Feb 19, 2018 · 1h 7m · capital-allocators
Ali Hamed - Novel Asset Investing (Capital Allocators, EP.40)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Capital Allocators, host Ted Seides interviews Ali Hamed, co-founder of CoVenture, about his innovative investment strategies across tech-enabled specialty direct lending, pre-seed software venture creation, and institutional cryptocurrency indexing.
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 17.2% of the talking time here. How this is scored →
Ted as informed peer 2.6 Guest teaching 3.9 Guest disagreement 1.3 Ted pushing back 1.6
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 58:40 Ali calls venture valuation marks totally bullshit
Ali emphatically rejects prevailing industry valuation practices, explaining how marking an entire startup cap table to the most senior structured liquidation preference misleads LPs.
Hardest push from Ted ▶ 38:56 Ted challenges token network effect frictionTed directly pushes back on Ali's utility token example by noting that adding token-based payment gates creates friction that destroys platform network effects relative to free competitors.
Biggest teaching moment ▶ 41:30 Ali dissects redemption mismatches in early crypto hedge fundsAli demonstrates deep operational mastery by exposing how crypto funds offering 90-day full NAV redemptions against illiquid token holdings engineer an inevitable run on the bank.
Ted holds their own ▶ 11:09 Ted points out the developer equity contradictionTed spots and exposes a logical tension in Ali's opening thesis, demanding to know why software engineers command higher equity if modern developer tools make coding commoditized.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| From High School Baseball to Early Startup Hustle | 2 | 3 | 1 | 1 | Ted opens by setting up Ali's background transitioning from competitive baseball to tech startups. Ali tells personal anecdotes about Cornell, early venture failures, and sleeping at Starbucks, setting an open, narrative tone. | |
| Pioneering the Software Development for Equity Model | 4 | 5 | 2 | 4 | Ted probes on the apparent contradiction of software engineering becoming cheaper while developers still command massive equity. Ali reframes the problem, explaining that non-technical domain experts lack technical networks and the ability to underwrite technical talent. | |
| Assembling Capital and Scaling CoVenture's Fund | 2 | 3 | 1 | 1 | Ali explains how he bootstrapped CoVenture from small checks into an institutional syndicate by recruiting experienced partners. Ted prompts him on how this scrappy setup evolved. | |
| Novel Asset Case Study: Financing ProducePay | 3 | 5 | 1 | 1 | Ali details the ProducePay case study, illustrating how technology tracks farm produce consignments to underwrite cash flow for farmers. Ted asks Ali to walk through the exact financial transaction step by step. | |
| Direct Lending Thesis and Structuring Niche Credit | 3 | 5 | 2 | 2 | Ali articulates the difference between mispriced and unpriced assets, contrasting early fintech lenders with novel credit originators. He explains how early debt financing allows CoVenture to secure locked-in yield rights. | |
| High-Yield Niche Lending: Title Loans and Payroll Advances | 2 | 5 | 1 | 1 | Ali provides concrete examples of high-yield niche credit, including technology-enabled title loans and hourly payroll advances underwritten against corporate employers. Ted listens as Ali breaks down the risk-adjusted returns. | |
| Unpriced Assets: Airbnb Portfolios and SecFi Option Lending | 3 | 4 | 1 | 1 | Ali describes underwriting digital assets such as Airbnb superhost accounts and lending against private startup employee stock options via SecFi. Ted observes that finding previously unpriced assets is an unusual investment angle. | |
| Sponsor Message: Ridgeline Investment Management Tech | 0 | 0 | 0 | 0 | Mid-roll commercial break with Ted reading a sponsor message for Ridgeline investment management software. | |
| Crypto Fund Architecture and Market-Cap Indexing | 3 | 4 | 1 | 2 | Ali describes CoVenture's crypto index fund product, detailing a rules-based top-15 market-cap weighted model. Ted questions why cap weighting is preferable given extreme volatility across underlying tokens. | |
| Store of Value Dynamics and Utility Token Economics | 4 | 5 | 2 | 3 | Ali explains store of value dynamics for Bitcoin and contrasts genuine utility tokens with speculative ICOs. Ted challenges whether charging via utility tokens risks destroying network effects when competing against free platforms. | |
| Institutional Crypto Standards and ICO Skepticism | 3 | 5 | 2 | 2 | Ted asks how institutional investors can gain comfort with crypto when early funds lack standard operating controls. Ali critiques crypto hedge fund liquidity mismatches and dangerous self-custody practices. | |
