Ali Hamed - Building an Investment Firm - [Invest Like the Best, EP.362]

Episode Summary

Executive Summary: Patrick O’Shaughnessy and Ali Hamed trace CoVenture’s 10x growth and the evolution of his investing philosophy: find overlooked markets early, size risk tightly, and build a firm that can adapt across venture, asset-backed credit, and hybrid capital.

Main Topics: From scrappy sponsor to scaled platform (Priority: 5/5): CoVenture grew from dorm-room beginnings into a multi-strategy, $2.5B firm. Investing where others ignore the frontier (Priority: 5/5): Hamed prefers overlooked, underpriced markets over consensus hot spots. Asset-backed credit as a scaling edge (Priority: 5/5): He argues scale and timing matter most in credit, especially in new asset classes. Real estate and housing supply (Priority: 4/5): He sees housing scarcity and zoning reform as long-term investable themes. Firm building and capital formation (Priority: 5/5): Success depends on matching LP capital to strategy maturity and vintage. People, culture, and mentorship (Priority: 4/5): Hiring and developing sincere, ambitious investors is central to enduring performance.

Key Arguments: Great investing comes from loving investing, not from chasing status or being liked. Fundless-sponsor scrappiness built a useful muscle: differentiate, convince, and underwrite under pressure. Eldridge, Apollo, and Blackstone show different paths to scale, but CoVenture must stay true to its own edge. Older asset classes get competed away and financed by cheap regulated capital, destroying returns. YouTube catalogs and buy-before-you-sell loans are examples of small markets that could become huge. Risk must be sized so a mistake hurts returns, not the firm; CoVenture caps crypto exposure at 5%. In venture, CoVenture wants low-double-digit seed valuations and avoids paying up for fuzzy TAM stories. The firm wins by being willing to be wrong and alone when its thesis is differentiated and well-sized.

Data Points: CoVenture AUM: $2.5 billion - Current scale of the firm mentioned by Patrick and Ali Growth multiple since prior conversation: 10x - CoVenture is about ten times larger than when they last spoke Earlier AUM: 200-something million - Approximate firm size in the prior interview First scale investment outcome: over a hundred times - Ali says the first meaningful firm investment is now up over 100x YouTube growth rate: about a 40% CAGR - Used to justify YouTube catalogs as a large emerging asset class YouTube creator payouts: $15 billion per annum - Annual money flowing from YouTube to creators Buy-before-you-sell loan duration: 90 days, 115 days - Typical short duration of the home-liquidity transaction Buy-before-you-sell LTV: below 50% LTV - Often below this level because mortgages are mostly paid down Buy-before-you-sell vs mortgage pricing: 1.5x to 2x more than a mortgage - Expected return premium for the short-duration asset Housing supply estimate in Los Angeles: 1.5 million more homes - Ali’s rough estimate of unmet housing need Los Angeles housing market size: $450 billion - Derived from 1.5 million homes at $300,000 each Crypto allocation cap: up to 5% of the fund - Risk limit used to prevent existential exposure Crypto actual deployment: 2.5%, 3% of the fund - What was ultimately deployed into crypto deals Amazon inventory shock: $2,500 to $21,000 - Container costs rose sharply during the COVID supply-chain disruption Amazon case outcome: 20 times our money - Some portfolio companies in the Amazon ecosystem returned 20x Refinancing IRR: 42% IRR - Returns achieved on certain deals that worked out strongly VC valuation reference: low double digits - Ali’s preferred seed valuation range in today’s market

Pivotal Quotes: "We were supposed to be like investing in interesting things that we think we'd make a lot of money on." — Ali Hamed: Explaining his foundational philosophy versus status-driven investing "The thing that we think is kind of funny is the older an asset class, it's almost like the worst it's gotten." — Ali Hamed: On why mature credit markets tend to be competed away "We want to be wrong and alone in a way that almost nobody else is." — Ali Hamed: On the value of differentiated views despite career risk

Implications: Listeners should watch where regulation, platform governance, and housing reform create new investable markets before they become crowded.