Jan 31, 2022 · 59m · capital-allocators
Ali Hamed – Novel Venture Investing at CoVenture, Venture is Eating the Investment World 5 (Capital Allocators, EP.233)
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In this episode of Capital Allocators, host Ted Seides interviews Ali Hamed, founder of CoVenture and Crossbeam Venture Partners, exploring how his firm integrates tech-enabled asset-backed credit with early-stage venture capital. Hamed breaks down their idiosyncratic approach to underwriting novel asset classes, evaluating full-stack founders, and building an institutional asset management platform for the modern digital economy.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 20.8% of the talking time here. How this is scored →
Ted as informed peer 3.6 Guest teaching 5.3 Guest disagreement 1.5 Ted pushing back 0.0
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 35:00 Ali critiques Instagram's economic viability and content decay
Ali dismisses conventional VC enthusiasm for social platforms, arguing that Instagram is decaying into cheap meme pages because creators lack programmatic revenue sharing.
Hardest push from Ted ▶ 45:38 Ted presses on follow-on funding constraints for non-traditional dealsTed points out that if earlier investors shy away from complex balance sheet deals, growth stage syndicates will likely hesitate even more during subsequent financings.
Biggest teaching moment ▶ 39:00 Ali contrasts direct lending LTV models with Amazon cash-flow underwritingAli breaks down how traditional direct lenders over-rely on low LTV metrics, whereas CoVenture underwrites high advance rates against predictable cash flows and debt service coverage.
Ted holds their own ▶ 30:08 Ted steers into crypto and DeFi lending intersectionTed demonstrates sharp industry awareness by challenging Ali on why decentralized finance and crypto frameworks were omitted from his earlier fintech lending overview.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Capital Allocators and Mini-Series Context: Venture Eating the World | 0 | 0 | 0 | 0 | Ted opens the episode with introductory context on the 'Venture is Eating the Investment World' miniseries and introduces guest Ali Hamed. | |
| Omni Sponsor Message: Private Market Legal Data Analytics | 4 | 5 | 1 | 0 | Ted asks Ali to summarize CoVenture's growth since his appearance three years ago. Ali details how building software for equity evolved into tech-enabled asset-backed credit and institutional scale. | |
| Team Dynamics and Cross-Disciplinary Structure | 4 | 6 | 2 | 0 | Ted inquires about team organization across credit and venture. Ali explains rejecting the traditional VC playbook and focusing Crossbeam on four pillars: fintech, balance sheet financing, platform economies, and network effect decay. | |
| Deal Sourcing, Sonar Learning, and Network Coverage | 3 | 5 | 1 | 0 | Ted asks about top-of-funnel deal generation. Ali describes 'sonar learning,' mapping adjacencies, and systematically covering 211 venture capital funds and over 500 LPs. | |
| Founder Evaluation: Full Stack vs iPad Employees | 4 | 6 | 2 | 0 | Ted asks how Ali balances founder quality versus market attractiveness. Ali contrasts 'iPad employees' who manage without doing the work against full-stack founders possessing strategic insight and analyst-level work ethic. | |
| Winning Highly Competitive Rounds through Speed | 4 | 5 | 1 | 0 | Ted asks about winning competitive deals and post-investment support. Ali describes early-stage VCs as merchant bankers whose primary job is turning contrarian bets into market consensus while acting as offensive tackles on boards. | |
| Risk Inflection Points and Pro Rata Discipline | 4 | 6 | 2 | 0 | Ted asks about milestone-based capital deployment. Ali explains evaluating probability over multiple risk inflection points and why taking less pro rata in overvalued markets acts as a disciplined risk mitigation strategy. | |
| Fintech Opportunities: Financing Businesses and International BNPL | 4 | 6 | 1 | 0 | Ted prompts Ali to elaborate on FinTech opportunities. Ali outlines how international buy-now-pay-later builds net-new credit profiles, contrasting it with domestic consumer lending and standard SaaS metrics. | |
| Evaluating Crypto, Metaverse Guilds, and Digital Infrastructure | 4 | 6 | 2 | 0 | Ted asks about crypto and decentralized finance within lending. Ali distinguishes picks-and-shovels infrastructure and gaming guilds from speculative digital art, noting he avoids hype-driven speculative assets. | |
| Criteria for Investable Platforms vs Decaying Networks | 4 | 7 | 3 | 0 | Ted asks what differentiates investable platforms from non-investable ones. Ali contrasts Amazon and YouTube, which drive organic traffic and share programmatic ad revenue, against Instagram and TikTok, which decay as pure meme broadcast channels. | |
| Ridgeline Sponsor Message: Unified Investment Management Platform | 4 | 6 | 2 | 0 | Following a sponsor break, Ted directs the conversation to novel assets and Amazon ecosystems. Ali contrasts traditional direct lenders relying on LTV with CoVenture's model of underwriting cash flows and debt-to-income. | |
