YouSaid · the spoken record

Ali Hamed

lines on the record: 89
first: 2018-01-09
most recent: 2018-01-09
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“That is a weird conversation to switch to. And they were like, I trusted you. Like, we had a few people redeemed because we're doing crypto. They're like, I can't trust you to do lending. If you're also going to do this Bitcoin thing, Larry Fink thinks it's like an index on the bad people. You know, I'm like, oh God. So those are probably the main two.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“Percent of people were going to think was awesome, and 80% of people are going to think it's idiots. The other part that I felt most exposed was when we started a crypto fund, honestly, because you have to understand at least half of our LPs have made money with us doing asset-backed lending. So I went from explaining why a low LTV over collateralized loan with great”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think when we put our name behind a thesis and venture that was really weird, you know, I think that when we first started, everyone wanted to find the next sort of app developer who was sort of obsessed with the design and had this like single page scroll website was like, all right, these app kids are going to build every company that changes the world. And we were like the curmudgeons who were like, yeah, we actually don't think you have to have a technical founder. And we're going to put our name behind that and we're going to go back people who like, God forbid they're not in their 20s and like app developers. We're going to go back people in their late 30s who've been industry executives before and we're going to build a tech company. There were VCs who were like were angry with us and wouldn't meet with us. It was really scary to have my name associated with that because they were like Ali Hamid in my inbox for stupid idea next. Never want to talk about that guy again. It was really scary to skip those intros and try to introduce something that I knew like 20”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“Can't just suddenly embrace the blockchain because they have a business that they might hinder. That allows a startup with nothing to lose to go after it. The larger the startup becomes, all of a sudden becomes a big company. Now they have a lot to lose. So I would say that later today I'll be incurring more risk than I will right now and tomorrow more risk than today.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“Every single day, I am exposed to more risk because my opportunity cost grows more. So on day null, there's less risk because you have almost no opportunity cost. I didn't have a fund, so my worst case scenario is I didn't have a fund the next day. So I can take some amount of risk. By the way, when you're underwriting a manager, you should try to figure out how much personal risk they have. And one way people do that is, oh, how much is the GP committed to the fund? I hope it's one to two to three percent of the fund. That's part of it, but it's also like how much do they have to lose from their reputation. So I would say, you know, we've now built a firm where, look, we've made money for people. The returns, I think, have been good enough where we're having people stay with us and grow with us. So every day thereafter, we have greater risk, and I personally have greater risk because I'm getting more and more to lose. I think that's actually a competitive advantage to newer entrants. It's just like when in like a large company won't go into a new space because they have more to lose. Microsoft.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“Like, I might just take a really long time to deploy the cap on you guys have to be okay with that. I think having that steady capital base that says, look, we're going to bet on you for three funds. And in 10 years, you're going to hit a home run. Don't do anything stupid just because this is like the fund that you feel like is going to make or break. Imagine if you were a baseball coach and you told this kid who was on your team, you said, look, all the scouts are here. You have to have a game. They're only going to see you for one game. You have to have such an amazing game that they're going to draft you in the MLB. You'd have most kids go up there and try to hit three home runs in the game and not do very well. If they said, look, you're going to be the starter for this whole season. The scouts are going to be at every single game that you play for 30 games. Just be you. You're going to have a great season. You have to sort of put someone with a capital base to succeed where they're not like every bet is all or nothing. And if I don't return 5x, I won't get my capital back. So it's sort of building long-term relationship with the LPs.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“With information. Hey, here's a company. It just had this announcement. Here's ways you can help make those asks really, really specific. In terms of the people who shouldn't be invested in venture, probably most of the world, like it's a liquid, it's scary. We have a crypto fund and we happen to think everyone should have 25 to 100 bits. So their assets in crypto, maybe that's right, maybe it's wrong. But the minute you're putting more than that in, like any speculative asset is scary. And if you aren't prepared to lose it, also if you are taking a swing where you think this is going to be the only fund I'm going to invest in, that's probably not the right way to think about being an LP in a fund. So the worst thing you can do for a VC firm or a VC manager is say, I'm going to give you capital. You have to deploy this capital within three years and I have to get 3X my money back or I'll never invest with you again. And the reason I say that is like some years just sucks to be a VC and some years it's going to be hard to find deals. And I think you had Shil on the last week's podcast. Like he said something really good, which is”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“So we've gotten really lucky. We've actually had an incredible LP base. So, any answer I give you on what makes someone not a good LP would be sort of what I can imagine. We don't deserve the LPs we have. And what we've done is, so we have about 180 either individuals fund of funds or something other across our various funds. They've become a huge source of deal flow because a lot of them are from the tech world. They've either started companies, they've started VC firms, some of them have been presidents of banks, some of them have run large private equity firms. So out of 180 people, we probably get 1,000 deals a year just from them. And then we've actually built communities within our LPU. So about every two months, we have one of our LPs give a talk to the rest of them about a new topic. How to buy a sports team, like introduction to the blockchain. What was the financial crisis like from the executive committee of a bank? And so we've created this cool community that keeps us top of mind. A lot of it is just being incredibly plain offense all the time.