News
Endeavour Capital and TMT Venture invest in GFG Group's growth plans
12 February 2005 / Media Release
Venture capital firms Endeavour Capital and TMT Ventures have co-invested a total of $3 million in privately-owned New Zealand banking software and services company GFG Group.
Endeavour Capital managing partner Mark Dossor and TMT Ventures investment director Kory Fagan have both been appointed GFG Group non-executive directors.
GFG Group chairman Ralph Green says the cash injection will enable GFG to boost service and support for existing customers and make major enhancements to the company's flagship GFG:UniCARD card management system, and offerings in the emerging mobile payments market. GFG's GFG:UniCARD now supports more than 14 million credit and debit cards in 16 countries including USA, The Philippines, Russia, China, Australia, New Zealand, Costa Rica, Dominican Republic, and Malaysia.
"The capital raising is also very much about growth," Green says. "We're looking for significant growth in revenue and profitability - maximising the opportunities stimulated by the explosion in credit and debit cards, and new ways of making payments involving cellphones and the Internet."
"We have a strong history of profitability, but in order to meet our customers' needs, as well as take advantage of new growth opportunities, we need to move faster - that means investment capital, rather than incremental growth funded from our own cashflow."
Green says around two billion cards are estimated to be in use today, with most in developed economies. Rapid growth in emerging economies, particularly India and China, will result in the overall number more than doubling in the next decade. GFG's GFG:UniCARD software and related services are well-established and well regarded internationally and particularly well suited to new customers in these emerging economies. Added to that, he says, GFG has a lead on the market with its new mobile payments software.
He says the investment follows the successful buy-back last year from Unisys of intellectual property in GFG:UniCARD, supported by foundation GFG:UniCARD customer ASB Bank. GFG Group originally designed and built the GFG:UniCARD system as an in-house solution for ASB Bank back in 1989. Subsequently, Unisys adopted GFG:UniCARD for worldwide distribution, with GFG continuing to provide support and ongoing product development.
"Buying back the intellectual property was as an essential first step in achieving our potential," Green says.
"Also very important has been the appointment of Anthony Howard as managing director. As a former managing director of Wang New Zealand - and through his strategic management and investment firm Howard & Co - Ant brings great experience and expertise to the Board and management team. Also important has been the appointment of Marie Tamplin-Woods as sales and marketing manager. Woods is a former senior sales executive with IBM New Zealand and Jade software. Her appointment signals a major commitment to developing a high-calibre sales and marketing organisation."
Kory Fagan, investment director for TMT Ventures, says the decision to invest in GFG was based very much on what GFG's customers had to say.
"Customer feedback plays a significant role in our investments decisions. The key themes from the customer feedback on GFG were that their payments software and services in the credit, debit and loyalty card market are highly regarded globally, and that the company has one of the world's leading mobile payments systems which allow purchases to be made using your mobile phone."
"The customer view was also that GFG's larger competitors weren't providing a good level of service and product flexibility to small to medium national banks, or to new players - such as Telcos or finance companies - looking to enable new ways for their customers to access credit or make payments. The flexibility of GFG's products and the company's responsive operating philosophy give GFG a real competitive advantage"
"Along with the strong customer feedback we were also impressed with the quality of the management team, their strategic plan for growth, and the company's strong track record of profitability," Fagan says.
Mark Dossor, managing partner of Endeavour Capital, agreed that the investment decision was primarily based on favourable GFG customer feedback and the fact that GFG has a proven product in a secure international market niche - as well as new opportunities around mobile payments.
"GFG Group is already highly successful in their market and with their mobile payments solutions - at Smart Communications in the Philippines and Vodafone here in New Zealand - have great momentum in a most exciting area of the market. External funding will give them the ability to grow faster than they've been able to in the past, either organically or through acquisition.
"Our initial investment of $3 million is prudent - there's more investment capital if that's what's required to maximise the opportunity," Dossor says.
The GFG Group venture capital funding is a beneficiary of the New Zealand Government's Venture Investment Fund, set up two years ago. The Government allocated $100 million to four venture capital managers. Each venture capital manager was required to raise two dollars for every dollar of Government funding. Endeavour Capital and TMT Ventures are two of the selected fund managers.
The GFG Group co-investment is being made by Endeavour through its EIP fund, managed in partnership with i-cap Partners. The investment by Direct Capital has been made through their TMT Ventures fund. This venture capital programme, seeded by Telecom New Zealand, focuses on the technology, media and telecommunications sectors. Other fund partners include Alcatel, Lucent Technologies and Marconi.
