A Swedish startup backed by the venture arm of EQT AB wants to chip away at the dominance of US cloud providers in Europe by building eight large data centers across the region.
Evroc AB aims to raise as much as €3 billion ($3.2 billion) to fund the project over the next five years using a mix of debt, private funds and financial support from the European Union, according to founder and Chief Executive Officer Mattias Astrom.
The plans for Evroc’s so-called hyperscale cloud centers come as European regulators step up their scrutiny of tech giants such as Amazon.com Inc. and Microsoft Corp. amid increasing unease over data privacy and security. Facebook owner Meta Platforms Inc. was hit by a record €1.2 billion EU fine in May over data transfers to the US.
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“Europe’s dependency on US cloud services exposes us to the vulnerability that the data can be seen by US authorities,” Astrom said in an interview. “In today’s geopolitical reality we just can’t be dependent of other states when it comes to critical infrastructure.”
Still, Evroc will be entering a European market where the top US cloud providers continue to maintain dominant market shares despite a German attempt to create a sovereign cloud service called Gaia-X. Foreign firms currently account for 87% of the European cloud market, according to Synergy Research Group.
“It’s in Europe’s self-interest to break the digital dependency on foreign cloud providers,” Astrom said.
With fears of a power crunch across much of Europe — in Sweden electricity demand is poised to double in the next few decades — Astrom hopes his hyperscale cloud centers will offer an attractive alternative to on-premise server halls given they are up to 88% more energy efficient.
“But we’ll of course need to find locations with an abundance of renewable energy,” he said.
On the financing front, the company’s fundraising plans come amid a weakening market for venture debt in part due to surging interest rates. The CEO said the company draws confidence from an investor group that includes EQT Ventures and Norrsken VC.
“We wouldn’t have embarked on this if we hadn’t felt the support from our current investors,” he said. “They are fully aware of the amount of capital that’s needed to build a hyperscale cloud for Europe.”
The potential investment is small compared to market leaders. Amazon’s AWS cloud unit in 2022 spent an estimated $28.4 billion on capital expenditures, BofA Securities analysts estimated.
Evroc received 150 million Swedish kronor ($14 million) of funding via a seed round last year. The next financial milestone will be in the fall, when it hopes to raise €120 million to fund a test center in Stockholm.
“We’ve been looking at this case together with EQT Infrastructure since the beginning,” said Ted Persson, a partner at EQT’s venture capital arm. “I can say that there’s an ambition and an intention from EQT’s side to let multiple EQT funds invest in the project.”
Evroc has started the process of selecting sites for its first two hyperscale cloud centers. One will be located in Sweden or Finland and the other is likely to be in France or Spain, according to Astrom. He expects the first to open in 2025 and all eight to be operational by 2028.
“To carry large amounts of data doesn’t really cost anything,” the founder said. “When the sun shines we can move the data processing to Spain. When it’s windy in Holland, we can move the data processing there.”
--With assistance from Lars Paulsson and Mark Bergen.
