Source: Finextra Research
Stewart Foster (left) and Gary Linieres - two of the four ex-Financial Objects executives that have set up new investment management vendor Third Financial Software - take time out to take the Finextra Q&A.
Date and place of birth:
SF: 14th August 1970 Wolverhampton
GL: 2nd April 1967 St Lawrence
SF: Degree in Property Development and a MBA
GL: Degree in Linguistics
SF: Started at JPMorgan’s FX Options middle office in 1994 before moving into the front office. Started at Financial Objects in January 1998 and spent nearly nine and half years there moving up from a junior business consultant to the main board by 1995. Started Third Financial Ventures in June 2007 and made our first investment with the creation of Third Financial Software (TFS) in December 2007.
GL: Started as a money broker at Liberty Eurobrokers before moving into the software business. Spent seven years at Microbank Software before the company was sold to Sungard. Started as a sales executive and ended my time there as the regional manager in Paris for the European business. Moved on to various senior sales, marketing and general management positions at Reuters, Netik, DSTi and Financial Objects.
SF: Director of both Third Financial Software and Third Financial Ventures
GL: Director of Third Financial Software
What was your first job?
SF: Holiday job building apricot computers at ACT’s Glenrothes factory in Scotland
Who is or was your mentor?
SF: My father Roger Foster
GL: Brian Twibell- founder of Microbank Software and Redvision
Which business leaders do you most admire?
SF: Warren Buffet
GL: Brian Twibell, Richard Branson and of course.....Roger Foster
Why start a new company, given the current market conditions?
SF: Current market volatility does not affect the driving forces behind the changing market landscape in the investment management community. Investment managers still need to invest in front and middle office technology to retain and win customers and meet new compliance regulations and increased instrument complexity. There is a clear opportunity for the first vendor to go to market with the next generation product to provide solutions to these issues - this has been the whole purpose of setting up TFS.
GL: Market conditions will always be variable. If you have a good idea, together with financial backing and the determination to carry something through - when the good times come around, as they always do, you will be in a position to take full advantage.
What particular challenges do start-ups face in the current market? How are you going to make sure Third Financial Software survives these?
SF: The usual problem for product start up companies is how to stay in business in the initial R&D phase - while the new product set is developed and no revenue is coming in. TFS is a new style start up built to overcome this problem. We have acquired proven technology components to compliment in-house development, meaning we have products to sell on day one. TFS already generates revenue from services work. Our management has unrivalled heritage and domain expertise - and of course TFS is also extremely well funded.
GL: The key issue is funding and cash flow. We have strong financial backing and we are already billing our first clients. In many ways we are in a perfect position to ride out the next 12-18 months.With the initial take-up we have been able to hit the ground running and are in a position that many start-ups would take many months to arrive at. As a new entrant we can offer tailored pricing structures to our customers rather than taking a one size fits all approach - as has been fashionable in the past. It is the medium sized companies that are most at risk during turbulent times - large companies can cut costs and usually have a big enough client base to retain profitability. Midsized companies are often already running very lean operations and can be less agile in reaction to market change.
As a new start up, how quickly do you expect your company to grow given the current financial climate? What are your aspirations for growth?
SF: In difficult market conditions cash is king and financial services companies do not like paying large upfront traditional licence fees. TFS is able to avoid this issue as unlike most of our competitors, we licence our Tercero platform on a rental basis. Our goal is nothing less than to become a major player in the investment management technology space over the next few years.
GL: We have a five year plan. We expect the first year to be a year of establishing ourselves and delivering on our first commitments to our advisory clients within the investment management community.We expect there to be significant interest in our solution throughout the second half of 2008 as we start to demonstrate the full platform to the market and begin to reference our advisory clients. 2009 through to 2012 will be the years of expansion from the perspective of revenue growth, geographic diversification and corporate development.
What is the M&A market like right now?
SF: There is still plenty of private equity cash around but everyone is being more cautious about making sure they are not overpaying for companies with only marginal USP’s. Some sellers have withdrawn from the market as they can’t come to terms with the fact that valuations are at much more sensible levels now than last summer. As we move forward there will be plenty of opportunities to buy into good companies that may be struggling with the market conditions, meaning the M&A market will remain lively.
What kind of vendors/companies have approached Third Financial since the M&A venture was set up? And vice versa.
SF: I have been surprised by the number of very diverse and interesting companies I have seen so far. From near start up companies, to established businesses looking for investment to take them to the next level; and even from loss making companies that need turn around. Third Financial Ventures is looking for complimentary businesses to help TFS in the investment management arena and/or turn around opportunities where we can really help to add value.
If you weren’t in your current job, which company would you most like to lead?
SF: Something completely different - I would love to be the general manager of the San Francisco 49ers.
GL: The sports marketing company IMG because I love sports.
Which competitors do you benchmark your company’s performance against?SF: Advent
GL: I’m not a fan of trying to benchmark our product with our competition. I believe we have something new and innovative and we should focus on differentiation rather than comparison. I would say that the two most successful companies in our space to date are probably Odyssey and Advent. I will compare our success as a company with what they have achieved in terms of revenue achievement and global spread.
What has been your best experience in business?
SF: Without a doubt it was being responsible for turning around two loss making business units at my former company Financial Objects where I had more than nine very enjoyable years. Being in charge of and turning around their Retail and Wealth business units and making them grow organically and profitably every year was a fantastic life experience.
GL: Setting up Third Financial Software with Stewart, Pete and Roger.
What keeps you awake at night?
SF: Ideas for work and my new born baby
GL: Global warming
How do you relax?
SF: Spending time with my beautiful wife and son, following American Football and jogging around Wandsworth Common
GL: Boxing and playing drums
What was the last gadget you bought?
SF: 12.1 mega pixel Sony camera
GL: Sony walkman
Favourite Web site
Desert island disc/book
SF: Favourite book is Red Storm Rising
GL: Bitches Brew by Miles Davis and Grace by Jeff Buckley