WSJ: Alphabet Invests In Tech Infrastructure
By Miriam Gottfried, Wall Street Journal
Google parent, subsidiary Sidewalk Labs and Ontario Teachers’ Pension Plan are launching an infrastructure holding company.
The white-hot world of infrastructure investing has attracted a notable new entrant: Alphabet Inc.
The technology giant is teaming up with its subsidiary, Sidewalk Labs LLC, and Ontario Teachers’ Pension Plan to launch an infrastructure holding company that is being spun out of Sidewalk. Sidewalk Infrastructure Partners, as the new firm will be known, will focus on investing in what the group calls technology-enabled infrastructure, the partners said.
The firm, which will be funded initially through financial commitments from each of the three partners, will aim to invest in advanced mobility, energy, water and waste, digital infrastructure, and social infrastructure. It will typically be investing in projects that require more than $100 million of equity, according to people familiar with the matter.
SIP, which will be structured as a company rather than a fund, will back large-scale infrastructure projects and purchase or take stakes in fast-growing technology companies whose products are being used in these projects. For example, the firm might fund a new urban roadway project while also taking a stake in a company whose technology improves vehicle safety and performance by allowing cars to communicate with their surrounding infrastructure.
There is a “growing unmet need to modernize aging urban systems,” said Jonathan Winer, co-chief executive of SIP, in an email.
“Early-stage technology companies often lack access to sufficient capital to deploy their systems” at scale, and “the typical sponsors of larger-scale infrastructure systems seek to avoid technology risk,” he said.
Investors have been flocking to infrastructure in droves, as money managers bet on the growing need to upgrade and expand the world’s railroads, natural-gas pipelines and data centers. Private infrastructure funds raised a record $95.7 billion in 2018, and have raised $47 billion year to date, according to the latest data from Preqin.
Mr. Winer, who has served as head of investments at Sidewalk Labs, will be leading the new venture with co-CEO Brian Barlow, who has been Sidewalk’s director of infrastructure investments.
Messrs. Barlow and Winer realized the technologies they were evaluating at Sidewalk Labs “could also be transformative for urban environments struggling with sustainability, mobility and other challenges,” Mr. Barlow said in an email. But existing infrastructure-investment models don’t encourage the adoption of technology, he said.
Sidewalk Labs was founded in 2015 by Daniel Doctoroff, the former deputy mayor of New York City and former CEO of Bloomberg LP. The Alphabet subsidiary focuses on developing technology to address problems cities face. In 2017, Sidewalk won a bid to build a sustainable neighborhood on Toronto’s waterfront, but its first detailed plans faced resistance from its government sponsor, which said they went beyond the scope of the government’s initial proposal, The Wall Street Journal reported.