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“We went out and raised any dollar we could. We raised $396,000. We were trying to raise $395,000. We raised $396 because my little and my fraternity gave me $1,000 on Venmo. And I ended up giving him his first distribution back on Venmo. And I was like, crap, how do I put this in the books? And now he works at Coventure, by the way. So it's pretty awesome. So he worked at an investment bank. And this was an investment bank that when I was in college, I didn't even get an interview for. But he said that now when they go back to universities on their sly exit opportunities after the investment bank, they have our logo. You can go into venture capital after the bank and like, man, that's the best thing that ever happened to co-venture. That's our career highlight.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm going to be really annoyed with my nomenclature. I think that's sympathy. Empathy is imagining yourself in the other person's shoes and understanding that problem as a first party, even not just like having heard about it or read about it and saying I can list the problems. By the way, when you're talking to someone who does asset management, you just know because you're like, you and I were talking like, okay, it's the beginning of the year. We got to make sure all of our LPs know what's going on. I empathize with that. That is brutal. Not because you don't love your LPs, but you're like, I want to make sure I'm getting all the right information.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“Hey, wow, you know, I think that the rating agencies are stupid because they're hired by the person who's underwriting the loans that originating. Like, of course, that's dumb. And I read the big short, and I'm a good fast reader, and so I read it twice. And so now I know how it works, and I'm going to build a company that solves that. Okay, that's really tricky. And you would look at some kid in Silicon Valley being like, okay, I'm going to solve this obviously stupid problem. Or like, by the way, remittances. Okay, this is a great, great example. Everyone's like, okay, the blockchain is going to solve the remittance problem. Maybe you still have two governments talking to each other. You still have this crazy process of trying to clear payments. Everyone in Silicon Valley thought, okay, we have a technology solution. Of course, that's going to solve this really slow and expensive process. I think someone from financial services or who had worked at a bank was like, whoa, there's like politics involved. And this isn't just a technology problem. This is a switching cost problem. This is like a political problem. This is a, people are going to lose their jobs problem. I think that”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“Just being a couple really smart kids who went to an Ivy League school and studied CS, you don't understand how a hospital works.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“Are we able to build a business that's sustainable because of that? I do think, and again, probably most of my best friends live in San Francisco in the Bay Area, so they're all going to text me after this in San I'm an India. But I think the tech world has this problem where we go out and we say we all think that we're really smart and we think the rest of the world's really dumb. And so why don't we just build apps to make their lives more like ours? And it's like sort of crazy. And what you end up doing is you end up building products at the end that are sort of built with judgment at their core. And when you build product or you find founders that are building products for themselves and their friends, you end up building products with empathy at their core instead. And that empathy ends up translating into features and functions that understand the seemingly unpragmatic nuances of a given industry. You know, you and I would look at how a hospital works and be like, God, what a bunch of idiots. They're probably not a bunch of idiots. Most of them went to med school. They're genuinely smart. Sure, not everything's perfect, but they're more or less doing their best. You have to understand why the hospital is built the way it is. And I think that...”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, the type of person who they're making progress during the diligence process. There's nothing that gets us more excited than when we're talking to a company and say, by the way, I landed the sale. By the way, I did this. The other thing is founders who set expectations of what success is early on. There's a guy named Jordan Betman who's got his own VC fund now, and he gave me this advice, which is he said, every time I invest in a founder, the very next board meeting, we write a deck for what the next round's deck is going to be. And that becomes like what we have to get to with this capital. We look for founders who are very focused on what do I have to do to get to the next inflection point and my resource to get there. And is there some sort of validation that we believe the business is more valuable because they've gotten to that next inflection point? There's all the other things like barriers to entry and are they building moats and do they have pricing power. But I think at the end of the day, you know, it really just comes to, is this a company that's outside of the obvious sort of solutions to Silicon Valley?”