Ali Hamed - Novel Asset Investing (Capital Allocators, EP.40)

Episode Summary

Executive Summary: Ali Hamed traces how CoVenture built a differentiated platform at the intersection of venture, specialty lending, and crypto by backing or financing “unpriced” assets created by new technology. He argues technology creates novel credit and equity opportunities, and that early-stage investors should focus on helping founders reach market while providing capital structure expertise and liquidity solutions.

Main Topics: Ali Hamed’s background and entrepreneurial path (Priority: 5/5): Hamed describes growing up around baseball, pivoting from a potential pro sports path to startups after injury, and learning resilience through an early failed startup and scrappy survival on the East Coast. Founding and evolution of CoVenture (Priority: 5/5): CoVenture began as a scrappy venture effort built around providing software-for-equity and expanded into a multi-strategy firm spanning pre-seed venture, direct lending, and crypto assets. Investing in unpriced assets and new credit products (Priority: 5/5): Hamed argues that technology creates assets traditional finance cannot underwrite well, such as short-duration receivables, employee pay advances, title-like loans, produce financing, and options-backed lending. Producer Pay and specialty lending as a case study (Priority: 4/5): Produce Pay illustrates CoVenture’s thesis: technology enabled financing produce receivables with strong recourse, low loss, and high barriers to entry, turning an overlooked niche into a high-quality financial asset. Crypto investing and the evolution of token economics (Priority: 4/5): Hamed explains CoVenture’s crypto fund as a diversified cap-weighted index product and distinguishes store-of-value crypto from tokens that genuinely improve network incentives and platform economics. Pre-seed venture strategy, sourcing, and liquidity (Priority: 4/5): He argues pre-seed investing is like consumer marketing, so CoVenture uses proprietary distribution via LP referrals, VC referrals, and its other funds to generate deal flow and manage illiquidity with structures like SPVs. Manager selection, capital allocation, and pricing of skill (Priority: 4/5): Hamed contends top managers should have different required returns based on strategy and track record, and allocators should match fund choice to their target return rather than assume all venture funds are the same.

Key Arguments: Technology creates entirely new asset classes and credit products, not just cheaper versions of old ones; CoVenture seeks those "unpriced" opportunities rather than merely mispriced ones. Founders should be paired with the hardest part of the business: as software becomes easier to build, domain experts and operators become better CEOs while technical help can be provided in exchange for equity. Alternative lending can be attractive when it finances short-duration or hard-to-underwrite assets with technology-enabled underwriting, recurring customer relationships, and defensible distribution. CoVenture’s lending and venture businesses reinforce one another: lending creates yields and data, venture creates access to founders, and crypto expands visibility into a separate emerging asset class. Produce Pay shows how a niche receivable-finance business can deliver low-default, asset-backed returns because technology reduces friction and recourse structures reduce risk. Crypto should be assessed by use case: Bitcoin as store of value, and tokens only when they improve platform economics for both users and creators; most ICOs fail that test. Institutional crypto funds need strong custody, careful documentation, and experienced managers because early market participants often lacked proper fund controls and liquidity management. Venture capital pricing is too static; return targets should vary by strategy, manager quality, and asset conditions rather than defaulting to universal 3x expectations. Allocators should choose venture managers based on fit with their required return and time horizon, not just on co-investment access to top-tier funds. Illiquidity in venture is worsening, so managers must provide creative liquidity solutions and be willing to adapt rather than tell LPs to simply wait longer.

Data Points: CoVenture founding age: 26 - Ted Saides notes Ali Hamed is only 26 during the interview. Initial capital raised for early software-for-equity work: $396,000 - Hamed says he and partners scraped together this amount to test the model. Produce Pay produce transaction take rate: 0.25% to 1.25% - Hamed describes Produce Pay taking a point to a point and a quarter on financed produce transactions. Produce Pay financing advance rate: 40% to 50% of market value - He explains the farmer sells grapes to Produce Pay at a discount for immediate cash. Produce Pay scale: Hundreds of millions of dollars of produce last year - Hamed says the company moved hundreds of millions of dollars of produce annually. LP base: Over 180 LPs - CoVenture now has more than 180 limited partners. Crypto fund portfolio size: Top 15 crypto assets - CoVenture’s crypto product is a basket of the top 15 assets by market cap. Crypto fund rebalancing frequency: Every two weeks - The index-like fund is rebalanced biweekly. Crypto fund fee structure: Flat fee, no carry - Hamed says the fund charges a flat fee and does not charge carry. Employee pay advance APR example: 20-something percent APR - He contrasts technology-enabled wage access with payday loans. Traditional payday loan APR example: Up to 500% APR - Used as a comparison for abusive short-term lending. Short-term employee advance return: Mid-20s return - Hamed says they can earn mid-20s returns on a Fortune 500 employer-backed product. CoVenture deal size example: 2.5x the whole fund - He cites a company where the next round would mark the investment at roughly 30-40x and equal about two and a half times the fund. Potential valuation step-up: 30-40x return - The example company’s follow-on round would create this paper gain. Example loan stock option product: Employee stock options from private companies - SecFi lends against employee options to improve tax efficiency and provide liquidity.

Pivotal Quotes: "We try very hard not just to find mispriced assets, but rather unpriced assets." — Ali Hamed: Describing CoVenture’s core investment philosophy in specialty lending and new asset classes. "Our solution has been to turn our little pre-seed seed business into a B2B business." — Ali Hamed: Explaining how CoVenture sources deals through proprietary distribution rather than generic marketing. "The term valuation is broken." — Ali Hamed: Discussing how capital stacks and preferred structures make simple headline valuations misleading in venture.

Implications: The conversation suggests finance will keep fragmenting into niche, tech-enabled asset classes, rewarding managers who can underwrite complexity and build proprietary access. For VCs and allocators, specialization, flexibility, and liquidity management may matter more than broad labels or standard return assumptions.