| Venture Capital Cost of Capital and Market Pricing | 4 | 5 | 2 | 3 | Ali critiques the venture capital industry's uniform 3x cost of capital assumptions, arguing premier funds should accept lower returns and price deals accordingly. Ted notes that price differentiation has rarely been used as a strategic lever by top firms. | |
| Allocator Guidance and Co-Investment Signaling Biases | 4 | 5 | 2 | 2 | Ali breaks down the game LPs and emerging managers play around co-investment signaling, noting the negative selection bias of chasing top-tier syndicates. He advises allocators to underwrite first-principles thesis fit rather than co-investor brand names. | |
| The Structural Evolution from Seed to Pre-Seed | 2 | 4 | 1 | 1 | Ali maps the shifting nomenclature in early-stage investing, explaining how traditional seed investors moved upstream to series A check sizes and created a vacuum for pre-seed firms. | |
| Managing Startup Illiquidity, SPVs, and Cap Stacks | 3 | 5 | 2 | 2 | Ali explains how CoVenture uses SPVs to generate liquidity for early investors rather than leaving them trapped beneath complicated liquidation preferences and ratchets in late-stage mega-rounds. | |
| Baseball Career Highlights and False Positive Lessons | 2 | 3 | 1 | 1 | Ted moves through standard closing questions covering Ali's baseball memory of a false positive home run, parental life lessons, and reading habits. | |
| Show Conclusion and Monthly Newsletter Announcement | 0 | 0 | 0 | 0 | Brief outro monologue where Ted promotes his monthly email newsletter and wraps up the episode. |
Statements from this episode (27)
Hamed: Technology is a commodity; go-to-market is the hardest part
“Because whereas a few years ago, the hardest part of building a technology company was actually building the technology. Now, for most of these companies, it's just getting to market. The technology, in many ways, is just a commodity. And so in underwriting wh…”
Hamed: VCs train engineers to be CEOs, not CEOs to manage product
“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.”
Hamed: CoVenture's initial fund was $396,000, including a $1,000 Venmo
“We scrapped together 396,000 dollars. A thousand of it actually came from my little and my fraternity. That's why it was three 96 and not three 95, and he Venmo'd it to me.”
Hamed: Early fintech lenders digitized bank products without inventing new credit
“What they were doing is they were taking products that banks always used to offer offline and put them online. And, you know, they were originating loans cheaper. They were doing stuff banks used to do, but weren't doing anymore. They had these like really, re…”
Hamed: CoVenture secured mid-teens to 20s yields on asset-backed credit
“And again, you know, we were realizing that we could get mid to high teens yields, or even in some cases, low to mid twenties yields on stuff that was asset backed. It was low LTV. We could put it into an ABL structure that we felt comfortable with.”
Hamed: Cheaper debt capital brings tighter covenants and structural protections
“Every single basis point in your cost of capital comes with pages and pages of legal docs of other types of structures to protect the lender. So it's not like just one person's offering you nine and the other person's offering you 14. There's a lot that comes …”
Hamed: Title lending is abusive and frequently charges 500% APRs
“Title lending is an incredibly abusive type of loan because you basically have this thirty-day loan. It's secured by a car. The person doesn't pay their loan back in 30 days. You take their car. Because it's only 30 days and you have to pay for the transfer, t…”
Hamed: CoVenture portfolio company earns mid-20s returns on Fortune 500 payroll advances
“And so what it's doing is it's essentially lending to the employee, but on the credit risk of the employer. And so instead of these employees who are often hourly workers going out and getting a payday loan, instead they can take an advance of three days. We k…”
Hamed: Employer-integrated lending combines SaaS switching costs with high credit yields
“It's also the type of lending company that has barriers to entry because it has a proprietary source of originations because it's going through that large employer that other people would have to integrate with. And so it has a lot of the great characteristics…”
Hamed: Airbnb ecosystem will evolve like traditional hotels with recognized brands
“And we think that the Airbnb ecosystem will end up much like the traditional hotel ecosystem, where you have property owners, you have property managers, and you have brands that You're going to start going to an Airbnb host and come out of the shower and see …”
Hamed: Banks lend to founders but ignore rank-and-file startup employees
“Banks have provided liquidity to founders all the time with PGs, but there's no one who's really been serving employee 20 through 2000.”
