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Datacentre, Datacentred, telecity, Mike Kelly, MediaCity, dotcom

Telecity founder back with new venture

The founder of Telecity has secured funding from venture capitalist Jon Moulton for his return to the data centre market almost a decade after falling victim to the dotcom bust.

Mike Kelly has secured initial funding for the first data centre, based in Manchester’s MediaCityUK, which will be followed by a further seven centres in large European cities.

University of Manchester academic Mr Kelly became a dotcom darling when he launched Telecity in 1998, with backing from 3i, to create a pan-European network of data centres to host and route internet traffic.

Mr Kelly helped build Telecity to a market capitalisation of £1bn in the dotcom boom before the crash cut demand for data outsourcing services, which led to difficulties for Telecity as well as rival groups. Telecity was taken private for £58m in 2005, five years after floating on the main market. It returned to the stock market with a listing two years later.

The sector has since seen a recovery, with valuations for data centres rising on the back of increasing demand by companies to move their data and processing work off-site. Telecity is now valued at about £1.4bn.

Mr Kelly will offer services to “co-locate” data in the centres for IT storage, while also providing a cloud-computing platform for businesses requiring data processing and content access.

DataCentred, Mr Kelly’s business, has secured £4m from Jon Moulton’s family office Perscitus Advisers, as well as the Greater Manchester Investment Fund and the North West Fund for Venture Capital. The group has also secured further funding of “tens of millions” that will be announced next month, according to the company.

Mr Moulton said: “We always look to invest in an opportunity in which we see high market growth, management commitment and management capability. We believe that DataCentred is one of these happy combinations.”

The cost of building the planned eight centres will be about £240m. Mr Kelly said that a return to the public markets with the business could also be a possibility.

Mr Kelly said data analytics, video-on-demand and heavy data applications were driving substantial growth in the demand for computer and storage capabilities. He estimates that four in five UK businesses still manage their computing in-house.

The company says its experienced software development team could set it apart from rivals that have regarded the sector more as a real estate investment with data “tenants” in their buildings.

Mr Kelly intends to avoid existing clusters around financial centres in London and Frankfurt. Instead, he said that Manchester was attractive because of the cluster of creative and digital businesses there. These businesses require high data usage but also manage their own technology. Other UK cities being considered include Birmingham, Glasgow, Edinburgh and Bristol.

“The concentration of data centres around the Isle of Dogs causes some concern,” Mr Kelly said. “Manchester is a natural place for the first shift outside London.”

Mike Kelly was advised by Stuart Moss and Alex Wilson of Rickitt Mitchell.

— Financial Times

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28.05.15