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

Episode Summary

Executive Summary: Ted Seides interviews Ali Hamed, co-founder of CoVenture, about building an alternative asset manager around “unpriced” opportunities created by technology. Hamed explains how CoVenture combines pre-seed venture, specialty lending, and crypto investing, using software, capital structure expertise, and proprietary sourcing to finance novel assets and workflows that traditional investors overlook.

Main Topics: From athlete to entrepreneur to investor (Priority: 4/5): Hamed describes a baseball-heavy upbringing, a back injury that redirected him from sports, and an early startup experience that sparked his interest in building software and taking risks. CoVenture’s strategy: technology-enabled alternative assets (Priority: 5/5): He frames CoVenture as an alternative asset manager that seeks newly created or previously unpriced assets enabled by software, data, and changing market structure. Software-for-equity and pre-seed venture (Priority: 5/5): The firm began by offering technical build support to founders in exchange for equity, because many startups need help with product development more than cash, especially when distribution and go-to-market are harder than coding. Specialty lending as a source of unpriced assets (Priority: 5/5): Hamed argues that technology enables new lending products with short durations, unusual collateral, or embedded workflows—such as produce receivables, earned wage access, and employee stock-option loans—that banks can’t efficiently underwrite. Crypto as an emerging asset class (Priority: 4/5): CoVenture’s crypto business began as a cap-weighted, diversified index fund. Hamed distinguishes useful token models from speculative ICOs and argues institutional standards are still immature in custody, fund docs, and risk management. Finding deal flow through networks and cross-asset expertise (Priority: 4/5): He explains that CoVenture sources deals from LPs, venture firms, and other managers, and that its lending, venture, and crypto businesses reinforce one another through shared expertise and referrals. Changing venture economics and liquidity (Priority: 4/5): Hamed thinks venture fund sizing, return targets, and liquidity expectations have become misaligned with market reality, and that pre-seed investors should adapt by using tools like SPVs and more realistic return/risk segmentation.

Key Arguments: Technology creates new asset classes and financing opportunities that traditional finance cannot properly underwrite, so the best returns come from identifying assets that are not merely mispriced but effectively unpriced. In early-stage investing, the hardest part is often go-to-market and scaling, not coding; therefore founders should be chosen for the hardest part of the business, and CoVenture adds technical execution rather than just capital. Building software for equity can be more efficient than cash investing because entrepreneurs often need technical help more than money, and alignment is stronger when the firm shares the same upside/downside as the founder. Specialty lending can generate high yields without necessarily taking excessive credit risk when the product is novel, asset-backed, short-dated, and supported by proprietary origination and recourse structures. Crypto can make sense as a store of value or as a tokenized incentive system when token economics improve the platform for both users and creators, but most ICOs mainly benefit issuers raising cheaper capital. Institutional crypto investing requires better security, governance, custody, and fund documentation; self-custody and loosely defined redemption terms are not acceptable for serious allocators. Venture capital pricing and target returns are too static; different strategies, market conditions, and managers should imply different required returns and different costs of capital. Seed/pre-seed investing should be treated as a distribution-and-sourcing business more than a pure branding game, so proprietary channels and differentiated value-add create a true edge.

Data Points: Ali Hamed age: 26 - Ted notes his age as unusually young for a founder of CoVenture. Initial capital raised for the venture concept: $396,000 - Scraped together from personal contacts while testing the software-for-equity model. Funding from fraternity connection: $1,000 - One thousand dollars came from his fraternity little via Venmo, making the raise $396K rather than $395K. ProducePay take rate: 1.0% to 1.25% - ProducePay earns this spread on produce financing transactions. ProducePay financing discount: 40% to 50% of market value - The company buys produce receivables well below market value and advances cash quickly to farmers. ProducePay default rate: de minimis - Hamed describes the portfolio as having very low defaults due to recourse and cross-collateralization. ProducePay volume: hundreds of millions of dollars - Annual produce moved/financed through the platform. Yield on specialty lending assets: mid-teens to low/mid-20s - CoVenture targets these returns on asset-backed lending deals. Employee paycheck advance APR: 20-something percent - A payroll-linked earned wage access product compared with payday loans. Traditional payday loan APR: up to 1000% - Contrasted with the lower-cost employer-linked advance product. Title loan APR: about 500% - Example of a tiny, short-term loan that traditional lenders struggle to originate efficiently. Crypto index size: Top 15 assets - CoVenture’s initial crypto product is a basket of the largest crypto assets by market cap. Rebalance frequency: Every 2 weeks - The crypto index is rebalanced biweekly. Fee structure for crypto index: Flat fee; no carry - Positioned as a cheaper, more secure diversified exposure product. LP base size: Over 180 LPs - Used to describe CoVenture’s sourcing network and investor base. Typical VC check sizes in historical seed rounds: $50K to $250K - Hamed references old seed-market patterns of small, fragmented checks. Typical seed fund return expectation: 3x - He argues this has become an overly static standard across very different strategies. Illustrative venture return target for some managers: 2x to 4x - Used in discussing how allocators might compare managers with different objectives.

Pivotal Quotes: "We try very hard not just to find mispriced assets, but rather unpriced assets." — Ali Hamed: Defines CoVenture’s core investment philosophy in specialty lending and emerging asset classes. "At the end of the day, we sort of felt like a lot of VC firms were built to teach engineers how to become CEOs. But there weren't a lot of VC firms that were built to teach CEOs how to manage their product." — Ali Hamed: Explains why CoVenture pairs technical execution with founders who know the market. "The best engineers are doing as hobbies on the weekend will end up being what we all do in the weekday later." — Ali Hamed: A Chris Dixon quote Hamed uses to describe how emerging asset classes become mainstream.

Implications: CoVenture exemplifies a broader shift toward technology-native finance: investors who can combine product, data, and structured credit may uncover new markets before they become institutionalized. For allocators, manager selection should reflect strategy-specific return needs, not one-size-fits-all venture benchmarks.