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Avaloq Launches Fintech Ventures Arm

Tom Burroughes, Group Editor, London, 14 November 2018

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The firm said the new subsidiary is intended to foster innovation.

Avaloq, the Switzerland-based software and business process firm serving banks and wealth managers, has set up a venture capital arm to support fintech start-ups to keep pace with new technologies disrupting the sector.

The subsidiary is called Avaloq Ventures. It will give funding for fintechs that partner with Avaloq by offering solutions on Avaloq’s Software Exchange platform, for example. The business will be led by Minho Roth, an alternative investments and fintech entrepreneur; it will be chaired by Avaloq’s founder and chairman, Francisco Fernandez.

So far, more than 1,300 third-party fintech developers work with the firm and more than 90 third-party fintech solutions are available on Avaloq’s market place, the firm said in a statement.

The move suggests a ratcheting up of Avaloq's growth strategy. In April this year, for example, it bought a 10 per cent stake in Metaco, a Lausanne-based blockchain and crypto-currency specialist. Avaloq appears to be branching out. The firm said it continues to look at potential M&A deals at a group level. In March, New York-headquartered private equity house Warburg Pincus has agreed to buy a 35 per cent stake in Avaloq in a deal valuing the latter company at more than SFr1.0 billion ($1.0 billion), and described by the firms as a way of accelerating Avaloq’s growth.

“Avaloq Ventures will look to partner with third-party investors such as banks, wealth and asset managers, and established fintech companies in providing capital. The size of funding will be decided on a case-by-case basis,” it said in a statement earlier this week.

Details

This publication asked Avaloq how it intended to choose what start-ups to support and how it will sift through candidates. “Any fintech that has a technology or solution which is mature enough to be selected by Avaloq‘s Software Exchange and generates concrete interest of Avaloq‘s client base is a potential fit for the investment universe,” a spokesperson for Avaloq said. “Not only the solution as such, but also the execution skills of the team will be of importance in the selection process,” the spokesperson said.

Avaloq played down the idea that this venture is a diversification move as such: “Due to the recurring revenues from its service business, Avaloq has a very stable revenue base. The fund rather has the aim to strengthen the Avaloq ecosystem and foster innovation.”

“It is part of Avaloq’s philosophy that innovation does not come from one company alone – this is why Avaloq has strengthened its ecosystem in the past few years, increasingly working with innovative fintechs,” the spokesperson said.

Besides Minho Roth, other board members involved with Avaloq Ventures are Lex Fenwick, previously CEO of Bloomberg and Dow Jones; Professor Dr Philipp Sandner, head of the Frankfurt School Blockchain Center; and James Stickland, previously director of Innovation & Investments at HSBC and part of JP Morgan Chase’s CIO office. Roth has worked for FiveT Capital AG and Baader Bank AG among others.

Hires and launches
The rollout of Avaloq Ventures coincided with Avaloq’s next generation ecosystem.

The firm is launching 150 API endpoints during the second half of 2018. (API means “application programming interface” - software that enables different technology systems to communicate with one another.)

This month, the firm also appointed Martin Greweldinger as group chief product officer, taking up the role on 1 January next year, and reporting to Juerg Hunziker, group CEO. Prior to this, he was principal at The Boston Consulting Group. He was also a core member of that firm’s Financial Institutions and Technology Advantage Practice Areas. Prior to that, he worked for a number of top-tier financial institutions for more than 15 years, including Commerzbank, Credit Suisse and Dresdner Bank. He spent a significant time of his professional life in Asia-Pacific.

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