Marc Murphy was a little cautious at first. But the more he read and the more he learned about SPACs, the more his caution turned to hesitancy and ultimately to resistance. His wife, an accountant, and his brother, a strong figure in his life, were also reluctant. “Are you sure you want to do it?” they kept asking him.

And the more he thought about it, the more the answer was no. So-called blank-check companies, which go public with no assets and then merge with private companies, SPACs had exploded in popularity in 2020. Speedier than a traditional IPO and with fewer regulatory hurdles also, they were a phenomenon.

But Murphy was unsure it was the right fit for him or Fenergo, the financial software business he founded in 2008. He believed that the market valued all SPACs as being in the same category, regardless of what sector they were operating in. And Murphy’s company was operating in the hottest space in the world, a sector that was dominating IPOs and M&A activities at massive valuations.

Fenergo develops software for financial institutions that helps them with issues such as regulatory compliance and managing client data and has also expanded into new sectors such as wealth and asset management. Murphy wanted Fenergo, a company that employs 1,000 people all over the world, to be valued against its peers.

 “If I’m putting rockets on the moon or if I’m making banks safer with reg-tech or fintech, everything is labelled as SPAC,” he told himself. “When they’re up, they’re all up and when they’re down, they’re all down. I’m in the sexiest industry in terms of valuations in the world, yet I will be labelled with this dirty word.”

There was one problem, however. Murphy was days away from entering the public markets, through a side door admittedly, via a SPAC. The letter of intent was on his desk. Goldman Sachs had been retained as the banker for the deal. And his main shareholder was the one who had proposed the transaction in the first place.

For Insight Partners, who had led a $75 million funding round in July 2015, it offered a mechanism to cash in on its investment and retain some equity in a fast-growing, high valued company.

Murphy, however, needed a way out. And to find that way out, he needed to find an alternative deal within 72 hours.

*****

Fourteen weeks have passed and the import of what Murphy and his team pulled off in that 72-hour window are now beginning to crystalise. Within that period, he sourced new investors, the French private equity group Astorg and the London-based fund Bridgepoint, to buy out Insight, and convinced Insight to accept the bid. And along the way, his company was propelled into the rarefied world of Irish unicorns, tech companies that achieve a billion-dollar valuation.

But, sitting in the home office of his house in Clontarf in north Dublin, Murphy is both modest and reflective. He grew up in the north Dublin suburb of Finglas – a place he says where “you either get eaten, or you build a ton of EQ” – and he has retained a lifelong passion for GAA.

But his modesty can’t dim his drive or his ambition, and both come through brightly as he tells me the Fenergo origin story, his plans for the future and his views on developing more homegrown success stories.

His drive also comes across as he tells the inside drama of how he pulled off a billion-dollar deal in 72 hours. And it begins with a call to the French private equity group Astorg 14 weeks ago.

“They had been very good to us over the past few years. They had stayed in touch in case an opportunity would arise,” Murphy says.

“I called them one weekend and I said ‘Listen, I’m going to be forced down this path. I’m a little nervous, more than a little, could you pull off a deal? Insight need to be at this kind of number to make it happen’. So, they made a few phone calls, and Bridgepoint got involved.

“Then I had to go into bat against Insight and say ‘Guys, I have an alternative to this, will you have a look at it?’ and initially it was ‘no way’. But what I’ve learned working with private equity is that, when you make it very personal, they’ll listen to you. They need to.

“It is almost like if you find an under 12 hurler. When you hand them over to the minor manager, they need to have the discipline, the work ethic, the skills and you want to be able to say, ‘I had a hand in that’. And that is how they think. Different metaphors of course. So, I had to go to battle. Then a price was agreed. They gave us the deadline; we worked our asses off and we made it happen.”

The deal was confirmed three weeks ago and valued Fenergo at $1.16 billion. It was a validation for Murphy and his team, and also of the sector, it operates within. In a 2017 interview with the journalist Gavin Daly, Murphy said he had a plan to get to €100 million in revenues by 2020 and be valued at €500 million. As it turned out, the company did $107 million in revenues in the year to the end of March 2021 and the company is valued at $1.16 billion.

