption going outside of the dead holes Um into into the wider public a little bit touching on what you just said So there seems to be a much more It's us and it's internal and it's for us from us for us Kind of thing um at the moment. I think after kofi. That's kind of what happened a little bit The sector got a little bit. He closed off a little bit more than what he was before kofi He was coming down a way which was opening up and then we'd go be kind of closed off A tiny little bit Which is understandable because we all had to go in that sort of survival minute if you like decisions as well Yeah, and make good decisions, but I think when you get to a certain size It's like, you know, civil service or the nhs in the uk or big organizations. You start policing yourself And and for me, that's a risk because we've got this huge opportunity to do good for the world in so many ways I think we need to be outward looking Absolutely, um nothing you're aware from all you just said just I know we just press for time a little bit Um, if we look into who finance investment dreams this year, how do you think 2023 is going to cope with the last few record breaking years? Um, are we going to see the same amount of capital coming into into play? For instance, yesterday, we heard talk equities Um, well, it wasn't yesterday. They announced it after a few months ago, but now they've rebranded Um affirmation data centers, but they're looking at a nine billion dollar acquisition spree Um across europe, which sounds quite a lot Um, and then and like them there's a lot of companies out there. They have those kind of targets two billion three billion Um, so how how do you expect 2020 to unfold? Money-wise I expect to see some big funds still new funds or funds raising extra money I expect to see those big numbers still in 23 and I think that will continue to 24 I'm not sure What happens then because at some point, you know, we are I'm trying to use this sort of giraffe analogy. We are on that top We cannot be a forever growing giraffe up to your point. We are on the moon but it's I think we are still seeing those big funds But I think some of them will start getting scared and their LPs will get start getting scared You know, these are beautiful resilient, um businesses But there are risks. There are always risks. Um, and again going back to don't get complacent so I think we'll see that um, and I You know, when it comes down to financing, I think absolutely 2023 will Totally reinforce the sustainability message. I think we will get to a point. Maybe even in 24 25 You cannot probably even now actually in some places you cannot raise money without a true sustainability Policy that you genuinely believe in and you cannot get cheap money doing it Yeah, well in the banking space. There is one of the main topics. It's um sustainability and human capital I do very important aspects of any business if you're looking for money So you've really got to pay attention to it. Um, I was going to ask as well because I mean the world is in quite a Strange place at the moment Interesting interesting challenging space. Uh, there is a shifting global marketplace happening There's a lot of macroeconomic activity. They're going against the the tide here Um, what would you say are the major opportunities and challenges still for data centers in Europe? Um in the in the face of all this. I mean, there's recession recession fears because we aren't on session yet Um, cost of cost of living crisis Um, we just had a big scare with um, svp Um in in the past week not even a couple weeks at least like not even a week Last few days. Yes, exactly Um It's been the last few days a bit of economic fear going on at the moment, especially with uh on the venture catalyst side Especially with startups. Um, and then of course we have the awful war in ukraine We have things unfolding in china and taiwan and us How does all this play Into the the risks for the recent operators and uh, what the challenges and opportunities are out of it Yeah, I think there's a lot of factors there and Um, sometimes everything into like a too many I think sometimes, you know what you just want to keep things simple. Um, so actually if I run my business well And I've got a clear strategy and I'm aware of what's going on Actually, that's the best way to survive and to do Give my investors a good return or whatever it is. I'm trying to keep it simple I'm a big believer in kimp. It's simple. Um, and so when you look at operationally, it's you know There are more and more technologies out there allowing you to be more efficient within the data center, whether it's, you know ai analysis of the hot spots or Whatever it is. There's more and more technology out there. There are more great opportunities But it's hard to go and find a tier one. You know, it's impossible to find in europe a tier one city There's no god data centers, you know finding somewhere where there's space is different, you know Brings all sorts of other questions But um, so I think there are opportunities, but a lot of it. I think Contradictory what to I what I said earlier about, you know, we have a risk of navel gazing and looking internally Actually, sometimes the opportunity is internally is make itself more effective I don't think cost um famous last words I don't think cost of living is a big issue as as as companies we run with very few people So our payroll inflation is limited obviously power is a different thing But we should all I'm sure we're all passing through power And I think the biggest thing comes from the sector to you. You're selling too So yeah, if in like in kovat if you were selling to only retail customers You felt that but if you're more diversified and de-concentrated that's different Um Yeah, and then I think right now to your point earlier There's an opportunity now to take money that matches what you want to do Um, and that might not be there in five years time Hmm. Okay. I like the whole concept of just keep it simple. Keep it simple to carry on Could it be more for british answer? And it's not your grant because at least you didn't look away But uh garen as well, so you also have a very interesting portfolio Um of things they're involved with talk us through what you up to nowadays Um, yeah, so I kind of do three pots of things. So I X acquisition we've been looking at deals for the last couple of years and very much deal making globally Digital infrastructure slightly outside of other tech as well. That's been fantastic We have met some amazing businesses and some fabulous teams that that is opening doors to other projects And the other thing I do number two is I chair Three sort of startup scale up businesses and that's a real privilege because that's very entrepreneurial I get to see real tech in real life. So that's in house and media tech or embedded software and Attec and then last I do a lot of mentoring and coaching and a lot that's in I a entrepreneurship for example, but I'm also Up with ming in tech, which is really important to me Um, and working on social mobility with my old university, which is university of braffit You know quite quite busy but with a lot of exciting projects. Yeah Lots Yeah, and again a big focus as well on human capital, which is very important in diversifying the workforce Human capital is every any business, you know, you can someone said in fact the first bank I ever raised money with probably about 20 years ago a long time ago Said to me you can take um a really good business and ruin it with a terrible management team Or you can take a really bad business and make it amazing with a good management team Absolutely, and I think that goes not just for banking. It goes for every single company. Um, and um, I mean, I've seen that happen It's not compared notes later We must So Karen if people want to reach out to you um to hear more about what you do and see how maybe can you You can help them. How can you do that? LinkedIn is always best. So Karen back London I'm actually based between France and London as you know We met up in Paris a couple weeks ago always up for another cross line jail Yeah. Oh, yeah. Well, yeah. I mean, just let me know when you're when you're over But Karen, thank you so much for talking to me. It's always a pleasure. I'm again, I could be talking for hours and hours and hours That's my biggest problem. Um, as for your home. Thank you for watching and And for tuning into JSA tv life. Don't forget to check our social channels for more content until next time. Happy networking