Investors plough $3m into GFG

Banking software developer GFG has secured a $3 million co-investment from two of the funds in the Government's VIF (Venture Investment Fund) scheme, Endeavour Capital and TMT Ventures.

Endeavour was set up by MAS Technology founder Neville Jordan. TMT Ventures is a fund administered by Direct Capital, which includes money from Telecom, Alcatel and Lucent.

Kory Fagan, from Direct Capital, and Mark Dossor, from Endeavour, join the GFG board.

The deal gives the new investors about 18.6 per cent of GFG, valuing the company at $16 million.

Although one of the main aims of VIF was to encourage early-stage investment in technology companies, GFG is a safe investment. It has always had positive cashflow and never had a failed project.

The company has operated since the 1980s, selling services and software around credit and debit card management systems, loyalty schemes and mobile payment solutions.

Last year, it bought from Unisys the intellectual property in UniCard, a card management system GFG developed for ASB Bank and now used by 70 banks worldwide.

Last month, its implementation of a UniCard system at Bendigo Bank won the Card Smart Award for outstanding achievement in the Australasian card industry.

GFG Group chairman Ralph Green said the new investors brought important relationships and skills to the table, as well as corporate credibility for the company.

"The money is useful because it allows us to advance product development and build up an international sales and delivery infrastructure," he said.

"In the past our product development has been on the back of projects for specific customers, which we then attempt to generalise into a product. This allows us to do it in a less-compromised way."

Green said GFG planned to triple its revenue over the next three years. It turned over $9 million last year.

"That means we have working capital requirements if we are to avoid the speed wobbles companies get as they sell more.

"The thing about this business is customers don't pay immediately, and you can be stretched by success."

Green said that by bulking up, GFG would be in a better position to build payment utilities that could secure long-term supply contracts with major institutions, smoothing its revenue.

"Selling services and products can be lumpy. If we can replace the systems environment with click revenue, that is of great interest to us."

Fagan said his fund believed GFG had significant growth potential, particularly in Southeast Asia.

"The exciting thing for us is they are internationally recognised with UniCard, and they are using that to leverage into mobile payments," he said. That interested TMP's telco investors.

"The company has real prospects for growth both organic and by acquisition, so the thinking is to get as many deep pockets round the table as quickly as they can," said Fagan.

TMP has invested about 60 per cent of its $103 million fund.

Fagan said the fund was entering its fifth year, so he expected to make just a few more investments before concentrating on follow-on funding.

"We will be picking the winners in the portfolio and making investment in those businesses where we see a real uplift over the next three or four years."

Dossor said Endeavour was impressed by GFG's customers and references, particularly the work it was doing in the Philippines with Smart Communications.

"If things go as planned, there will be a number of opportunities to develop new products, improve distribution channels and acquire new technologies."