Capital Allocators – Inside the Institutional Investment Industry

Episode: [REPLAY] Ali Hamed – Novel Venture Investing at CoVenture, Venture is Eating the Investment World 5 (EP.233)
Release Date: July 7, 2025
Host: Ted Seides
Guest: Ali Hamed, Founder of CoVenture

Introduction

In Episode 233 of Capital Allocators, host Ted Seides revisits a previous conversation with Ali Hamed, the founder of CoVenture, a prominent player in institutional venture investing. Since their last discussion three years ago, CoVenture has significantly expanded, growing its assets under management (AUM) from approximately $100 million to an impressive $2 billion. This episode delves into CoVenture's evolution, investment strategies, and Ali's insights into the rapidly changing venture capital landscape.

Evolution of CoVenture

Growth Trajectory

Ali Hamed provides a comprehensive update on CoVenture's journey over the past few years. Initially starting as a fundless sponsor with a focus on asset-backed lending, CoVenture quickly institutionalized its credit business, enabling larger investments. This strategic pivot allowed the firm to scale rapidly, reaching $2 billion in investments.

“We accidentally became credit investors first. It was just this incredible experience. It taught us investing in a way that venture capital might not always teach.”
(03:30)

Transition to Venture Capital

In March 2020, CoVenture launched Crossbeam Venture Partners, its venture capital arm. This new venture focuses on early-stage investments, complementing the established credit business. Ali emphasizes the unique approach Crossbeam takes, distinguishing it from traditional venture capital firms by prioritizing capital efficiency and focusing on sectors they deeply understand.

Building the Team

Cross-Disciplinary Expertise

Ali discusses the challenges and decisions involved in staffing CoVenture to support both its credit and venture endeavors. Initially considering a cross-disciplinary team, CoVenture eventually split the businesses to maintain specialization. This decision streamlined communication and knowledge transfer within the team, enhancing operational efficiency.

“Having such a tight knit group of people makes communication easier. It makes knowledge transfer easier, it gets rid of a lot of bureaucracy.”
(05:44)

Investment Approach

Distinctive Investment Thesis

Ali outlines CoVenture's unique investment strategy, which diverges from traditional venture capital approaches. Instead of emulating established firms like Sequoia or Benchmark, CoVenture focuses on sectors where they possess deep expertise, such as fintech and novel asset classes. This bottom-up approach allows them to identify and support high-potential startups that others might overlook.

“We just try to build ourselves our way.”
(07:00)

Funnel and Deal Sourcing

CoVenture employs a rigorous deal sourcing process, leveraging extensive networks and sonar learning—engaging in continuous dialogue with industry experts to refine their investment theses.

“What we often talk about is that it takes 50 Bs to recognize an A in a certain asset type.”
(10:49)

Evaluation Criteria

Ali emphasizes the importance of backing strong founders and robust business models. CoVenture adopts a holistic evaluation where factors like the founder's capability, market size, and scalability are non-negotiable essentials.

“If any of them are off, we just don't do it.”
(13:01)

Due Diligence Process

The due diligence process at CoVenture is highly interactive and supportive. They aim to assist startups by connecting them with potential customers, hires, and strategic partners, while also assessing the company's growth velocity and founder's performance.

“We try to be as fast responding to them as they are to us.”
(16:10)

Focus Areas

Fintech

CoVenture has a strong focus on fintech, particularly on tech-enabled asset-backed credit. They identify and invest in innovative financing solutions that institutional investors typically overlook, leveraging their expertise to evaluate the sustainability and scalability of these businesses.

“We think most VCs don't [understand fintech].”
(22:35)

Novel Asset Types

Ali elaborates on CoVenture's interest in novel asset types, such as:

• International Buy Now, Pay Later: Creating credit profiles for consumers without prior credit history, enabling substantial lending beyond traditional limits.
• Yield Farming: Investing in decentralized finance (DeFi) platforms to earn returns through liquidity provision.
• User-Generated Games: Financing platforms like Roblox and Minecraft that host user-created games, drawing an analogy to music publishers.

“We're looking for asset types that people walk into, knowing that they don't know everything so that you can structure them in a way that's a little bit more humble.”
(34:48)

Network Decay

CoVenture assesses the sustainability of network effects, recognizing that some platforms like Instagram are struggling to maintain creator monetization, whereas others like Amazon continue to provide tangible benefits to users and creators.

