Chris Leahy is not your conventional CFO. For a start, he never really wanted a career in finance. I have always wanted to be a journalist. I got into corporate finance quite by accident, he says. Childhood dreams aside, as CFO of technology services company techpacific.com, Leahy is more involved in the corporate development side of the business rather than the actual accounting.
But maybe thats becoming characteristic of the technology industry. As Leahy says, What these guys want is not necessarily bookkeepers or people who count paperclips. They want guys who understand corporate strategy, understand how to get companies listed and how to help those companies grow once they get listed.
And with Leahy, thats exactly what they got. With a background in stockbroking, investment banking and corporate finance, Leahy has spent the past 16 years working for companies such as Bank of Butterfield, SG Warburg, Greenwell and more recently, BNP Peregrine. It was here he was the director responsible for floating techpacific.com. After working on the IPO for nearly a year, and at the time deciding to make a move out of investment banking, the position of CFO of the company was the opening he had been waiting for.
Leahy is the first to admit that his role is different to that of a conventional CFO. While he has the overall responsibility of the accounting function, he has a team of five accountants who take care of the actual accounting work.
And it seems he is not alone as an ex-corporate-financier-turned-CFO. Before he joined techpacific.com he was offered four other jobs, all as CFO, all for technology companies.
A lot of the CFOs now in this field are actually ex-corporate financiers, investment bankers or research analysts. That is very, very much the thing to be doing, he says. I was surprised that I got so many different approaches. You talk to most people in this particular area and theyll tell you that they want guys that can help them get listed, help them develop their business. Because one of the things youre looking at here is speed to market and speed once youre in the market, once youre listed and developing the business.
And really, thats what techpacifics business is all about. The company, which was established in December 1998 by Johnny Chan, formerly the managing director of Bear Stearns Asia, and Ilyas Khan, a former investment banker with Nomura International, is best described as a financial and technology services business that finds, finances and builds technology businesses in Asia.
The incubator myth
Often described as an incubator company, Leahy is quick to disagree. The reason people say were an incubator and Im not remotely surprised is because its the one comfortable term that everyone has with techpacific that they understand, and everyone likes to pigeonhole. And an incubator was a very trendy term that everyone had for new technology companies. That was the one that fitted us. No ones ever come up with a term for techpacific for what it is, he says.
We operate in the technology sector in Asia thats the canvass on which we paint and what we do is we try to find early-stage technology companies in Asia that need capital and that need help with their business to grow.
We have four business divisions. Incubation is one of them and its the smallest. We would not do incubation if we didnt have the other businesses to help pay for it.
The other business divisions Leahy is referring to are its corporate finance, venture capital management and e-services businesses. We help the companies find capital thats the corporate finance function. The capital, some of it comes through us thats the venture capital side and some of it also comes from the incubation business at its very early state. But most of it comes from outside of our capital. We have an institutional client base we call Mentors. [These] are people who are investors in technology ventures, and we help find them. Its like doing an IPO for a technology company thats just much smaller.
A merchant bank, a Peregrine or Goldman Sachs or Morgan Stanley, goes and gets a client for an IPO and then they sell it to their institutional client bases. Were doing exactly the same thing, although a tiny, tiny fraction of the size. Were only $3-$4 million but we take a fee on the sale size when the company lists, he says.
With the downturn in tech stocks and the fact that a lot of investors have turned away from the sector, one would expect the pressure to be on such a young company. techpacific.com listed on Hong Kongs Growth Enterprise Market in April of last year. The IPO raised $40 million after the price for the 300 million shares on offer was dropped to HK$1.05 ($0.13) from a range of HK$1.38-HK$1.68. But the lack of enthusiasm for the tech sector has sent techpacific.coms share price falling even further to around HK$0.25 since listing.
Leahy, however, is not concerned about the declining value of technology companies. We have found in the environment that its good and bad. Its tougher to do deals, get funding closed for the companies we act for, and we are much more selective. But valuations have come down significantly. Our capital is going a lot further, he states.
Im not overly concerned by the correction. Its a good thing that it corrected. I would say that in some cases it has overcompensated, its the pendulum effect and its swung too far the other way. But Ive been in the business for a long time and Ive seen cycles come and cycles go, and Ive seen bubbles before, which it clearly was.
Markets are cyclical, it will come back. And what were doing here is trying to build a company that has sustainable revenues with a significant market presence in the technology sector in Asia, providing services to the technology sector in Asia, investing in the technology sector in Asia. We are doing that and weve been, I think, quite successful within a very short period of time, he affirms.
Surviving the tech wreck
Unlike the casualties of the tech sector slump, techpacific.com has been and continues to be profitable. For the nine months ended 30 September 2000, the company posted a profit of $1.08 million on revenue of $4.98 million an increase of 645% in revenue and 515% in profit for the same period in 1999. Were growing from a small base, so the numbers are likely to be good we should be growing fast and we are growing fast, he says.
Theres always more that you can do, but weve got traction, we have sustainable revenue and were generating more, and were growing the business very quickly and I think that will make this company very, very valuable when the market turns. Were not in a hurry. I dont think the internet is going to go away, I dont think technology is going to go away.
The aim of techpacific.com now, says Leahy, is to expand all four operating divisions. The building blocks are in place we have constructed the building. Now what weve got to do is put revenue through it weve got to really grow those businesses in each one of [the divisions].
And this also means expanding the regions in which techpacific.com operates. Already in Hong Kong, Korea and Malaysia, the company has just set up operations in Singapore and is looking to move into China. Also, the companys acquisition of a 51% controlling stake of Sydney-based digital services company Spike Cyberworks in January has created a market presence for the company in Australia and Japan and an expansion of its e-services division.
A bright future
At a time when a lot of technology companies seem to be pulling back the reins, techpacific.com is still powering ahead. We are hopeful. Weve got over 35 companies in our portfolio. If only two or three of those become super hits, the home runs as they say, who knows how much they will be worth, he says.
I can see us becoming a multi-billion dollar business because to me its quite simple: the technology market is growing, Asia is one of the fastest growing regions in the world, and the need for technology is probably greater than anywhere in the world. That means its going to attract enormous amounts of capital.
On a three- to five-year view, we are going to be a very, very valuable company, Leahy says.
And what of Leahys plans for the future? My plan is to be a part of techpacific and make as much money for the company as I can, add as much value as I can, and hopefully make some money for myself, and then I want to write books. It seems he still hasnt given up on his childhood dreams.