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so we have engineers in both New York and Canada, where we have an office in Ottawa, and I think Ottawa is like one of the best places you can recruit engineers, partly because you have University of Ottawa and Carleton there, and partly because you just don't have the same companies recruiting the best ones. Like when I recruit someone in New York, I got to convince them they shouldn't work at Palentir or Facebook or Twitter or Google. But the other thing is we actually have a really good time recruiting engineers, because think about with the job application is. Hey, you can either go work at a big tech company and work on the same thing for a year, or you can come to Coventure and co-found a company every six months. And if you happen to like the company, just go join as the co-founder. It's a pretty cool job for an engineer. Very. And so I think that's why we're able to attract really good talent. But yeah, so that's where the software development's done. And it's been like a really good experience.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“Of the venture business Almost every case. There's two companies that we've invested in where it wasn't. One, the founder had sold a business for $100 million that we had backed before and we were like, we'll do anything he does. The other is a company in the, you know, I haven't made a lot of companies in the sort of blockchain space, but it was a crypto company that now is a top 15 crypto, and we can't believe that happened. And I have no idea if it should be that valuable, but it is. And so it's great.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so we're invested in a company called Gallium based out of Georgia. And the woman is the Stanford PhD. Her name. Unless I know something, like maybe farm lending, like I don't know, I don't happen to have a bunch of farmers on my Rolodex, but I know someone at Robobank, right? And they do, right? So I'm sure I could figure it out. And that's part of the process that I think a lot of other people don't run. The other part is because we build products with the founders, we make follow-on decisions better. So, you know, a lot of VCs will say, I make follow-on decisions. Well, because I'm on the board and I get information rights. I mean, you've worked at a company. The employees of the company just know different stuff than the board does. And our team working hand in hand with the founder just gives us certain insights.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“So primarily precede on the venture side, although we do equity investments in lending, and I'll explain how we think about those in a second. And the way we do the diligence is, one, are you a founder who knows everything about your space? We don't want to back some really smart HBS kid who read a study about the space and now is going to start a company in it. We want someone who actually knows the customers is sold into it, et cetera.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think you should know what round you are in and decide which hypothesis you're trying to solve for and not take the two or three blogs that everyone uses to figure out they should be funding a company that seriously.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“I would. I don't know if you would, but that would be a dick move if you didn't. So I'd pay the bill. It doesn't mean there was customer value created. The KPI to track is do we finish everything on our plates? Do we take a box home? Do we come back? So we say, look, prove customer value because that'll give you some indication of what your LTV is going to be, your customer lifetime value is going to be. What's crazy is that seed funds expect those businesses to already be growing, which implies they've been using their money to acquire customers. If you don't have a hypothesis of what your lifetime value of the customer is going to be, how are you supposed to know how to acquire them? If your customer ends up being worth $100,000 to you, you can hire a sales team. If they're worth $2,000, you have to do marketing and ad campaigns. Why would you try that until you know you're available menu of cost-effective options? You know, so I think that that's when you do a seed round and the series A is to see if any of those cost to customer acquisition channels scale. I think we all have to get on the same page on that.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“Write a list on Excel or something of all the rounds that were done in New York that were under a million dollars in size, but led by an institutional VC fund, like a seed fund, I bet you would be an incredibly short list because all those seed funds do what Series A was supposed to do. The other is they've all, you know, all these VCs accidentally subscribe to Mattermark and saw a couple bloggers write, I think that you need a $20,000 monthly recurring revenue and 15% month over month growth to raise around. And they all said, okay, that's what you need to raise around. We're only going to invest in companies that do that, not realizing that every company should be underwritten differently. And I think we need a new framework for thinking about how all the different rounds have to happen. When we do what's now called a precede round, we say, look, we're going to give you money. And the only thing you're supposed to do with this money is figure out if you're creating customer value. People often think revenue means customer value, but I'll give you a reason why that's not true. If you and I went to lunch and we had a really crappy lunch, we would still pay the bill.