This episode features investor Ali Hamed, who argues that real investment edge comes from 'earning' returns by creating new asset classes, not just 'finding' good deals. He builds funds around things traditional banks ignore, like financing perishable produce. He prefers founders with deep industry 'empathy' over pure intellect. Key holdings: ProducePay (financing fresh produce, founded by a farmer), Gallium (an app saving heavy-equipment dealers $300k/year on warranty claims, founded by a Stanford PhD), and an earned-wage platform (lending to McDonald's employees, yielding 20%+ with low risk).
26-year-old investor Ali Hamed shared his creative investment philosophy on the Invest Like the Best podcast. His core argument is that the key to generating alpha lies in "earning" it rather than simply searching for it, requiring unique thinking and empathy. Through his Coventure fund, he has impl
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26-year-old investor Ali Hamed is the co-founder of Coventure. He argues that excess returns come from creating, not finding. The core judgment of this episode is: In investing, true competitive advantage stems from "earning" rather than "finding"—by constructing unique asset classes and business models, returns become the inevitable result of your systematic efforts, not a one-time stroke of luck.
Ali Hamed believes the key to generating alpha lies in "earning" rather than simply "finding." His investment philosophy revolves around a central question: "Is this a trade, or is it a business?" He seeks businesses that are repeatable and can build a moat over time.
Ali Hamed notes that his firm, Coventure, focuses on identifying "emerging asset classes" created by new technologies and building funds around them. He explains: "We look for things where technology has helped us create a new asset class, and then we build a fund around it." The core of this strategy is entering an area that is not yet fully priced and lacks intense competition. For example, in the "perishable agricultural commodity financing" space they entered, traditional banks (like the "RoboBank" he mentions) explicitly stated, "We can never underwrite or lend against perishable agricultural commodities," which precisely created an opportunity for Coventure.
To validate whether an opportunity is worth pursuing, Ali Hamed asks himself three questions:
1. Why is this asset class "new"?
2. Does our team (situated between tech and finance) have a unique underwriting capability?
3. As we do more of this, do we build a stronger barrier to entry?
Ali Hamed offers a sharp critique of the "one-size-fits-all" concept of cost of capital in the venture capital industry. He argues that different funds should have different risk and return expectations, and understanding and leveraging this is key to creating a competitive advantage.
Ali Hamed believes the VC industry's universal expectation of a 3x return is "absurd." He points out: "If Sequoia Capital says, 'Ali, I'll let you be an LP, I'll give you 2x,' and some fund I've never heard of says, 'I'll give you 4x,' I'd still give my money to Sequoia because the probability of getting 2x is very high." This means funds with a lower cost of capital (like Sequoia) inherently possess an unfair competitive advantage—they can invest at higher valuations while still meeting their LPs' return expectations.
He extends this logic to his own lending business. Ali Hamed observes that many founders of new lending platforms are attracted by the 7-8% yields reported in the Wall Street Journal, but ignore the risk of "unknown unknowns." He believes early entrants should earn higher returns because they bear greater uncertainty. As time passes and risk decreases, the cost of capital should also decline, creating a structural advantage for early investors.
Ali Hamed questions the traditional venture capital operating model and has developed a unique "pre-seed" investment approach, emphasizing that founders must possess industry "empathy" rather than just "judgment."
Ali Hamed criticizes two contradictions in the current VC industry: first, the contradiction between "sticking to your core competency" and "having to hold a contrarian view"; second, the forced "upward migration" of seed funds as they grow in size, leading to a genuine lack of early-stage investment. He argues that the seed round should solve only one problem: "proving customer value," not pursuing revenue growth. He explains: "People often think revenue equals customer value, but it doesn't. If you and I go have a terrible lunch, we'll still pay the bill. That doesn't mean customer value was created."
When evaluating founders, Ali Hamed stresses the importance of "empathy." He distinguishes between "judgment" and "empathy": "Judgment is 'I know how to do this better than you,' while empathy is 'putting yourself in someone else's shoes to understand their problem.'" He gives the example of smart people in Silicon Valley who think "rating agencies are stupid" and want to solve it with technology, but lack empathy for complex factors like industry politics and switching costs. He prefers to invest in "high-velocity" founders like the founder of Gallium—a Stanford PhD who immersed herself in the heavy equipment dealership industry, using an app to solve a warranty claims problem "nobody in Silicon Valley cares about."
