Gary Fegel is restless. The man who managed to accumulate a billion dollars before the age of 40 doesn’t like to be asked about money. “I’m not enjoying this interview,” he says. “I have no interest in talking about my place on Forbes’ Billionaires List.”
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Fegel, 41, a Swiss Jew who made his fortune in commodities, today controls GMF Capital, which is actually more of a family office than an investment fund. Last month, together with former Prime Minister Ehud Barak, GMF invested $15 million in the Israeli security company FST Biometrics. Founded and headed by Maj. Gen. (res.) Aharon Ze’evi Farkash, the company has developed innovative technology that identifies people not only via iris recognition and fingerprints, but by building a profile of the person that can identify them from a distance.
Fegel, who lives with his wife Yael in Switzerland, splits his time between Zurich, London and New York, and is also a frequent visitor to Israel. “My wife and I believe it’s very important that there be a Jewish state. It’s part of our lives,” he says. Fegel’s parents live in Herzliya and his wife has an extensive network of relatives in Israel.
He joined the Forbes billionaires list after the May 2011 initial public offering of Swiss mining and commodities giant Glencore, where Fegel headed the aluminum business until 2013.
FST is Fegel’s largest investment in Israel to date. It’s unusual in that he has typically sunk his money into real estate.
The process started when Ze’evi Farkash called Barak and asked him to consider investing in the company. “I’ve known Barak since I was a young lieutenant colonel,” recalls Ze’evi Farkash. “When you need money, you turn to all sorts of people – and I turned to him. At first it was just so he could get to know the technology.”
Barak, in turn, introduced Fegel to Zeevi Farkash. “I’ve known Ehud for quite some time,” says Fegel. “I’ve made several other investments with him in cybersecurity, mostly smaller deals ... We spent a lot of time analyzing the company and the people who stand behind it, and came to the conclusion that there’s a special situation here we want to be part of.”
What potential do you see in FST?
“It’s not run by a 28-year-old, but rather by experienced people with a track record. You know what they’ve done – they’re pretty famous [in Israel]. They have real customers, a real cash flow, real deals. Their system has been installed in 140 sites; they identify more than 100 million people a month with an accuracy rate of 99.7%. It’s not a startup; it’s a real company that’s proven itself.”
FST’s technology sounds like something from a sci-fi movie.
“Let’s face it, it’s coming. How many people today have cameras in their homes? How many offices today have security doors? How many businesses want to know what their employees are doing? It’s everywhere. So if you’re asking me about the company’s potential, I think it’s limitless. The question is how fast we’re able to penetrate the market – and that’s why the company is raising money. They’re not doing it so they can develop technology.”
Before Fegel and Barak came onboard, FST had raised $17 million; in other words, Fegel and Barak almost doubled the company’s cumulative investment. Barak will join the board of directors.
What was Barak’s share of the investment?
“He’s not interested in disclosing that information, and I respect his decision.”
Are you still collaborating?
“Yes, we’re friends. We talk a lot about many things, including deals and opportunities.”
Are you planning to make other investments in Israel?
“I take an opportunistic approach. I check out a lot of interesting things. You see many things, but maybe only five of them look interesting – and from that only one ripens into a deal. There’s a lot happening in Israel and we’re looking at many different things, but nothing will be happening tomorrow or the day after. I hope we find more opportunities like this one.”
Doing something different
Fegel, who earned an MBA from the University of St. Gallen in Switzerland, doesn’t speak much about his personal life and insists he’s neither a venture capitalist nor a startups investor. His investment policy is influenced by his past at Glencore, the world’s largest commodity trading firm.
Fegel joined Glencore in 2001 after working at Credit Suisse in New York. In 2006, he was tapped to run the aluminum business.
“I started in 2001 when the market took off, and I left in 2013 when things had changed a bit,” he relates. “After many years there and after I achieved whatever can be achieved as a commodities trader, I changed, the company changed and I wanted to do something different.”
His 1.2% holding in Glencore was valued at more than $1 billion at the time of the IPO in 2011. “When I left Glencore, I thought to myself. ‘Wow, the world is so big, I can do any number of things. I always liked real estate, and it’s a good investment over the long term if you take the proper steps,” he says.
“Private equity is a big concept. In Israel, it’s mostly connected to venture capital and startup investments, but that’s not really what I do and it’s not what I want to do. I’m not a venture capitalist and I don’t want to invest solely in startups. FST is not a startup.”
What do you focus on in private equity?
“I’m not one of those people who believe only in value assessment. Startup investments revolve around valuations, but in my world, valuations don’t mean much. I focus more on cash flow, and concentrate on businesses I like. I’m more of an investor in boring, unexciting businesses. FST is an exception.
“I’m not trying to find the next Facebook, but I don’t think I’d be successful in finding it ... If you invest in a startup, your chances of success are maybe 1%. If you know the industry well, the chances increase to 10%. But mathematically, it means your chances of failure range from 90% to 99%.”
So what’s the key to success?
“I think if you look at successful people, no one is made of the same components. Some of them had a lot of luck, some are smart, some worked hard – and some had all three. I think working hard and setting goals, loving and enjoying your job is part of this. When you enjoy getting up in the morning and like what you’re doing, it helps with your success, but it doesn’t ensure it. If you don’t wake up one morning, it will ensure you won’t succeed.”
With the growing debate regarding income inequality, do you feel a hostile attitude toward the wealthy?
“So there are people who made money along the way – what can be done? I think that along with success comes money, so I don’t think it’s smart to suddenly turn around and ask, ‘Hey, why do they have so much money?’ I wouldn’t want to know what Israel would do without these industries and these entrepreneurs and these great people who did good things. Personally, I don’t think jealousy is a good thing.”
Speeding up airport checks
When Zeevi Farkash is quizzed about FST Biometrics’ vision, the former head of Military Intelligence offers a simple answer: “I want us to be able to get to the airport 15 minutes before the flight.”
To understand what he means, it should be noted that while the company does deal with identification, it’s not simply facial recognition. FST’s identification system is based on additional data, such as height and weight, as well as the analysis of in-motion behavior. The company’s In Motion Identification technology (IMID) makes it possible to identify people from afar without requiring them to stop or even slow down. Those identified do not necessarily know the system has identified them.
“Because FST’s technology involves three layers – biometric behavior, facial recognition and a combination of other technologies – that makes the system more reliable than a trained security officer, for instance,” states Zeevi Farkash.
One example of this is the integration of facial recognition and height data. “If I come to a certain place and the system identifies my face from a distance, it can’t confirm the ID if it’s someone whose height does not match mine.”
Biometric behavior analysis has aroused widespread criticism, because the databases used are privately owned and could be sold or traded without an individual knowing. Even worse, information could be posted online and become common knowledge.
“I’m aware of the criticism and am concerned about this issue,” acknowledges Zeevi Farkash. “We need to find the golden mean. We must set rules and standards regarding how to use the data.”