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“And fund the company. That's sort of weird. And so what it turns into is every seed fund listens to all the Series A funds and says, oh, wow, so that's what you're invested in now or like, oh, you all like AI or you all like elderly care or like whatever insurance tech, whatever themes that have been in the past. Okay, now we're going to go, where are your scout teams? So we're going to go find those companies and then send them to you so you can make all the good stuff happen. I think that's a really big problem. You know, and I think the other problem that probably people have talked a lot about is, you know, the terminology of all these rounds is probably wrong. Because what happened was you had a bunch of seed funds and the seed funds were either bad and disappeared or they were good and the manager went out to the LPs and said, now I want to raise a bigger fund. And the LP said, good. I'm willing to give you more money, but you have to keep doing the same thing you were doing because I already underwrote that. And the GPU was like, yeah, I promise. And then they had like more money. And so they had to write bigger checks. And so, of course, they kind of moved up the stack. And so if you were to like do.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“I'd start with, I think, a few key issues that we need to resolve in the next year. The first is there's two comments that everyone agrees with, but the two comments don't agree with each other. One of the comments is you should really stick to your knitting. If you're a seed stage fund, you should be really good at steed. Don't grow too quickly, like get really good at that, and don't do things outside your core competency. If you're a Series A fund, the same if you're a Series B fund, the same. The second thing that people say that everyone agrees with is the only way to make money is to have a contrarian view that is correct. So to believe in something that no one else believes in, but it turns out you are right. Now, if you're a seed fund that's sticking to your knitting and you shouldn't do any other stage, but you're also investing in contrarian things, who's going to follow on to that round? Because you can't. So now the game is called Have a Contrary in View that it turns out you're right about, and then within 12 months convince all the series A funds that they should change their view.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“You're getting, but it's probably not enough to sort of make up for it. So I think that it's crazy that cost of capital always stays static. And then they say, okay, so I'm going to make you a three-year loan, and the price of your debt each year will be the same, even though on year three, it probably should be like, I don't know.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“Think they're going to be able to get that. The second thing is they don't really appreciate the unknown unknowns. And so I think that it's one of the things that really blows our mind is you'll have either funds that go to them and say, wow, I think that you're new, but I'm willing to give you a cheap cost of capital because I think over time you're going to figure this out. And I think I'm going to get paid in warrants. And so that'll be my new interesting way of getting paid for having taken the risk. I think that's a fallacy. The reason I think that's a fallacy is often the debt and the equity are inversely interesting. So if the debt is interesting, it means it's probably going to stay interesting because the yield will stay high over time because the loan book doesn't get so big that it takes in entrance with low costs of capital like the Apollos and the blacksons of the world, et cetera. However, if that happens, if the debt stays interesting, the equity will never appreciate in value. If the equity ever appreciates in value, the loan book's going to get so big that that cost of capital that you are charging, you're still going to get refinanced out of. And do the warrants really make up for it? I don't know what coverage they're charging or what warrant coverage.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, if you were to take a really sort of the world's perfect and everything's linear view, you would say you have fund A and fund A starts in the year null. And so they should have the highest cost of capital that year. In year one, they should have a lower cost of capital. In year two, they should have a lower cost of capital still. And then so you could say, okay, so that's obvious because every single year they're going to get better at better at predicting how they should make investments, which makes them less risky. And then their cost of capital should come down. So the fact that Sequoia would ever have the same cost of capital as a new incumbent makes no sense. Sequoia should just have a lower cost of capital because it's less risky to give them money. I think you also see that in lending. Like I think right now, one of the biggest struggles we have when making investments in our lending business is we'll go to a platform that's originating new cool loans. We think it's a great risk profile. But one, the founder went online and read in the Wall Street Journal that people are getting 7% to 8% yield and like that's really good.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“Them for investing at really high valuations, they just built a better product. They just have a lower cost of capital. If I convince my LP base that all I had to do was return one and a half X their money on my VC fund, I would have an unfair product because I would be able to go to a company, invest at a higher valuation than all the other competitors, and still do what I needed to do to raise my next fund. That's like a differentiated product. That's really cool.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“There's a lot of reasons I'm interested in cost of capital. One, it depends on how much I can originate. I'll give you one place to start, which is I think the cost of capital and venture capital is ridiculous. I think it's absurd that we were supposed to return 3XR capital in 2007, 3X our capital in 2010, 3X our capital in 2013, 3X our capital now, when the markets have been different in each of those years. But no matter what, we're always supposed to return 3X. That sort of sounds absurd. The other thing that sounds absurd to me is that every VC fund has the same cost of capital, which like if first round capital said, Ali, I'll let you be an LP. I'm going to give you two extra money. And then some firm I've never heard of said, Ali, I'm going to let you be an LP and I'm going to return forex your money. I'd still give it to first round because the likelihood I get 2x my money back is pretty high. Yet everyone says they all need to return 3x. It's just this crazy thing. And what's also crazy to me is I think there's firms out there who everyone yells at.