A recent deal involving the Emerging Africa Infrastructure Fund has a unique aspect – the infrastructure firm is partnering with a venture capital player – North Bridge Venture Partners, on the transaction.
Emerging Africa is investing $25 million in O3b Networks, an internet satellite company, as part of a larger investment group that is infusing the company with $1.2 billion of financing. Massachusetts-based North Bridge Venture Partners is a member of the investment group.
“Projects like this have very, very strong cashflows and are very self-sustaining after the first constellation of satellites [is launched],” said Jamie Goldstein, general partner at North Bridge. Goldstein declined to say how much equity the firm committed to O3b.
Projects like this have very, very strong cashflows and are very self-sustaining after the first constellation of satellites [is launched]
London-based Emerging Africa, a $600 million fund managed by African banking group Standard Bank, committed $12.5 million in a $145 million mezzanine debt facility, and $12.5 million toward a $115 million senior debt facility.
“We’ve got a developmental mandate, so we were prepared to take risk that commercial entities won’t,” said Nick Rouse, managing director at Frontier Market Fund Managers, the Standard Bank-backed management company for the Emerging Africa Infrastructure Fund.
The remainder of O3b’s $1.2 billion of financing included a $510 million senior debt facility provided by HSBC, ING, Credit Acricole, and Dexia, and $410 million of equity, of which $230 million was new commitments the company closed on in late November. Equity investors include Google, the internet search provider, North Bridge Venture Partners, HSBC Principal Investors, Sofina and Africa-focused private equity firm Sataya Capital.
Africa: about to
In developed markets, such as the US and UK, infrastructure investors tend to back mature, cash-flowing assets such as roads with 40 years’ worth of operating history. But in places like Africa, where much of the infrastructure needed to support the continent’s roughly 1 billion people still has to be built, infrastructure projects often don’t have a rich history of revenues from which to benchmark future performance.
“We are several years pre-revenue, so it’s a different risk-reward profile,” said Mark Rigolle, chief executive of O3b Networks. O3b stands for “Other 3 billion”, a reference to the three billion people who do not have adequate Internet access.
We've got a developmental mandate, so we were prepared to take risk that commercial entities won't
O3b hopes to provide those people internet access by launching eight new satellites in 2013 that will provide internet providers with a way to get data quickly from one place to another without the need installing fiber-optic cable.
“That’s why we call it ‘fiber delivered from the sky,’” Rigolle said.
Rigolle, the chief executive, hopes to use the money to hire more people and build a business plan that can deliver the satellites on time in 2013.
“Everything’s coming together,” he said. Thanks to the financing, “we will be able to talk to customers no longer on the basis of an idea.
“We have now become a company, we’re a reality, we’re really on the map,” he added.