But, for Murphy, this is just the start of the next phase of the journey. And to really understand that journey, you must go back to 2008 to see how – and why – Murphy launched Fenergo.

A journey of many parts

In 2008, Marc Murphy’s wife Jackie looked him in the eye and gave it to him straight: “You’re crazy,” she told him. “You’re leaving this great job behind.”

And it was hard to argue with her logic. He had studied software engineering at Dublin City University and landed a job with IBM for a graduateship placement. After a year, he joined Ergo, the technology services businesses founded and run by his uncle, the entrepreneur John Purdy. There he built a financial services software business within Ergo, for which he was handsomely remunerated. He played golf with clients a few times a week, was actively involved with his local GAA team in Finglas, Erin’s Isle and had just closed out an MBA.

Now, he was proposing he leave it behind and launch his own business – in the teeth of a growing economic storm. Jackie’s argument was persuasive, but there was something within Murphy that wanted to go it alone, that wanted to be his own boss. “You’d never do it as a 43-year-old. Twelve years on, you’d never do it. You’d be too balanced, too thoughtful, too many scars. But what I did have was a bunch of confidence and a lot of determination,” he said.

The idea was to spin out his business unit from Ergo into a separate company. Purdy consented and put up some money to help. The original idea was to help banks get around the regulatory challenges of opening accounts. However, within months of launch, that was a busted flush. With the global banking industry in crisis, they were more interested in closing accounts than opening them.

Murphy had mortgaged his home and was leveraged up to the hilt. He had borrowed money from his father. His uncle was a shareholder. And the money was burning fast.

“What did I have? I had dumb confidence and determination and the wrong business at the wrong time,” he says. “I was up shit creek, pardon the French. This was just the wrong idea at the wrong time, and I needed to just pivot the business.”

Things were so bad that Murphy and his team could not even get a meeting with a bank, let alone sell them software.

“We had 12-15 months of just banging doors. I was flying into London, Tuesday to Thursday every week. Just trying to do what I was doing in Dublin. Networking, building relationships. You’d meet great people but they’d be like, ‘Marc, don’t know you. You are tiny, a big bank is never going to sign up with a firm of your size,” he says.

Others simply told him they did not need his software.  The old sales tactics of lunches were not working. “I had to build new muscles and the new muscles I had to build was to have the best product, in the best place, at the best time,” Murphy says.

So, he took a decision that would, in hindsight, represent a remarkable turnaround: he walked Howth head with his senior team.

“We walked and we talked and then we pivoted the business. We asked: where are banks going to spend money? The answer was regulation. It was going to be centred around regulation and that continues to be our unique selling point today. We’ve a regulatory brain that covers regulation for banks in over 125 countries. We do it across a ton of stuff, around know your customer, around money laundering, around counter-terrorism financing,” Murphy tells me.

“So that’s the kind of space we operate in. Billions, there are billions in losses potentially for banks. So, we’re going in asking for large seven-figure sums. But it is rounding errors for a lot of these guys. So that pivot was the moment that changed everything.”

But it was not the only moment. Another milestone was when Murphy heard a fintech entrepreneur from Co Louth give a speech. Enter Paul Kerley.

Look west not east

Paul Kerley was an Irish tech entrepreneur back when Ireland had very few tech entrepreneurs. He founded, floated and sold financial software Norkom Technologies, and counselled a host of fledgling start-up founders over the years.

At a 2010 event hosted by Enterprise Ireland, Kerley gave a speech. Sitting in the audience, Murphy was left with his mouth open. “I’m thinking, I need to get to know this fella. He’s going to teach me all the things I don’t know about internationalisation, selling to big banks, being unique,” Murphy recalls.