Ali Hamed views lending as a more creative tool than traditional equity financing, especially suitable for companies with stable cash flows that are reluctant to dilute equity excessively. By providing capital to emerging, technology-driven lending platforms, he achieves high yields.
Ali Hamed recounts a case: a company with $1 million in monthly revenue, near break-even, wanted to raise $3 million at a $50 million valuation cap. He suggested: "You have over $2 million in accounts receivable on your books. Why don't I factor those receivables for you?... I just saved you 3.8% of your company." He was surprised to find the founder thought "factoring sounds addictive" and preferred dilutive convertible notes. This made him realize the VC industry is "very uncreative" in its approach to financing.
Coventure's lending business focuses on providing capital to platforms that have "invented new types of credit," such as ProducePay, which finances perishable agricultural commodities, and platforms offering "earned wage access" services to employees of large companies like McDonald's. Ali Hamed emphasizes that they achieve high returns not by taking on high risk, but by "discovering things nobody has done before." For example, the platform offering daily pay to employees can yield over 20%, yet its risk exposure is the credit of McDonald's.
| Position | Analyst Stance | Key Data |
|---|---|---|
| ProducePay | Bullish | Has financed hundreds of millions of dollars in agricultural products; founder Pablo Borges is a fourth-generation Mexican farmer |
| Gallium | Bullish | Founder Gail is a Stanford PhD; her app saves each dealership approximately $300,000 per year |
| Blockstack | Bullish (as a concept) | A decentralized data storage platform; Ali finds the "decentralized data" concept interesting |
| Metro Mile | Risk Warning | Pay-per-mile car insurance; Ali thinks it's "a good idea" but unsuitable for VC seed investment, as subsequent funding rounds would be extremely dilutive for early equity |
| Chloe's Soft Serve Fruit Company | Neutral (personal connection) | Founder Michael Sloan was Ali's first investor and life mentor |
1. "Earning" vs. "Finding" Alpha (Ali Hamed): True alpha isn't about discovering a secret; it's about building a system that allows you to consistently and repeatably create opportunities others cannot easily replicate. If you're afraid to talk about your investment on a podcast, it's not defensible enough.
2. Cost of Capital is an Underutilized Competitive Advantage (Ali Hamed): If Sequoia Capital can convince LPs to accept a 2x return, it can invest at higher valuations, gaining an unfair competitive advantage. The VC industry's "one-size-fits-all" 3x return expectation is absurd.
3. "Empathy" Over "Judgment" (Ali Hamed): Silicon Valley's "judgment" is "I know how to do this better," while "empathy" is "I understand why things are the way they are now." Investing in founders with empathy for an industry is more likely to succeed than investing in "outsiders" relying solely on intelligence.
4. The Sole Goal of a Seed Round is to "Prove Customer Value" (Ali Hamed): Don't measure seed round success by revenue growth. Customers paying doesn't mean value was created (like paying for a terrible lunch). The real metric is whether customers will repurchase or recommend to a friend.
5. Lending is a More Creative Tool Than Equity Financing (Ali Hamed): For companies with stable cash flows, factoring receivables or providing debt financing is superior to issuing convertible notes or equity, as it reduces founder dilution.
6. Free Content Exacerbates Socioeconomic Divides (Ali Hamed): The customer of free media is the advertiser, not the reader. Its content aims to "aggregate" specific demographics, not provide truth. Paid media (like the Financial Times) has the reader as the customer, leading to higher quality content. This results in the wealthy having high-quality information while the poor are "productized," widening the gap.
7. "Two Laws of Consumer Tech" (Ali Hamed): First, starting a company is getting cheaper, but scaling it is getting more expensive. Second, raising money can reduce risk (providing more runway) but also increase risk (piling up preferred stock, leading to zero proceeds for founders upon exit).
8. The VC Industry's "Scout" Dilemma (Ali Hamed): Seed funds are told to "stick to their core competency" and "hold contrarian views," but these are contradictory. If a seed fund invests in a contrarian view, it must convince a Series A fund to follow on within 12 months, effectively forcing the seed fund to act as a "scout" for Series A funds rather than a truly independent investor.