Hamed: Seed investing is B2C marketing; Series A is B2B sales
“Series A investing is a B to B business. You're investing in a company that's already a company. Seed investing is a B to C business. You're investing in a person that's about to start a company. B to B businesses can rely on sales, but B to C businesses have …”
Hamed: Seed VCs seek personal fame because fund marketing economics are broken
“Seed investors often have less management fees than series A investors, but they're trying to play a more expensive marketing game. And so you have a business model where the marketing part is just totally broken. And so you have all these growth hacky things …”
Hamed: CoVenture launched a top-15 crypto index fund with no carry
“The way it started is an index fund. It's a basket of the top 15 crypto assets, weighted by their market cap, and rebalanced every two weeks with a flat fee, and we don't charge a carry.”
Hamed: Bitcoin has the worst tech in index but unbeatable network effects
“Bitcoin's probably the worst technology of the ones in the index. It's probably slower, more expensive, but it's got stain power, and people trust it, and it's hit some level of network effect that would be very, very difficult to overcome.”
Hamed in 2018: Inexperienced crypto managers will face redemption runs
“Eventually that is going to matter, and you're going to have a lot of managers who have never experienced something like that, and they're going to throw up gates, either prematurely or too late, because that's sort of their secret weapon.”
Hamed: Most ICOs Are Run Because They Are Cheaper Than Equity
“Because we think that most of the ICOs today are entrepreneurs raising money via an ICO because it's cheaper than equity and not because they actually think the ICO is going to help the economics of the business.”
Hamed: Proprietary networks in crypto fund management will become commoditized
“You know, I think there was this early wave of managers who said, I was really early in crypto, so I know all the people who matter. That'll become really commoditized. There just aren't that many people who matter in crypto. It's actually really easy to get t…”
Hamed: Top VC firms will win deals by accepting lower net returns
“But I do think in 10 to 15 to 20 years, that's where the market will evolve. And if you're one of these firms with a really established LP base, you've produced strong returns consistently for a long time, you will be able to produce less good returns than oth…”
Hamed: Target small frontier funds for 5x returns, mega-funds for 2x
“And if all I need is a two X on the portfolio, you should go to an established firm that's been around for a long time and has billions of dollars under management because they have the highest certainty of getting you there. If you're sitting there and thinki…”
Hamed: Blockchain funds are already priced in due to lack of skeptics
“As an allocator, I'd have a really hard time, by the way, investing in blockchain funds, because I can meet a lot of people who talk shit about Bitcoin, and I can't meet a lot of people who are haters on the blockchain. So that's probably already been priced i…”
Hamed: Co-investing with top-tier VCs suffers from negative selection bias
“You know, there's negative selection bias in any of those deals that you can actually get into unless you can really explain it. So I think that as an LP, what you should really be doing is take that as a indicator of their network and who they know and who th…”
Ali Hamed: Venture Capital Has Almost No Mediocre Funds
“And what happened was those people were either really good or really bad because that's how venture works, right? There's not a lot of mediocre venture funds.”
Hamed: In 2014, NYC had only six institutional sub-$1M seed deals
“And there was a time, I think it was in 2014 or 2015 where there were six deals in all of New York that were at a million dollars in size or under that had an institutional seed investor in them.”
Hamed in 2018: The SoftBank Vision Fund has replaced the IPO
“And now we have the soft bank vision fund, which is like the replacement of the IPO, right? Like the goal used to be, I want to IPO my company. And now they're like, the goal is I want Masasan to like, give me more money than anyone could ever imagine.”
Hamed: Venture valuation is broken by pricing all equity at senior rates
“The term valuation is broken, right? We basically take, let's take the price of the most senior security and ascribe that to the price of every other security, regardless of the structure and call the cumulative number, the value. Which is like totally bullshi…”
Hamed: Reading a candidate's favorite book reveals their character and aspirations
“So now I've taken the practice of when we hire people or when we're even investing in a company, I try to read their favorite book. And the reason is people's favorite protagonists from a book is often someone they either aspire to be like or empathize with. A…”