He tracked down Kerley and gave him the Fenergo pitch. Kerley, however, initially wanted nothing to do with him or his company, telling Murphy, “This is a slog in a bog. You don’t want to do this.” Eventually, Murphy brought him round, and Kerley signed a seven-figure cheque on the condition that Murphy stay with him every Monday afternoon.

“I’d done the theory MBA up in DCU. This was the real-world MBA. I used to dread on a Sunday, the thought of having to sit with him for a half a day because he bashed me, he bounced me off walls – in the best possible way,” Murphy says.

“Paul kept saying to me, ‘It took me 13 years, we’re going to do this in six, that’s what we’re going to achieve’. And he really drove into me, and I think about business the way that Paul does. I read balance sheets, I read P&L’s, I think about cost, I think about investments. I did my apprenticeship under Paul Kerley and really, I couldn’t speak highly enough of the man. And he’s done incredibly well off the back of our journey, but he deserves every cent of it.”

In addition to money and mentoring, Kerley also helped reshape strategy. Instead of wasting time in London, he told Murphy to look to the US. It paid off, and in the summer of 2011, Fenergo signed up State Street, Scotiabank, Bank of Montreal and Sun Trust. Murphy attributes the success of that summer to an entrepreneurial spirit in the US that does not exist in Europe.

“What was the turning point? It was a combination of meeting Paul and him telling me ‘Fly west, forget about flying east’, and then capturing those banks. Those three things together really gave us a starting point or a foundation, under which the business has been built,” he said.

By October 2013, the Ulster Bank Diageo Venture Fund, managed by Investec Ventures, had invested €4 million for a 20 per cent stake, valuing Fenergo at €20 million. Two years later, in July 2015, it was valued at $110 million following the Insight Investment. Today, it is worth $1.165 billion.

*****

Marc Murphy on scaling globally

“There’s a fabulous book for any budding entrepreneurs, particularly in software but it applies across any industry, called ‘Crossing the Chasm’ by Geoffrey Moore. It talks about this curve, where you segment the customer bases. Up the top of the curve, you have laggards and down at the start of the curve, you have the innovators. You have those with the entrepreneurial spirit and that’s what you get in North America, you don’t get that in Europe, it’s more conservative.  So, for example, we’ve won in clusters. We have every large bank in Australia, we have every large bank in Canada. Right now, we’re winning the Nordics. So, we have eight of the large ten banks in the Nordics. We have four of the large five banks in Japan.  So, they buy together. It’s a peer-based buying eco-system.”

A twin track economy, and why it needs to change fast

Marc Murphy has been thinking a lot about Ireland’s industrial policy and the role played by homegrown enterprises like Fenergo. He believes that the market is currently skewed in favour of multinationals and would like to see additional resources ploughed into indigenous enterprises to help more companies scale and succeed like Fenergo.

Every day, he faces a battle to prevent his staff from being poached by foreign giants who get IDA supports. Murphy says Fenergo will be just fine but worries for the next generation of businesses coming through. This is a theme that he brings up on a number of occasions during our interview.

Ian Kehoe (IK): Talk to me about the future, about how we can create more companies like Fenergo?

Marc Murphy (MM):  We need to focus on a key question: “How do we build, indigenous Irish businesses to compete on the global scale?” Because we can, and we do and there are tons of examples of it. And it’s only when you go abroad and you realise just what we can do. We’re better than so many others.

And honest to God, when you go around the world and you realise how well educated, we are, or how strong we are and then the cop on that we have. We have that in spades and when we start marketing that on a global scale by building our own businesses, that’s when we’ll realise our potential. And that’s what we need to start doing right now. Relying too much on FDI, that is going to catch up on us and we’ve really got to pivot fast into investing in local and homegrown businesses.

IK: Do you think we do that well enough? Because it often strikes me that more infrastructure of the state goes into FDI and it’s been that way since the sixties.