| Emerging Frontiers: Gaming, Yield Farming, and Credit Risk Transfer | 4 | 5 | 1 | 0 | Ted inquires about newer asset types on CoVenture's radar. Ali reviews yield farming liquidity provision, user-generated gaming publishers like Infinite Canvas, and credit structures where borrower risk is decoupled from distributor credit risk. | |
| Equity Efficiency and Profitability in Balance-Sheet Startups | 4 | 6 | 2 | 0 | Ted asks how novel asset investing fits into the competitive VC landscape. Ali explains how high-advance-rate debt facilities create extreme equity efficiency, yielding profitable venture-backed businesses that traditional VCs misunderstand. | |
| Growth Financing Hurdles and Educating the Market | 4 | 6 | 2 | 0 | Ted asks about later-stage financings for unconventional companies. Ali describes the valley of death between $10M and $20M EBITDA in rollup models and the need to educate growth equity firms and manage restructuring or litigation. | |
| Securing Institutional LP Buy-In and Rapid Fundraising | 4 | 5 | 1 | 0 | Ted asks how Ali secured buy-in from institutional LPs. Ali highlights building credibility in credit over a 26-month average sales cycle, demystifying venture memos, and closing a fundraise in three weeks after years of relationship-building. | |
| Long-Term Vision: Navigating the Fog of Modern Asset Management | 3 | 4 | 1 | 0 | Ted asks about CoVenture's long-term roadmap and closes with personal questions. Ali uses a fog-of-war gaming metaphor to explain maintaining agility rather than projecting fixed five-year targets. |
Statements from this episode (35)
Hamed: CoVenture deploys close to $100M per month
“I think now we're probably investing closer to a hundred million dollars a month.”
Hamed: Venture capital is a sales asset class, not an investing one
“Venture capital often becomes more of a sales and business development asset class than it does an investing asset class. It's very rare that in venture, you're crunching a bunch of data, whereas in credit, you're just relying on the data.”
Hamed predicts economic value will shift from platforms to individual creators
“So those media companies have less leverage on the people on them. So the value will start to shift to the people on those platforms as opposed to the platform itself.”
Hamed: Seed deals need 30x to 50x returns, Series A needs 10x
“And really loose venture math is often something like you need a 30 to 50 X return if you do a seed deal, you need a 10 to 20 X if you're going to do a series A deal, and about a 10 X if you're going to do a series B deal, deduced by how many of the companies …”
Hamed: Investors must evaluate 50 B-grade deals to recognize an A-grade
“What we often talk about is that it takes 50 B's to recognize an A in a certain asset type.”
Hamed: Crossbeam maintains a tiered coverage list of 211 VC firms
“We actually have a list of 211 VCs. That we cover. We have coverage groups. So we have certain VCs who are high fidelity VCs, and we are in touch with them four times a year. We have lower fidelity VCs that we're in touch with one to two times a year.”
Hamed: Founder, market, and business model are factors of zero
“I always think of them as factors of zero. So if any of them are off, we just don't do it.”
Hamed: It is rare to find great CTOs who build from scratch
“It's very rare that you find someone who's going to be a great CTO. Who's also willing to like go build the first application and be the lead engineer and do everything from scratch”
Hamed: Crossbeam tests founders by offering active help during due diligence
“So often a lot of our diligence process is trying to help the company as if we were already invested and see if they can use our help well.”
Hamed: Strategic vision is irrelevant compared to execution in year one
“In the beginning, the company needs to make something and sell it, and there's like not a ton of strategic vision in those first 365 days.”
Hamed: Venture investing means turning contrarian ideas into consensus within 12 months
“It's sort of a contrarian business, but what it really is, it's a contrarian business that you're really working hard to turn into a consensus business. If you invest in a company and 12 months later is still contrarian, the company's gonna run out of money un…”
Hamed: Early-stage venture capitalists are effectively just merchant bankers
“The term that most people in venture capital wouldn't want me to use Is that we're sort of merchant bankers. We run around, we invest some of our own capital. And then our job is to tell the rest of the market that they should invest at a higher price. And so …”
Hamed: Defining funding stages strictly by revenue run rates is a mistake
“A lot of venture capitalists and investors generally make the mistake of thinking, well, you know, a deal that's doing a few 100,000 annualized revenue is a seed deal. A company that hits the million dollar annualized revenue run rate is a series A deal. Five …”
Hamed: Crossbeam allocates more capital to initial rounds, less to follow-ons
“We actually have the point of view that during a market like this, we're actually loading up more of our checks into the initial round and then doing less into the follow on round, especially for our best companies.”