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, totally, right? Like, and I think that our goal is to continue to add one or two asset classes a year. And again, we're going to go through the same analysis around our investment philosophy, which is, okay, so why does this newly exist? Do we understand why no one knows how to price it? Do we think that our team's DNA being sort of in between technology and finance allow us to underwrite it differently than anyone else can? We have a really amazing LP base that allows us to be flexible and do these weird, niche, interesting things because they like that we're getting a really high return because it's a little smaller in the beginning and different and notice how to do it. And then does it build barriers to entry over time? And if it checks off those boxes, we'll probably get into it.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“How do you put a multiple on that? How do you value the reviews? That person has really good reviews. There's barriers to entry. They have a really great picture. How do you do that? How do you value an Instagram account? How much is an Instagram account worth? How much value do you put on a like or an impression? These aren't overly complicated, but they're probably mispriced because no one's tried it and it hasn't gotten to the mean yet. And so where we are now in Coventures, we have three businesses. We have venture capital. We have lending, and we also have a cryptocurrency index fund. We felt like based on the firm's DNA, we had to have one. It's a new asset class built on the back of technology. We think it's interesting for a million reasons that have probably already been on this podcast and reasons you've heard, and I'm happy to go into it. And that really became just an index fund. And we said, look, I really couldn't tell you why Ripple's on a tear this week. Rumors that it might be on Coinbase or the SBI deal that they had, but I think it's really hard for anyone to say that they know the future is. And so he said, look, it's just going to be an index fund. It's going to be a basket of the top 15.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“And it turned us into a lending business. So, okay, so this story's becoming long. So we had a venture capital business and a lending business, and we looked at ourselves and said, what are we? And we realized that what we really love to do is find asset classes that we could get a really good return because they were just new and hadn't really existed before. So no one really had perishable produce financing before. But that was why we get a high yield. And we said there's so many cool assets out there that no one really knows how to value. How do you value an Airbnb account?”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“Him advances when they receive the produce, but even that would take 15 to 20 days. So it wasn't a real solution. He came to us, he said, look, if I build inventory technology, I'll allow a farmer to go into the website and say, I have $100 of grapes, and I just sent it to a big distributor in the U.S. As soon as the distributor says they've received it, I can buy it for 40% of its market value, and then take a commission when it's sold. And we built the initial technology, we invested capital, and then he said, hey, can you provide me debt financing so I could actually fund these asset pools? And so we went out to our LPs and we said, look, we think this is a great piece of paper. We think we can get a high yield on it. And we don't think it's riskier than anything else. We just think it's new and different. Two and a half years later, I think we financed hundreds of millions of dollars of produce. Produce pay probably is one of the most important businesses in the agricultural world, which is absurd. I never thought I'd own tens of millions of dollars of watermelons in any given year, but that's what my life's like now.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“Which is fine for me. And we raised a few million dollars. And the way we raised only three, but the way we raised it is we went to a guy who is sort of a famous venture capitalist and I said, hey, if we raise $2.975 million, will you be our last $25,000 check? And he said, sure. I was like, great, you're in. So then I used his name to go get everyone else. And it was awesome. And so that's how we kind of got into venture. Then we invested in this company called Produce Pay. And Produce Pay was founded by a guy named Pablo Borquez, and Pablo is a fourth generation farmer from Mexico. And he realized that his family and many other families who had farms had this huge cash bottleneck in the harvest. And the reason is his family would literally go from like three hundred full-time employees to four hundred during the harvest. The whole harvest was forty five days, and the first revenues they got were on day fifty. And so what used to happen is the distributor he worked with in the US.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“Raise enough money where they could pay someone a ridiculous amount to be their CTO, and they also often didn't notice CTO was. So that was really how we got started is we hired a bunch of engineers. We started building software for equity. And then right after that, we approached two guys. So one's a guy named Thatcher Bell, and Thatcher had spoken to one of my classes at Cornell. And Thatcher was one of those alumni who would come back to school and all the undergrads would be like, oh man, I want to be like him one day. And the other guy was Mike Beller. And Mike was actually my best friend's dad. And he was like one of those people that I always go to and ask for advice. And I went to both of them. I said, look, you know, we've known each other for a while. I'd love if you both worked with us a day a week. And I'll pay you each a day a week because I can't afford to pay more than that. But after a year, if it goes well, you guys should both join and we'll go raise a fund. And I didn't have the resume or the background to raise a fund, but both of them did. Thatcher was a real VC. Mike had taken a company public. They were real guys. So after a year, Thatcher kind of recruited Mike. Mike kind of recruited Thatcher, and I was just a lucky guy in the middle.