MM: It’s a bugbear of mine, you know. We’re fine, we’ve built a great business. We’ve had a bunch of US money backing us, a bunch of our clients in Europe. So, we’ve been fine. Enterprise Ireland was very good to us at the beginning. And the IDA and Martin Shanahan have done an amazing job. But where is the agency that’s equivalent to that, that’s focused on Irish business?

Enterprise Ireland is amazing from zero to a hundred. We’re a hundred-million-euro revenue business today. This year we’ll be at 125 but who is working with us to get it from 125 to a billion? Because at every 100, I’m adding extra jobs locally for that. And I just think there isn’t that focus and emphasis on it.

But this is what we’re going to have to do when the tax regime morphs and neutralises the unique position we have.

IK: If you were a foreign business, you would receive sweeteners and incentives to locate here.

MM: Completely. Look, I’ve my own shit to be getting on with and we’re fine. We’ve built our own but if we’re serious about our country, and I’m a very proud Irishman, but if we’re serious about the country, we need to invest. These folks won’t hang around. If Apple or Google had to pay 30 billion here or 20 billion somewhere else, it’s tally-ho. As we saw with manufacturing in the past. That’s just the nature of it, so, for me, it’s one thing you say, we could do so much better.

Later in the interview, the topic comes up again.

IK: What about the need to invest in scaled businesses as opposed to scaling businesses? How can we carve out a kind of leadership position in this area?

MM:  We’re obviously doing what I would call the less sophisticated things around the data centres. And that’s good that some of that is coming here and you’ll hear that it is because of our climate and whatever. We’ve covered that and that’s a starting point, but we’ve got to be doing what Intercom is doing, what Workhuman is doing, what Fenergo is doing and build big technology businesses. It doesn’t just have to be software. Look at what has happened in other parts of the world, they have created certain reputations. Like cyber is so topical given what happened with the HSE. Israel has an amazing reputation around cyber and they invested very heavily. There are more unicorns being built in Israel than any other country in the world because they’re looking at investing in that.

IK: You have talked about tax and also Brexit. What is your overview of the Irish economic outlook?

MM: My own view is that we almost have a two-class economy. Every day, we have every big brand trying to poach our staff.

IK: Really?

MM: Yeah, we have very experienced financial tech people. So, Stripe, Amazon, Google, LinkedIn. We’re a hot bed for them or a pool for them to come fishing in so that’s very challenging for us and the pressure on salaries and wages is incredible.

Like I hear salaries in other industries and then I hear what we pay graduates. What we pay people with two years’ experience it’s almost double, you know. It is just because of that ecosystem we’re in, I see that and then you’d just see the other side. I looked out the window of my office, all the cranes down at the east docks. There’s a commercial real estate crash coming in my opinion. Look I’m here telling you there’s going to be half, a quarter of the people coming to the office, I’m giving up my second building. Where are all of these going to be filled? And I was doing a bit of analysis on it because we’d like to move. And I was just looking at what happened in 2008 and it was only in 2010 when the commercial real estate prices really crashed, we knew it was coming, everyone was talking about it and I had a couple of the real estate people in and to hear them talking it up. I’m laughing in their faces, going, “Lads, wake up and smell the coffee here, this is coming at you”.  So, we’ll sit tight, we’ve a good lease there. We’re happy but for me, there’s a crash coming there.

*****

A group of five

And then there were five. Since the term ‘unicorn’ was coined in a November 2013 blog post by venture capitalist Aileen Lee, there has been a handful of Irish-founded internet-based privately held companies worth more than $1 billion. The others are Stripe, CarTrawler (its value has since fallen), Workhuman and Intercom.

If Murphy is giddy at joining the list, he is not letting it show. Instead, he is looking to the future.

IK: Does achieving the status mean something to you, or do you care? When the deal was announced you said: “Our new backers believe we can become a much bigger business and they want us to build a $5 billion company, rather than a $1 billion one so we’ll be growing the company significantly over the coming years.”

MM: In the market, we’re in, we have owned the corporate and institutional banking space. We have just started touching the commercial banking space and that’s ten times the size of the corporate institutional banks. Then you’ve got retail banks which is ten times more.

