Ali Hamed – Creative Investing - [Invest Like the Best, EP.71]

Episode Summary

Executive Summary: Patrick O'Shaughnessy interviews 26-year-old investor Ali Hamed of CoVenture about building a firm around new asset classes enabled by technology. The conversation spans CoVenture’s venture, lending, and crypto strategies, its founder-first, domain-expertise-driven approach, and Ali’s view that cost of capital, underwriting, and fund structure are being reshaped by better information and new markets.

Main Topics: CoVenture’s origin and structure (Priority: 5/5): The firm grew from venture support work into venture, lending, and crypto funds. Founder-domain fit and product building (Priority: 5/5): CoVenture backs operators with real industry knowledge and helps build software. Cost of capital and pricing risk (Priority: 4/5): Ali argues static VC pricing is irrational as firms should earn lower cost of capital over time. Venture capital market structure (Priority: 4/5): He criticizes rigid stage labels and formulaic metrics that ignore company-specific underwriting. Lending to new asset classes (Priority: 5/5): The lending business finances novel receivables and cash-flow products that banks avoid. Crypto as a new asset class (Priority: 3/5): CoVenture treats crypto as an indexable emerging asset class needing professional risk management. Media, distribution, and unconventional assets (Priority: 2/5): Ali extends the same lens to podcasts, Instagram, tattoos, and other underpriced digital/offline assets.

Key Arguments: Best investments are businesses with defensible, repeatable edge—not one-off trades. CoVenture builds funds around new asset classes created by technology, not generic categories. Founders with real domain expertise outperform outsiders who only read about an industry. CoVenture helps portfolio companies build software and get to market, not just write checks. VC cost of capital should vary by manager quality; Sequoia shouldn’t price like a new entrant. Seed should prove customer value; Series A should test scalable acquisition channels. Lending works best where tech creates new credit products, like produce finance or payroll access. Crypto needs professional underwriting, not venture-style docs forced onto liquid markets.

Data Points: Initial venture check size for software help: 5% to 7% of the company - CoVenture’s equity-for-build support model for early founders Cash investment range: $25,000, $50,000, $200,000 - Typical cash checks alongside product support ProducePay harvest labor swing: 300 full-time employees to 2,400 - Farm labor expands sharply during harvest ProducePay timing gap: day 50 - First revenues arrive about 50 days after harvest begins ProducePay advance timing: 15 to 20 days - Distributor advances still lagged the farmer’s cash needs Crypto fund size: top 15, market cap weighted, and rebalanced every two weeks - CoVenture’s index-fund approach to crypto LP base size: about 180 - Individuals, fund-of-funds, and other investors across CoVenture funds Deal flow volume: about 1,000 deals a year - Deal flow generated from LP relationships Deal flow volume (lending): about 200 deals a month - Pipeline seen by the lending business Typical crypto allocation suggestion: 25 to 100 bips - Ali’s view on sizing crypto exposure for most investors Average bail: $25,000 - Example used to argue bail bonds are a high-APR secured product Early firm capital raised: $396,000 - CoVenture’s early fundraising total included a $1,000 Venmo contribution Produce finance example yield: high yield - LPs were told the produce receivables paper offered attractive returns McDonald's-like payroll finance return: 20 something percent return - Early wage-access lending example tied to employer payroll data McDonald's-like payroll fee: $1.50 - Fee for employees taking pay early instead of waiting biweekly Venture round target under critique: 20,000 monthly recurring revenue and 15% month over month growth - Ali criticizes formulaic metrics used too broadly in VC

Pivotal Quotes: "Is this a trade or is it a business?" — Ali Hamed: Describing CoVenture’s core screening philosophy "The key word in that last sentence isn't alpha, it's earning." — Patrick O'Shaughnessy: Framing the episode around effort, mindset, and differentiated returns "The only way to make money is to have a contrarian view that is correct." — Ali Hamed: Explaining the tension between consensus and true edge in venture

Implications: CoVenture’s model suggests the next edge will come from inventing new financial products around technology shifts; listeners should look for asset classes others still lack a language to price.