The Avaloq founder is knee-deep in his various startups. He just restructured agritech Innoterra and is now on the prowl for investors. As a 61-year-old, he loves building things just as much as he did as a child, he tells finews.com in an interview.


Mr. Fernandez, you sold your life's work, the banking software developer Avaloq, to NEC, the Japanese IT group. Has it all become a distant memory in the meantime?


Not at all. I still sit on Avaloq's board and I am chairman of the former Avaloq venture capital fund Five T Fintech. We are currently preparing to launch a second fund focusing on startups in the distributed ledger technology space. I am still heavily involved in fintech.



But Not only that?



I had a so-called liquidity event when I sold parts of Avaloq in 2017 to financial investor Warburg Pincus.

«This kind of intensity is what makes life worth living»

At the time, I had already started building several new companies and increased the general scope of my business activity. Such as doing things in e-sports with the Formula 1 simulator Racing Unleashed or in property with Crowdhouse. Innoterra was about supply chains for healthful agricultural products cultivated or bred by small farmers. I always knew there was going to be a life after Avaloq and I still had the energy to start everything from the ground up again at all these companies.



That sounds like a full schedule.



Right now everything is even more intensive than it was at Avaloq. I work nearly 80 hours a week.


You are one of the wealthiest individuals in Switzerland and are 61 years old. You no longer need to be doing anything.



For me, this kind of intensity is what makes life worth living. I always want to challenge the status quo and find out where I can really contribute to society. That gives me personal satisfaction.

You have also shown - repeatedly - that you are an exacting and savvy businessman. Given that, where do you see the sweet spot in the market when it comes to Innoterra?

Wholesome nutrition for the world's population. It is an issue that makes Innoterra compelling. It is not just about food production. But more about supply chains and the question as to how products that are good for consumers get from the farm to the table – as well as how to make that more efficient than it is now. It makes a good deal of sense to use the potential of over 500 million small and medium-sized farmers who already produce 80 percent of all food in emerging markets.



Are there any hurdles in the way?



Those kinds of farmers are in weak positions socially even though they are tremendously important to the world's population. They have limited access to markets, capital, education, and infrastructure. They frequently live below the poverty line. Simply because of their significance, they should be in a position to earn a reasonable living. 

«We had to manage at least five crises at Avaloq»

That is where Innoterra comes in. We buy rice, spices, fruit, vegetables, and milk from the farmers and link them by way of a data-driven platform to buyers worldwide. The use of modern technology makes demand and supply more transparent and much easier to balance.



Have you gone from banking software to selling rice?



We distribute rice and spices from India to the wider subcontinent itself, but also to the Middle East, Africa, and in the meantime even to America and Europe. Our revenue is between 50 and 60 million Swiss francs ($66 million) with 200 employees. We already have positive margins given that we don't work with local agents and intermediaries while automating trade. We are also showing the world that you can do it - even in that area.

That is a typical fintech claim. Get rid of the middleman.



We weren't trying to do that with Avaloq. We were never trying to get rid of the banks, but simply ensure that all market players were working more efficiently. At the end of the day, Innoterra is also an efficiency play.



But the startup had to cut costs recently. Innoterra used up a great deal of capital but it remained behind its original targets. What happened?

Entrepreneurial success is not like some kind of escalator constantly going up. It is much more like a street full of potholes. That is true for all companies. I remember that we had to manage at least five crises at Avaloq. Even Charles Darwin thought that it was not the biggest or the strongest who survived but the most adaptable.

That means?



The environment for startups has changed. Venture capital investors used to pay for sales growth. Now they are more on the hunt for profitability. A startup has to be able to react to that.

What does that mean for Innoterra concretely?



We strengthened management and governance, made the products more uniform, and shrunk the company to a size that made more sense - one that was rigorously focused on operational processes. In February, we managed to break even. It is simply amazing what can be achieved in a short time. I am very happy with what the new management team has been able to do.



Did you have to fire anyone?



We divested certain areas but we also recruited new employees. That is something that happens when a company that size has to adjust its capacities.


Startups burn through capital. Are Innoterra's finances secured for now?



I always try to make every company profitable as soon as possible. That gives management entrepreneurial freedom. Companies should be able to finance themselves from their clients, and not through investors.

«At the time everyone said: forget it»

Innoterra has practically achieved profitability on a month-by-month basis at least. That has prompted us to launch a new financing round to get new capital and investors. We have already closed almost half the round successfully. Now we are working on the second tranche to get over the finish line. 


Are you also investing in it yourself?



I continue to support Innoterra with my money, time, and my network. I am there through thick and thin.



Does the same hold for the other startups that you have been investing in since 2017?



It is like every other portfolio. When you take a snapshot, some companies develop quicker than others. Right now we are seeing a massive amount of momentum in the areas of health and artificial intelligence. The e-sport area is also seeing double-digit growth rates. In other areas, we have to make adjustments or even restructure. If that wasn't the case, you wouldn't need managers anymore.



In 2022, you moved Partex, originally a German company, to Zug. The healthcare startup used artificial intelligence to look for active substances necessary for the development of cancer treatments. You also played a part in Utopia, a music royalties startup. With Racing Unleashed you are using a very hyped-up tech. Have you always had a good sixth sense for investments - or just luck?



I was already researching artificial intelligence 30 years ago at the ETH Zurich. At the time, everyone said: forget it, it is just a toy for scientists, and that it would never work economically. But we already proved then that people could build machines that could learn by themselves. Now we are seeing all that being implemented because of the massive improvement in computing capacities. But I only use AI where it has a use and helps the business model.



AI is highly controversial. Are you in favor of the technology?



I am a fan of technology and I try to capture trends very early on. I was already preoccupied with Blockchain and Bitcoin about 12 years ago and with AI three decades ago. If I get the feeling that technology can change society, I am there.



That naturally leads to the next question. What is the next hot tech trend that you see?



Anything that has to do with longevity or the search for factors that prolong lives, has potential. In Western countries, life expectancy has risen by about 20 years on average over the last 50 years.

«I used to love building things with Fischertechnik or Lego when I was a kid»

We want to live longer and better, something that has to do with the right nutrition. That is why we are currently analyzing the superfood industry with Innoterra. We are trying to find out how to care for ourselves with healthful food. We won't only be living in the Metaverse in the future.

Are the artificial worlds of the Metaverse science fiction in your eyes?



Artificial intelligence is going to change or get rid of millions of jobs. Maybe we won't be working eight hours a day, but only three. A key question will be how people keep themselves occupied with so much free time. That leads us back again to e-sports.



But you are working more than you ever have. What do you think personally about the vision of prolonged longevity? Do you find that is something we should all strive for?



Everyone wants to live as long as possible. For myself, I would like to do that qualitatively. I want to live intensively. Contribute. Build new things. I used to love building things with Fischertechnik or Lego when I was a kid. If something useful comes from that, even better.


Francisco Fernandez is the founder of Avaloq, the Swiss banking software developer sold to Japanese IT group NEC in 2020 for $2.2 billion. He continues to sit on the company's board and he is also active as an investor in various areas, among them companies that focus on artificial intelligence and cloud technologies fintech, agritech, proptech, e-sports, healthcare, and music. Fernandez, who grew up in Lucerne, has Spanish roots. He studied information technology and economics at the ETH in Zurich.