Business

Octave Klaba wants to build a European cloud-computing champion

Octave Klaba, the founder of OVHcloud, arrived at a court in Paris earlier this year to bid for a promising tech start-up that had gone bankrupt, only to bump into a rival bidder: Xavier Niel, France’s most famous tech billionaire.

“He is a shark who can spot a good business opportunity, and so am I,” Klaba said, remembering how he outbid Niel, the founder of the tech incubator Station F and a serial investor in start-ups, for Shadow, a cloud gaming service.

Unlike Niel, the 46-year-old Poland-born entrepreneur has kept a relatively low profile until now. But this week, the cloud computing company OVHcloud he founded in the industrial city of Roubaix in northern France will start trading on the Paris stock exchange.

The group aims to raise €350m by selling new shares at the IPO at a valuation of between €3.5bn to €3.75bn, and Klaba and his family still own 78 per cent of the shares.

Even after they sell a slice at the IPO, their roughly 70 per cent stake will be worth €2.5bn if the shares price at the bottom of the range, making them some of the richest tech entrepreneurs in Europe.

“I know it’s hard to believe that a company from Roubaix that was bootstrapped with no venture funding can compete with American tech giants,” said Klaba. “The IPO will help us convince the doubters that this is really happening and that they should get on board.”

Founded in 1999 as a company that hosted websites, OVHcloud now employs 2,200 people and provides computing, storage and networking services to clients mostly in Europe and the US. A big fire at a data centre in Strasbourg earlier this year dented its growth and incurred extra costs, but it still aims for annual sales of €663m and roughly €230m in operating profit.

Octave is chair, his father Henryk and his brother Miroslaw, both engineers, work as the head of networking and R&D, respectively and are board members.

The IPO will be a key moment for France’s tech ecosystem, which is steadily creating more billion-dollar start-ups, but which has seen few public listings in Paris. Before digital music company Believe went public earlier this year, no France-based tech company had listed publicly at a valuation of more than a billion dollars since the online advertising group Criteo listed on Nasdaq in 2013.

Meanwhile, some French founders have moved to the US to expand their companies, leading to blockbuster IPOs such as DataDog in 2019 and Snowflake in 2020.

Klaba, who is married with three daughters, does not appear to care much about the outward trappings of wealth. His office attire consists of T-shirts with OVH logos and sneakers. “I was born in communist Poland where we had nothing so you learn to make do with very little,” he said.

OVHcloud employs 2,200 people and provides computing, storage and networking services to clients mostly in Europe and the US © François Lafite/OVHcloud

Instead, he spends his money on expanding the company, playing guitar, and more recently investing in other start-ups and setting up a new wind-turbine manufacturing company. A serious battle with cancer about 10 years ago made him realise his priorities and that OVHcloud needed to be structured and strengthened so it would outlive him.

Klaba’s grandfather was a miner in the north of France after the first world war, but returned home to Poland in 1949. But through his grandfather’s French citizenship, the family was able to relocate to France when Klaba and his brother were teenagers.

“We told [our parents] we wanted to go,” said Klaba. “Ever since then I saw it as my role to make sure that the family did not end up poor in France. To take care of everyone.” 

Klaba did not speak much French when the family arrived in Roubaix, but developed an interest in the internet, and in the servers underpinning networks, at engineering school in Lille.

That hobby would lead him to create OVH (the name stands for “on vous héberge”, French for “we host you”) which stored and operated web pages for its clients. As the company grew, the whole family joined the business. Klaba’s father helped invent OVH’s in-house server technology that became key to their low-cost model since it used water to cool its processors instead of more expensive air conditioning. His mother handled finance and administration.

The family took no outside investment until 2016 when it sold a 20 per cent stake to private equity funds KKR and Tower Brook for €250m.

“What I am trying to prove with OVH is that there is another model that is more European that puts entrepreneurs and families at the centre of the ecosystem,” said Klaba, referring to how he had eschewed venture capital and expanded more slowly than a US start-up. “In ours, the entrepreneurs keep control instead of being at the mercy of investors or financial pressures.”

Klaba got a helping hand early on from none other than Niel, who rented the young entrepreneur some space in a building he owned in Paris for his growing banks of servers. Klaba was so dedicated that he used to sleep next to his equipment some nights, Niel recalled.

“Given his unusual life story, what he has done is impressive,” said Niel. “He came from nowhere to build a great company that will be a European leader in cloud computing.”

Today, OVHcloud is trying to crack the market for so-called public cloud computing services, which is growing at roughly 25 per cent a year and is dominated by the US players including Google, Amazon and Microsoft.

So far it has lacked the scale and financial clout to compete directly with them in this segment — it estimates that it has 1 per cent market share in Europe, compared to 66 per cent for the US groups.

But its position is stronger in “private cloud services” where equipment such as servers are used exclusively by one business or organisation as opposed to shared, as in public clouds. OVH estimates that this market represents sales of €8bn to €13bn a year globally, and is growing at 15 to 20 per cent a year. In Europe, it estimates that it holds about 10 to 15 per cent market share, on a par with its main competitor IBM Cloud.

OVHcloud also still earns one-quarter of its revenues from web hosting, where it has a leading position in Europe.

Many in political circles in Paris and Brussels are rooting for OVHcloud to succeed because they worry that European sovereignty and economic competitiveness could be at risk if companies and governments are forced to rely solely on US cloud providers.

Klaba has ably used such concerns to advocate for OVH as a safer alternative because its servers outside the US are not subject to search warrants from US law enforcement and intelligence agencies, although some experts and lawyers question that claim.

“OVHcloud is the only European company that has a chance of resisting the dominance of the US tech giants,” said Cedric O, France’s junior minister for digital affairs. “It is a very important actor in European tech, and it’s telling that Octave has built it on his own without any help.”

 




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