IK: So there is significant room for growth?

MM: So, the amount of addressable market around us is huge. The team around me is young. I’m 43, and most of the team around me are in their early 40’s.

IK: You could have stepped back?

MM: It’d be great to go to all the regional finals, wouldn’t it? A Munster final, the Ulster final. Stay for a couple of pints after, that’d be great. Then when the kids are back to school in September, you’d be scratching around to say, ‘what am I going to do?’

But to have what we have, all of the senior people are in Dublin. Our CTO, Niall (Twomey), is in Cork. It’s an Irish centred business and we have, if someone said to you in 2009, you had the balance sheet money, you had over 150 of the 250 largest banks in the world on the platform, you’ve got this incredible team with 12 years’ experience, you can’t create that again. And so, now particularly for me, the pressure is off me physically. Like two years ago, I did 185 nights away from home. 

So Covid has been very good to me. But it’s also taught me now that I need to work now on the business, not in the business which I had been. There’s a fire! Put it out. Where are we flying to? We need to get a deal closed, here I go, where are we going?  And that was the done way.

That was doing the 26 miles of the marathon into the wind. Whereas I think there’s a much easier way to get the outcomes we want.

IK: It’s a really interesting way of looking at it. That phrase there is just resonating with me. Just working on the business without getting wrapped up in the day to day.

MM: Back in the day, people were like “Get him back on a plane”. I was doing everyone’s head in. The business that we are today, is more efficient, it’s better run, we execute better, we deliver better for our customers. Everything has been transformed for the better, because of it.

IK: Fintech is booming right now. Has much of it been accelerated do you think by Covid?

MM: It’s definitely been accelerated. Banks are under huge pressure to digitize, automate and bring efficiency because of how we behave – be it ordering a takeaway at the weekend, or buying something on Amazon. It’s two clicks and it’s there tomorrow. So, banking has to be at that level, or it will be replaced. We know of N26s and Monzos, Revoluts who are racing up and coming after them. But the big thing was, the idea that, banks, for us, with banks, particularly clients and regulatory data, had to be on the premises. Now it’s such an easy pitch. If I’m doing this on AWS or I’m doing it on Azure, it’s 25 times safer than that empty building where your data is and there’s nobody in there. So that became very powerful.

Personal investments and flotations

When you have built a unicorn from the ground up in your early forties, just what do you do next? For Murphy, the answer is to stay where he is – both in life and in work. As part of the Bridgepoint deals, he has signed up to another three years, at least with Fenergo. In the past, he has talked about taking the public through an IPO (not a SPAC) and that ambition and intent of a float remain intact.

“We’re going to sit down in June with our new backers and map out our north star. Do they want to take it public? Do they want to build for a strategic exit in time and so on? So, we’ve options to choose. There are not that many multibillion Irish businesses listed on the US markets. Now, these are European bankers, they may have a different view about which market you’d go on. But for us, in the US there’s an educated buyer ecosystem that knows how to price and value a business like ours,” he says.

And while much of his personal wealth remains tied up with Fenergo, he is also starting to take stakes in other businesses.

“I’ve also got an investment vehicle, I’ll be doing a few and I’ve done some in the last few weeks. A few personal investments as well so I’ll be tipping away at that stuff too and always looking for good ideas, businesses. I did two locally, I did one in Germany and I did one in the UK. Small enough twists, but enough to have a spread. I know what I am looking for now, particularly businesses in my ecosystem. I can see a winner – I’m not into horse racing, but I’m sure the trainers know a good one when they see it,” he says.

“So that’s the short-term plan. But it is also about balance. I have been on the road for eight, nine years. That takes its toll physically. I’ve always been active, running, cycling and I always keep that, because it keeps the head good. That’s been huge for me. But now I’m just doing more, it’s more structured. I’m part of the school run every morning at home. And there is a lot of drama that goes with that.”