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“So I'd done a startup. My freshman year in college, and after that, I was doing consulting. And really the consulting was anytime anyone needed anything, I told them that I was an expert at it. And then I'd go hire people who were and subcontract up the work. So it's very, very fancy. Actually, the first time I landed a contract with a big company, I got fired after two weeks after I sent my first billing because I was billing like $100 an hour. I was like, wow, this is amazing. And they're like, that's way too low. And then they were like, wait, he's 20. And so that was not so good. But eventually I made enough money where I could start making these really, really tiny angel investments. And I'd go to founders and I'd say, hey, here's $20,000. And they say, that's great. I'll give you like a quarter percent of my company for that. By the way, do you know anyone who could build the actual app? Or could you build the app for me? And so I realized that it was actually easier to raise capital than it was to find someone to help them build the product. And their only other options were give 30% of the company to somebody they just met.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“You know a lot about financial services, about asset management. If you came to us and said, I want to start a company in the healthcare space, we'd say no way. But if you're like, look, I've got this tech-enabled solution for the asset management world, and I believe I'm the right person to build it. Here's, by the way, 10 people who are going to be my customers. Four of them have been on my podcast already. Feel free to call them. We'd say, great. What do you want to build? Let's work with you to figure out what you need to build a prove product market fit. And then for anywhere between 5% to 7% of the company, we'll build your initial product and then help you recruit a technology team. And if I said, hey, who do you think your first technical hire needs to be? You might not know. If you go to a VC firm, they'll say, well, you should really have a technical co-founder. What does that mean? Is that a CTO, a VP of engineering, a head of product, a project manager, a project administrator, a lead engineer? And so we want to help our companies, A, get to market and figure out B, what type of team they should really have. And then we'll also invest.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“And the second reason is they don't find customers. These are not very complicated reasons, but those are the two main ones. And one of the reasons that these companies don't get to their customers is the founders don't often know anything about the industry they're going into. So if you look at a tech startup that's going after the elderly care space, how often are the founders actually from the elderly care industry? If you're looking at companies that are building businesses and financial services, what percent of those tech companies or tech startups are actually founded by founders who've worked in financial services? And God forbid they ever are, the likelihood they ever build the software is low. So he said, we're going to just find founders with domain expertise who work in those industries, build software for those companies and help them get to market, and then help them recruit their internal team. And that was the first business. And it's gone incredibly well. How would that work?”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“Coventure is a firm, our focus is we build funds in what we call sort of new and emerging asset classes that are propped up by new technology. So we look for things where technology helped us create a new asset class and then build a fund around it. And the way we got started was first in venture capital. So we thought venture capital was and continues to be sort of a little ridiculous of an asset class. So the way the venture capital model works is you find a couple people, they put $50 million together, and then they give a million dollars at a time to either a couple kids who can code or a couple people who can't code but might know the industry. And that just always felt ridiculous. And I was like, oh wow, seed investing isn't really working. I'm like, of course not. How is that a good strategy? And so what we did is we said, okay, so what are sort of the main reasons seed companies don't get to a series A? And one of the reasons is they never build their software. They never get to market. And so I said, okay, so we're going to actually help the companies we invest in build software to make sure they actually get out to market.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that our investment philosophy has been how do we, we go into every single investment saying, is this a trade or is it a business? And if we think it's going to be a one-off trade, we probably won't do it. We look at every new investment opportunity, whether it's something we within a current fund or a new potential fund as can we get an unfair advantage? Can we build a sustainable advantage where we understand why our team is uniquely positioned to get an outsized return? Do we think that we could do this a bunch of times over and over again? And do we think that the more times we do it, the greater advantage we'll have over our other competitors? An example of something we wouldn't want to do is say, hey, we've discovered this thing, and now that we're doing this thing, everyone else is going to realize it's also a good idea. And I would be nervous to get on this podcast and talk about it. The minute I'm nervous to get on this podcast and talk about one of our investments, it means it's not defensible enough. And I never want to be the guy who's like winning because I have just a secret and God forbid anyone else finds out about the secret. So I guess that.”
2018-01-09 · Invest Like the Best · Ali Hamed – Creative Investing - [Invest Like the Best, EP.71] · IDENTIFIED FROM THE TRANSCRIPT · source