“Network effects still do matter. We just think they matter less now than they used to.”
(28:15)

Competitive Landscape

Ali discusses how CoVenture's distinctive approach sets them apart in a crowded venture capital market. Their deep understanding of specific sectors and commitment to capital efficiency allow them to identify and support valuable financing businesses that others might miss.

“We're the ones who help them land their biggest customer. We're the most important one.”
(16:10)

Supporting Portfolio Companies

Tailored Support

CoVenture offers bespoke support to their portfolio companies, focusing on immediate needs like hiring and securing large customers rather than long-term strategic planning. Their hands-on approach helps startups navigate early-stage challenges effectively.

“Our number one job in the beginning is to help them hire people, help them find their first large customers.”
(17:09)

Board Participation

They position themselves as supportive board members, acting as "offensive tackles" to protect founders from unwanted interference, thereby fostering a productive and trust-based relationship.

“The earliest investor will come in with the most similar cost basis to the founder and end up being aligned with them in a lot of ways.”
(18:15)

Fundraising and Investor Relations

Building Trust and Community

Ali highlights the importance of building trust with limited partners (LPs) through consistent communication, transparency, and demonstrating a strong track record. Their methodical and patient approach to fundraising has paid off, allowing them to raise funds efficiently once trust was established.

“It just took a really long time to have our first exits, to have realizations, to have a lot of those markups bear fruit.”
(44:52)

Marketing and Education

To attract LPs, CoVenture invests heavily in marketing and educating the investment community about their unique approach and the sectors they focus on, turning venture capital from a “black box” into a more transparent and understandable process.

“We're trying to turn what venture is, is usually a black box and try to elucidate thinking deal by deal.”
(47:37)

Future Outlook

Ali shares his vision for CoVenture's future, emphasizing adaptability and readiness to navigate an unpredictable market. They aim to continue discovering and financing innovative businesses that shape the future economy.

“It's a really unpredictable time. So to make some big, bold proclamation about what we're going to look like in five years, I think would be not right for us.”
(47:43)

Personal Insights from Ali Hamed

Work Ethic and Habits

Ali admits to a current lack of work-life balance, dedicating extensive hours to CoVenture during this pivotal growth phase. His most important daily habit is reserving the early morning hours for deep work and problem-solving.

“I don't have it right now, honestly. I just work a lot.”
(49:33)

Pet Peeves and Lessons

Ali expresses frustration with hyperbole in venture capital, advocating for humility and realistic commitments. He emphasizes the importance of delivering on promises both commercially and socially.

“Hyperbole in venture capital... it's over promising having a realistic point of view of what you can actually deliver.”
(50:38)

Influential Figures

Two key influences in Ali’s professional life are Michael Sloan, his former employer and first investor, and Savneet Singh, CEO of Par and CoVenture co-founder, who taught him the nuances of investing.

“Savneet Singh... taught me investing amongst other people.”
(51:14)

Biggest Mistake

Ali identifies hiring too quickly as his biggest mistake, noting the challenges of scaling down in asset management and the importance of being methodical in team expansion.

“Hiring too quickly... today we're a little more flow in hiring, we're a little more methodical.”
(51:47)

Life Lesson

He underscores the importance of managing expectations and maintaining realistic promises to avoid overcommitting, aiming for consistency and reliability in both personal and professional spheres.

“Over promising... having a realistic point of view of what you can actually deliver.”
(52:30)

Conclusion

The conversation between Ted Seides and Ali Hamed offers a deep dive into the innovative strategies and philosophies driving CoVenture's success in the venture capital landscape. Ali's insights into fintech, novel asset classes, and the importance of trust and community provide valuable lessons for both seasoned investors and newcomers to the industry. As CoVenture continues to evolve, their unique approach positions them as a formidable player in shaping the future of institutional investment.

Notable Quotes:

• Ali Hamed (03:30): “We accidentally became credit investors first. It was just this incredible experience. It taught us investing in a way that venture capital might not always teach.”
• Ali Hamed (13:01): “If any of them are off, we just don't do it.”
• Ali Hamed (28:15): “Network effects still do matter. We just think they matter less now than they used to.”
• Ali Hamed (44:52): “It just took a really long time to have our first exits, to have realizations, to have a lot of those markups bear fruit.”