The Ledger
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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 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: 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: 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: 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: 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: 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: $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: 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: 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 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: 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: 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…”
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 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: 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: 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: 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 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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…”
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: 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: 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…”