The six-year-old smart city infrastructure and IoT firm describes itself as a pioneer in the so-called outcomes-as-a-service space. The guiding ideal is to help municipalities achieve results instead of simply selling them cloud or subscription software services.
“Installing it and walking away isn’t good enough,” said Del White, Quantela’s senior vice president for the Americas. “We want to make sure the customer gets something out of it. We will put our money where our mouth is.”
That means, in one instance, helping the city of Erie, Pa., attract entrepreneurs and better serve citizens by helping to finance and deploy free public broadband and other 21st-century tools.
In a private-public partnership, Quantela worked with city officials to secure funding for Wi-Fi and related efforts. More specifically, backing from Cisco strategic partner Digital Alpha — which just invested that $40 million in Quantela — in turn secured a matching grant from the Appalachian Regional Commission for Erie’s general push to upgrade its municipal technology.
GOV TECH ROI
The payment structure and return on investment timeline varies by project, with larger projects typically taking longer for Quantela to recoup its investment and gain a profit. According to Quantela, the ROI horizon is typically between five and 10 years.
The company enters into various split-revenue arrangements with its local government clients — one deal might entitle Quantela to 75 percent of the applicable revenue for the life of the deal, or more, or less, depending on circumstances. Quantela also can stay on to help operate a gov tech system after earning back its initial investment, charging new fees for providing ongoing services, often with the cooperation of local partners, White said.
GROWTH POTENTIAL
The new $40 million funding round will help Quantela to expand its offerings and perhaps make some acquisitions, White said.
“That could include companies that align with our technology, or align with our solutions,” he said. “Our goal is to provide solutions that allow cities to make money.”
The new capital came from Digital Alpha Advisors.
Earlier this year, as cities considered how to rebound from pandemic-related revenue cuts, Digital Alpha, a digital infrastructure investment firm, announced that it had more than $1 billion in a fund dedicated to these types of local government revenue-sharing deals. The company works closely with Cisco, the tech giant whose global smart cities efforts White oversaw between 2018 and 2020.
The ROI potential for such projects seems bright, especially as cities emerge from the pandemic with a new understanding of the importance of digital tools and services. Chattanooga, Tenn., stands as perhaps one of the most famous examples of that promise, with one economist estimating that the city’s municipal broadband network has been responsible for sparking more than $1.3 billion “in economic and social benefits in its first five years,” according to the Illinois-based Benton Institute for Broadband and Society.
While transportation still accounts for most private-public partnerships (PPP) in the U.S. — such work includes not only roads but airport terminals and other areas — broadband PPP work is on the upswing, according to The Law Reviews, which analyzes RFP trends, related legislation and other legal issues.
Expect more such efforts.
“A number of states, including New Jersey and Arkansas, have recently introduced PPP legislation facilitating the application of PPPs beyond transportation and authorizing a range of government agencies to procure such projects,” The Law Reviews found.
As for Quantela, the company aims to work with a variety of municipalities in the coming years, including cities blessed with relatively large budgets and sources of revenue. White said the company is responding to an RFP from Los Angeles to expand public Wi-Fi access there. The company also has global projects in the works, including for cities in India and Latin America.
“All cities have financing challenges,” White said. “COVID stretched those budgets.”
