October 21, 2005
Pay by touch gets funding from unconventional route - Hedge Funds
What happens when innovative financing backs revolutionary technology - a sure shot winner in the making! Such seems to be the case with San Francisco-based Pay By Touch. Pay By Touch Solutions develops retailer payment systems using "biometric" touchpad technology. This revolutionary technology enables customers at departmental stores or elsewhere to use their fingerprints instead of the traditional credit cards. All they have to do is have their fingers scanned by a device, which identifies them and there after authorizes payments for the goods bought at the outlet.
Stores like Piggly Wiggly in Carolina have already adopted the technology and offers it as another payment option. Some more stores like Albertsons and SuperValu in the U.S. and OSG Co-Op in the U.K are on the brink of introducing the service.
The company recently raised $130 million in financing, largely from hedge fund investors. For venture-backed growth companies, this is a rather uncommon path to follow. They usually get all their financing done by VC firms that take a part of the equity in return for the money they put in. Pay By Touch Solutions on the other hand was interested in debt financing that would leave their equity alone.
The additional funds have been garnered $75 million by way of senior secured notes from Och-Ziff Capital Management, Farallon Capital Management and Plainfield Asset Management. Add to this $55 million was raised in convertible preferred notes. In this case, Getty Trusts and Ron Burkle, founder and managing partner in the Yucaipa Cos played a major role.
Apart from this, the company was confident that for this type of business they did not need help in attracting management talent, which comes in as a package deal when one deals with VCs. They have however brought on board John Morris who is a former senior IBM executive. John will be the company's president and chief operating officer. Today.reuters.com reports:
"An additional $55 million was raised in convertible preferred notes, with investors including the Getty Trusts, an original backer of the company, and Ron Burkle, founder and managing partner in the Yucaipa Cos., and others. UBS advised Pay By Touch"
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