Taking the risk out of cash
Cash Connect was founded in 2006 as an automated cash handling business – with the intention to provide a secure mechanism for SMMEs in handling cash. It has since evolved into an end-to-end cash management offering (from vault to bank) and, more recently, has added the provision of loan capital for business growth to its offerings, “enabling retailers to move from a place of safety, to a place of growth”. Through the latter offering, existing clients can access operating capital within 24 hours to expand or grow their businesses, with flexible repayment options and affordable daily instalments directly from their cash vault. No asset security is required.
The Futuregrowth Development Equity Fund (DEF) bought a stake in this ground-breaking company in 2013 and currently owns 18% of the business. Futuregrowth also provided debt to the company in 2013 to support its growth ambitions, and this was repaid in 2018. Our investment was used for the manufacture of safes to be put out to market, and to facilitate the launch of Cash Connect Capital, a lending business open to existing clients of Cash Connect who operate in the SMME space.
The DEF has an interest in the promotion and protection of small businesses and was attracted to the offering of a unique end-to-end cash management service to SMME operators. We found Cash Connect to have a sound management team and stable, reliable technology. It is well-regarded in the market place and has a strong relationship with the major banks. The risk of competition is low as the barriers to entry in this space are high. Finally, there is good alignment between the DEF’s objectives and those of the other shareholders.
Cash Connect takes an interest in social issues and consider it important that its employees give their time and support to initiatives that make a difference in the lives of people in its community. It believes that its social upliftment endeavours not only have a life-changing consequence for the recipients, but also boost the morale of its employees.
A socially responsible investment
It was decided, based on the analysis of the end-user market, the SMME angle, as well as the safety and security element attached to Cash Connect, that this deal be classified as a Socially Responsible Investment (SRI):
- Safety and security: given crime stats in SA, the services provided enable an environment of safety and security in the SMME space, which goes beyond the protection of cash. Given the company’s track record (no cash has ever been successfully stolen from a Cash Connect safe), it was found that where a Cash Connect sign is displayed, this in itself is a crime deterrent.
- SMME/end user: The services provided are predominantly to the SMME market. We considered the underlying clientele and concluded that, based on our view that support for this sector falls under the definition of SRI, this deal could be classified as such.