Hamed: International BNPL is more powerful because it builds initial credit profiles
“International buy now pay later is so powerful, maybe even more powerful than in domestic buy now pay later, because you're actually creating a credit profile for a consumer that's never had credit before. And what it does is it gives you a relationship with t…”
Hamed: Most fintech startups are actually bad businesses without enduring moats
“One of the most wonderful things about fintech companies is most of them are pretty bad businesses. And we spent a lot of time trying to actually discern which fintech companies are good companies to begin with and which fintech companies are just never going …”
Hamed: Borrowers are replacing traditional lenders with vertical software providers
“People don't borrow money from lenders anymore. They borrow money from their software providers, and these software providers have, one, they're in the flow of funds of what they do. They have intimate relationship with the customers. They can use that relatio…”
Hamed: CoVenture only backs crypto businesses with identifiable future cash flows
“We don't ever do a good job lending on an LTV basis. We're more cash flow lenders. So the tokens and the crypto businesses that we understand why there might be future cash flows for, or where there's a real business model we'll pile into.”
Hamed: Top Amazon sellers get free traffic while Shopify merchants buy ads
“An Amazon seller who's ranked highly in a category doesn't need to spend much money on marketing and ads because the traffic will come to them for free. It's almost like you're in a mall without paying for the rent for foot traffic. In Shopify, that's not true…”
Hamed: YouTube beats Instagram by sharing programmatic ad revenue with creators
“YouTube content is good because YouTubers make money. They use that money to reinvest in production. And you have people like Mr. Beast producing incredible stuff. Instagram is so hard to make money on because Instagram doesn't roll out programmatic ads at sca…”
Hamed predicts Instagram risks obsolescence due to poor creator monetization
“And we think Instagram is really at risk of going away because the creators on Instagram aren't making enough money to actually make good content.”
Hamed: Amazon merchant debt will take years to hit ABS markets
“It's going to take a really long time for these assets to hit ABS markets or get rated or anything similar. So cost of capital is going to not come down for a bit because the regulated institutions can't get in.”
Hamed predicts user-generated titles are the future of video game publishing
“I bet you that the future of game publishing is not spending years and years coming up with a game and trying to distribute it in metal CDs, metal boxes at people's homes. It's these user-generated games.”
Hamed: Nine Crossbeam Fund I startups exceed $20M revenue and are profitable
“In the first fund we did at AcrossBeam, nine of the 25 companies we backed are over twenty million dollars of revenue run rate and profitable, which is just insane for venture capital, but it's because these financings often allow these companies to be super e…”
Hamed: Amazon rollups can secure 85% to 95% debt advance rates
“In Amazon, as mentioned, it's the opposite. You can finance them at 90, 95, 85% advance rates. One, because you don't care about the alignment anymore. You're their whole facility. You're the only financier. So if they screw up that facility, they're toast. Th…”
Hamed: Any fast-growing vertical SaaS with sub-one-year payback gets funded
“If we have a vertical SaaS company in our portfolio that's growing 15 to 20% month over month, it's got reasonable margins, it's got a reasonable payback period that's under a year, it's in a big enough market and the founder doesn't trip all over herself or h…”
Hamed: $10M to $20M EBITDA is the worst zone for Amazon sellers
“I would actually argue that right now in the Amazon ecosystem, the worst place to be is between 10 and twenty million dollar EBITDA. Because at 10 and twenty million of EBITDA, it's too big for a family office or a high net worth individual or a group of angel…”
Hamed: Profitable Amazon rollups growing 50% QoQ trade at historically low multiples
“We've never seen a company that's profitable and growing its EBITDA 50% quarter for quarter, raise at such low multiples and have so much trouble raising because so many people say, ah, just we haven't figured out the market yet.”
Hamed: A tier-one VC brand immediately removes contrarian risk from deals
“Your union square ventures. If you're Sequoia, the fact that you did the deal is the reason it's no longer contrarian.”
Hamed: Distressed CoVenture Fund I companies rebounded to nine-figure valuations
“One other crazy stat about the first fund. We had multiple companies going into the deals where we had to do recapitalizations. We had multiple companies going through litigation. When we financed them, we had a company where I had to call all their payables a…”
Hamed: The average LP check takes 26 months of relationship-building
“The average check that we've ever gotten from an LP took us 26 months of knowing the person to get it.”
Hamed: Venture returns from unexpected pivots or unpredicted reasons are low quality
“We have certain companies in our portfolio that have done tremendously well for reasons that we didn't predict. Those are not high quality returns.”
Hamed: Crossbeam's $25M Fund I deployed capital too quickly
“In Crosby one, it was a twenty-five million dollar fund. We co-invested with a hundred million dollars and we invested too quickly. Probably needed a bigger fund.”
Hamed: Hubris is the most dangerous factor in credit investing
“Hubris is the most dangerous thing in the world in credit. You need hubris to start a business. In fact, maybe you need an irrational amount of hubris, but you need to have the humility to know how confident, overly confident you're probably actually being.”
Hamed: Asset managers cannot scale back AUM without destroying firm morale
“Managing a one billion dollar AUM firm is a really good business to be in unless you used to manage a six billion dollar AUM firm. And the challenge is it's really hard to go backwards in asset management. It's hard for morale. People want to make more and mor…”