Q&A with Greg Wolfond, Chairman and Founder of 724 Solutions

by C. J. Kennedy

On Nov. 29, 724 Solutions Inc., the leader in the wireless banking field, purchased Tantau Software Inc., a provider of enterprise-level software platforms, for $375 million worth of stock. 724 Solutions' list of customers already included Citigroup, Bank of America, and Wells Fargo. With the Tantau acquisition, it adds Chase Manhattan, Commerzbank, and Credit Suisse Group, among others. Its customers serve approximately 272 million consumers worldwide and have cash and equivalents in excess of $200 million. Expect 724 Solutions to play a significant role in the growth of mobile transactions - which analysts expect to grow to approximately $21 billion over the next four years in the United States alone, compared to an estimated $29 million in 2000.

724 Solutions founder and Chairman Greg Wolfond talked recently with WirelessDevNet writer C.J. Kennedy about the thinking behind 724 Solutions' acquisition of Tantau, what he looks for in partnerships and acquisitions, the wireless market, and 724's future plans.

WDN: Can you tell me abut 724 Solutions acquisition of Tantau? What did they offer that interested 724 Solutions?

Greg Wolfond: There is no question that this mobile market is going to be as big as everybody is predicting, with hundreds of millions of users, not only using mobile phones but using mobile connected internet, and doing billions of dollars in transactions. To support that, what you need to win in this space is you have to have scalable infrastructure to handle the hundreds of millions or billions of transactions which are being run through the this infrastructure.

We looked at where we were, with our technology and the things we were building, the great applications, and we looked at some of the lineage of Tantau, the whole group that came from the High Performance Research Center at Tandem. We know John Sims and his management team quiet well. We looked at the geography of where they were compared to where we were. Most of their clients were European based and most of our clients were North American and Asian based. So you combine the two companies and we get to reach about 270 million customer relationships. And they have a great platform to go after more application areas. The technology road map that we had before, it makes much more sense to get there together. There is no question that the combination of the companies is stronger and we can get there faster. You take the partnership, the partnerships we had, and you add Compaq distributing the product, Hewlett & Packard distributing the product, Nokia distributing the product. There's no question that those partnerships are going to help establish us as a leader in this space. Tantau completes our global reach, and as importantly, this merger accelerates our path to profitability.

WDN: You didn't seem to be having a problem with revenue growth before this acquisition.

Greg Wolfond: There's no question that we have been successful before, or that we will continue to be successful, the question is how do you get there faster. To get there faster you really need the compliment of management strengths and you need connections with financial institutions. In this new world, financial institutions are going to play a big part of the mobile commerce equation. Being able to bring in the access to savings accounts, the access to credit cards, to enable merchants and content providers to come together, we've got to have the ability to do the things we do, like "actionable alerts", where you send out an alert to a customer saying the ticket you wanted between Toronto and New York is going for $200 and being able to click a button and buy that ticket right on the spot. So there are a bunch of players who are going to be part of the ecosystem. We've got to be able to bring them in and then have the scalable infrastructure to allow the transaction to happen.

WDN: When you are talking about alerts, is another of 724 Solutions' acquisitions, Spyonit.com, the company whose technology allows you to bring these alerts to your customers?

Greg Wolfond: We had the basic stuff before. We had what we called, "Tell-Me-When". Tell-Me-When my bank balance is a hundred dollars, Tell-Me-When my visa card is near its limit, or Tell-Me-When a stock hits a threshold or that it looses more than a certain percentage. But what we got from customer feed back was that customers wanted more than that. If there's something of interest to them, a discount or a bargain, and you can notify them with a high level of personalization on their device, there is huge, huge interest on the consumer's side. Customers from the Bank of Montreal sat in focus groups and said, Tell-Me-When is great, but can you tell me when GAP khakis are on sale. The things customers want to know are things which are relevant to them. I think that's the next logical extension. All of the media out there, all of the newspaper and television is funded by merchants who are trying to sell things to consumers. With these kind of devices you are going to be able to have a kid see a game they want for Christmas time and you are going to be able to buy that, add your pin number, have it shipped to you house, [tell the merchant] how you want to pay for it and what type of shipping you want, and you are done. Bring this together with not just a wireless world, but bring this together with all the other types of media which are out there. The wireless world offers that incredible security of scalability and real timeness to get things done for the consumer.

