As part of our DarcMatter Manager Series, we took the opportunity to interview Wissam Otaky, one of the founders of Hatcher+ about the background of the firm, their strategy, and their management team. For more information, visit Hatcher+ Fund Profile here on DarcMatter.
What is the history and background of your company, principals and funds?
Hatcher+ was founded by John Sharp, Dan Hoogterp and I in 2016. We are an early stage venture investor that uses the power of Artificial Intelligence, global partnerships and diversified portfolio theory with the objective of beating other public benchmarks. We aim to achieve this by using our proprietary resilient investment model to guide our deployment alongside a global network of co-investment partners. Having analyzed the venture capital industry, including best practices, investment strategies, and outcomes, we now leverage a large database of venture investment events. All of the partners come from the venture world, with years of entrepreneurial activity behind us, and recent experience as investors, mentors, researchers, and technology developers. Our firm was recently awarded “Most Innovative Venture Capital Technology” by World Finance Markets magazine. Hatcher Pte Ltd, an investment holding company which was founded in 2012 and managed by John and I, has achieved three complete investment cycles (ideation to exit, including two trade sales and a public listing).
Please explain the investment process for the strategy.
We spent years analyzing the industry, including looking at over 450,000 venture investment events, in building our resilient investment model. Our findings were straightforward: 1. The early stages in venture can be the most profitable 2. Attracting quality deal flow is critical to success 3. We believe Large portfolios deliver consistently higher returns. However, building a high quality, early stage portfolio as large as we needed it to be required significant innovation on the traditional venture model. Our targeted returns called for over 2,000 investments in 1,300 companies around the world, through the life of our fund. Such scale is multiples larger than what a standard venture firm achieves. We execute on our strategy through a unique combination of technology and global co-investment networks. Over the past two years we built partnerships with early-stage investment groups, including accelerators, incubators, micro-VCs and venture builders around the world. These relationships secure Hatcher+ the right to co-invest alongside every partner in every deal that they invest in ultimately allowing us to reach our target portfolio of 1,300 companies from around the world and across industries. Our partners also get access to our proprietary technology – the Hatcher+ Stack Predictive API – that helps them assess the submissions they receive using AI and machine learning approaches, as well as run their investment programs and monitor their portfolios.
You discussed your investment strategy in Question 2. Why should investors consider your fund in comparison to others with similar strategies?
We believe that we are ahead of the competition in how we approach venture. While there are many firms trying to use technology to help in portfolio selection, we believe we are the only one that has created a data-driven strategy using a unique combination of in-house technology and existing global partnerships to build as diversified a portfolio as required to achieve our return objectives.
How does your fund’s strategy fit within an investor’s broader investment portfolio?
We believe our strategy fits well within a diversified investment portfolio. Our portfolio objective is to have a low correlation with the Nasdaq while aiming to consistently beat it as a benchmark. While venture will always be a high-risk asset class to invest in, we believe that our approach reduces that risk in comparison to traditional models.
Please tell us either your highest conviction idea or trends that you find particularly interesting within your fund’s investment universe.
Venture as a whole, and specifically the early-stage space, is undergoing a tectonic shift, as the availability of data and computing power opens up the industry itself to the transformative influence of technology. The proprietary artificial intelligence and machine learning tools we created allow a deeper understanding of startups and similar business opportunities at a much earlier stage than previously attempted. We believe Innovations such as this and others may transform how investment opportunities are identified over the coming period. We aim to lead that transformation.
What are your views on the current macro landscape?
There is a lot of uncertainty at the moment around where the macro-economic cycle is headed, especially with respect to all the trade issues currently being discussed. This uncertainty is clear in the movement of public markets. However, the growing crop of Venture backed businesses conducting IPOs could generate much needed liquidity, part of which may find its way back into venture investments, continuing to drive interest in the early stage space.
What keeps you up at night?
My excitement. We believe that what we are doing at Hatcher+ today is nothing short of reinventing the early stage investment space. As with any business, there are lots of moving parts, things to do, deadlines etc., but I am used to all of that as I have been in the entrepreneurial world my entire life. However, seeing our strategy getting executed day after day gets me excited, and keeps me awake thinking of the possibilities.
What are the risks of your strategy?
The biggest risk we face is maintaining access to quality dealflow. We build co-investment partnerships with sector and geographic champions around the world to get access to the companies we invest in and therefore need to foster and maintain these relationships. In addition to managing the existing relationships we have, we also continuously monitor the ecosystem globally to ensure we are aware of any strong new players that should be added to our network.
Venture investors should keep in mind that investments in early-stage startups have drawbacks such as their high-risk level, limited transferability, long-time investment horizon, illiquidity, and capital calls. There is no guarantee that this investment will meet its investment objectives and this investment bears the risk of partial or complete loss of capital.
Securities offered through North Capital Private Securities, Member FINRA/SIPC.