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Monday 24 October 2016

Facebook backer Thiel shows the true potential of Ganley's Rivada

The smart money of Silicon Valley is going on Rivada rolling out a daring new multimillion project, says Nick Webb

Published 23/08/2015 | 02:30

Rivada founder Declan Ganley
Rivada founder Declan Ganley

Persuading one of the world's smartest and most sought-after investors to take part in a $50m funding round sends out the clearest signal yet that Declan Ganley's Rivada Networks is a serious contender.

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Peter Thiel made the bulk of his $3bn fortune from spotting potential. He's possibly the best known tech venture capitalist in the world because of his early stage investments in Elon Musk's Paypal and Mark Zuckerberg's Facebook. He's also a backer of Limerick brothers Patrick and John collision and their Stripe payments machine.

Ganley's Rivada has figured out that bandwidth - the radio spectrum used for wireless internet - is a commodity. Thanks to the laws of physics, there's only a limited amount of it about. And most of the bandwidth is used extraordinarily inefficiently.

If sending a pile of data over the Internet costs the same at peak times as it does at 4am, there's a market failure. Heavy users like Netflix could send vast amounts of data online in the middle of the night far more efficiently and without the same capacity constraints.

Bandwidth is valuable. It's a commodity. But oil can't be traded unless it's in a barrel.

Ganley's Rivada and its technology essentially provide that barrel but for bandwidth. Smart. And Rivada has 32 patents on the tech.

Ganley was quick to cotton on to the fact that the U.S. Emergency services - fire brigade, police, Coast guard - as well as the military have huge and largely empty spectrum for their emergency communications.

Emergency services in New York could have capacity for 2.9m users on its bandwidth at any one time.

Not even the arrival of Godzilla would see that maxed out.

So using this spare bandwidth to meet the increasing demands of consumers and corporates is really very clever.

But the emergency services need to ensure that if Godzilla does arrive that the bandwidth isn't clogged up by someone downloading game of thrones or ordering pizza. Rivada's tiered access technology can clear the way for priority traffic immediately.

It's what the emergency services call "ruthless pre-emption".

The US is rapidly waking up to the economic benefits of decluttering the internet and making an income off its own state-owned bandwidth. It is now in the process of opening this up to contractors through a tendering process.

But there isn't anyone else like Rivada out there. Ganley''s technology works - and now he has to execute. With a consortium of heavy-hitting infrastructure and engineering giants, he'll roll out what will become a brand new network across the US - state by state.

Over time it'll need about $30bn for the roll out. But the rewards are astronomical. Assuming he can get the USA up and running, internal projections suggest revenues of over $20bn from the US over the next seven years.

Plans to roll out in the rapidly deregulating Mexican market could nearly double that.

Steve Jobs' move to disrupt the music industry with iTunes is a clear influence. But where Apple takes 30c from every music dollar spent, Ganley's Rivada will take 20c on the dollar from selling access to these new super data networks. This could lead to a rapid explosion of royalties, hitting $6.6bn by 2022.

Canada is also getting ready to open up its state-owned spectrum to players like Rivada. Australia is also on the medium-term horizon, with significant interest also coming from Asia.

Europe on the other hand is painfully slow to wake up to the opportunity. There are 28 different regulators, making a pan European network a morass of red tape and self interest.

Ganley is a serial entrepreneur, who made his first fortune from forestry when Russia was being privatised in the early 1990s. He then moved into communications, cable and broadband in Central Europe before being jolted into action by 9/11 where the communications systems of the US emergency services simply failed to function properly following the Twin Towers attack.

This led to the development of Rivada, which would prove its worth providing emergency response communications in the aftermath of Hurricane Katarina, which devastated New Orleans in 2005.

It's been a long process of proving the tech works, making the connections and ultimately persuading the regulators that this is a smart, smart idea.

While Rivada had a pre funding valuation of $650m, based on the future and discounted cash flows, bond market investors are being told that it is worth a remarkable $5.2bn.

That's not top of the head maths either, a major accountancy firm has put its name to it. Ganley, who owns slightly less than 50pc of Rivada, is rapidly building up one of the most valuable companies ever the come out of Ireland. And certainly out of Athenry.

Sunday Indo Business

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