WDN: Does 724 Solutions have any plans of future acquisitions? Location services, for example? Or other areas?

Greg Wolfond: We own just under a third of a company, Maptuit. Maptuit builds location based services and they have mapping data from most of the world already. Jeff Papos, who used to run Lotus at IBM, came to be the CEO of this company. That is going to be an important piece for us to move forward.

WDN: When 724 Solutions makes an acquisition is it focused on the management team as much as the technology?

Greg Wolfond: Absolutely. In this business as well as any business it is the ability to execute the really differentiates. You need to have a really strong plan for who are the people who are going to run the company and how the company is going to run when it comes together. It's not just bits on pieces of paper and numbers on paper. It is what the organizational map is going to look like and how 724 is going to integrate these companies to get a successful product at the end to our customers. So you have to look at management team and you have to look at the organizational map and you have to look at the technology road map, and ask, can I get there faster, can I get the technology we need faster with this. You also have to look at geography, because in this business you need to have people with presence in a lot of the countries and regions, that speak German, that speak Finish, that speak all different languages and can localize the product and work with banks in those regions. For example with Tantau, they have relationships with banks like MeritaNordBanken, SE Banken, Credit Suisse, and you need all of those people with local skills and local languages to turn those applications on and deliver real value.

WDN: What plans does 724 Solutions have in the Asian market. I know Hanvit bank in Korea is a customer?

Greg Wolfond: Hanvit Bank is the second largest bank in Korea and Korea is the second fastest growing wireless market in the world, so that's a pretty good in-road for some of the other initiatives we are working on in that region. We will continue to be aggressive through-out that region and we believe that not only do we have to be successful in Europe and North America and South America, but also Asia.

WDN: In these markets do you have any acquisition plans?

Greg Wolfond: I can't get into specifics. In the end you have make it as easy as possible for the consumer anywhere to use one of these devices. To be able to get done what they want to get done. And you have to make sure that it is scalable and make sure that it is secure. We're confident that we're filling in the road map, evaluating the pieces that we have got, making sure we have best of breed solutions out there, and filling in the geographical map.

WDN: Moving to a slightly different subject, do you think that the wireless market is being hurt internet companies failing? Are Venture Capitalists wary of investing money after so many dot.com companies have gone under?

Greg Wolfond: Well, in any of these business models there is always a little bit of a euphoria and then a return to reality. And I think that those businesses which are not built on sound principles, and that don't say ultimately we've got to earn real profit for our share holders, they are not going to make it. There were some irrational folks out there, and there was some money flowing in a little more freely than had been before. But I don't think it hurts the wireless market in general. I think people are really seeing the opportunity of this market. I think we are very much at the point at which the internet was in 1995, with a lot of hype and excitement, and then when the applications begin to come, it will really begin to boom. Then people can see what this actually does. You are seeing that already in Japan, you're seeing that in Korea, in Europe. You are going to continue to see that at an accelerating pace.

WDN: V.C.'s and established companies like 724 Solutions look for a strong management team and a good revenue stream as well as new technology, and young companies may have a decent product but not a revenue stream or a veteran management team. Is the window of opportunity closing to start a new technology company?

Greg Wolfond: I don't think that the fundamentals have changed. I still think there is a tremendous opportunity for people in the space. But I think that the fundamentals, that to run a successful business, and particularly a successful business of any scale, you've got to be able to attract and keep a pretty good breadth of management. Because those things that work in small companies don't necessarily work when you try to scale them and take them bigger. That's the general problem with the internet, and you will hear the VC's talk about it, right? There isn't enough management breadth and depth in a lot of those companies to take those companies to the level they have to get to.