PayPal founder backs New Zealand submarine link

An investment fund led by PayPal co-founder and chief executive, Peter Thiel, has become one of the first to financially back a New Zealand submarine cable venture as part of a funding round that raised $NZ5.5 million ($AUD4.24 million) for the project.

The latest funding came as part of Pacific Fibre's fourth approach to market, which began in October 2010, with new investors finalised over Christmas last year. Though the amount of funding from Thiel’s New Zealand holding company, Valar Ventures, is unknown, the commitment garnered a 2.42 per cent stake in the startup.

It is the second of Thiel’s technology investments locally, following a $NZ4 million ($AUD3.08) committment to Xero, software-as-a-service (SaaS) provider, also founded by Pacific Fibre board member, Rod Drury.

“Pacific Fibre is strategically significant to the growing technology industries in New Zealand and Australia”, Thiel said in a statement. “The company offers a strong proposition to investors and we look forward to the successful financing of the project.”

Pacific Fibre has also gained government support, with an additional $250,000 in funding from New Zealand Trade and Enterprise for a feasibility study into the project’s economic benefits for the country and potential for foreign investors.

First announced in March 2010, the startup aims to build a new, 13,000 kilometre optic fibre submarine cable capable of up to 5.12 terabits per second (Tbps) of bandwidth by 2013, with links to Sydney, Auckland, Wellington and Los Angeles.

The group hopes a direct link to Los Angeles will provide lower latency and higher speeds as opposed to existing international links which pass through Guam or Hawaii.

The venture would provide additional international backhaul bandwidth to carriers in Australia and New Zealand, while also posing competition to established providers Southern Cross and Pipe Networks.

(NBN 101: Floating the submarine cable question)

Thiel’s investment is expected to aid the company in ramping up equity investment and debt funding rounds for build of the cable, which will commence once the fibre vendor is announced next quarter. The total cost of the build is expected to range between $US300-400 million, making the commitment from Valar Ventures a starting bid rather than full backing.

Pacific Fibre chief executive, Mark Rushworth, told Computerworld Australia the major round funding for the project continued to progress successfully, with investors from all three countries of operation now involved in the project.

Negotiations with potential customers and landing partners have also progressed, with memoranda of understanding already signed.

“They want to see a more competitive marketplace, they want to see more competitive pricing for international bandwidth, and they’re demonstrating that by signing up to contracts of support...across both Australia and New Zealand,” he said.

“Both markets I guess realise that at some point, with respective governments’ investments in fibre-to-the-home, that’s going to drive a whole new level of international bandwidth.”

Follow James Hutchinson on Twitter: @j_hutch

Follow Computerworld Australia on Twitter: @ComputerworldAU

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