Hi all - I do a weekly post on LinkedIn to (try to) get my business exposure, and thought this week's post might be relevant to this community. So re-sharing below. Maybe interesting or helpful to someone out there.
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like 6 different hedge fund folks sent me this story of the OpenAI 23yo raising $1.5bn on launch (goat farming is natural adjacency to AI hedge funds)
I think it’s just another example of the life rule (besides continued goofy flows/valuations around AI):
𝘖𝘧𝘵𝘦𝘯 𝘵𝘩𝘦 𝘣𝘦𝘴𝘵 𝘸𝘢𝘺 𝘵𝘰 𝘢𝘤𝘩𝘪𝘦𝘷𝘦 𝘴𝘰𝘮𝘦𝘵𝘩𝘪𝘯𝘨 𝘥𝘪𝘧𝘧𝘦𝘳𝘦𝘯𝘵𝘪𝘢𝘵𝘦𝘥 (/𝘦𝘹𝘤𝘦𝘱𝘵𝘪𝘰𝘯𝘢𝘭) 𝘪𝘴 𝘵𝘰 𝘢𝘱𝘱𝘳𝘰𝘢𝘤𝘩 𝘪𝘵 𝘰𝘣𝘭𝘪𝘲𝘶𝘦𝘭𝘺
If you’re the valedictorian at Columbia (I think he was), you could probably go to Goldman/BX PE then KKR then Tiger/Viking/etc. and then launch your own $1.5bn fund.
But that’s probbably a ~15ish year path these days (and you still need a ton of luck – v important in HFland!)
But the side door (OpenAI first) was smarter here.
(Granted he probably didn’t have a master plan to parlay AI into a hedge fund. But likely figured if he goes to the burning hot core of innovation he can monetize it in some way, which was smart and correct (I was originally gonna say that having the foresight to join OpenAI years ago was also remarkable, but it looks like he joined in 2023 - well after Google Trends says OpenAI was cool))
I think this sort of thing is expressed in various ideas:
‘blue vs red ocean’,
‘different is better than better’,
‘avoiding a crowded trade’,
maybe even ‘choosing the right game to play’ etc.
I think Jeremy Giffon even has a bit on this in his awesome Invest Like The Best podcast: 'if I wanted to get in a club, I’d figure out the owner and get coffee w him on Tues, not wait in line on Fri’ (wildly paraphrasing but I think that was the gist)
It's kinda like building an investment vehicle out of a small goat dairy. For sellers, Tucker's Farm Corporation hits different than "Hi we're Tree Pond Lane Capital [about as interesting as Toledo] and we'd be thrilled to preserve your legacy". (And not to mention, there's also something aesthetic about a more corporate (non-fund) aspiration (eg BRK, KII, etc.)).
But for sure it creates near term headwinds and general confusion when we need things from traditional folks (and building an investment firm is not a permissionless endeavor in the early years!).
But that friction is a good signal for us - it took a while for Romans to realize Rome had fallen.
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Pls send us any $3m+ EBIT assets!
Based on the most insightful WSO content, this post highlights a fascinating trend in hedge fund launches, particularly leveraging unconventional paths to success. The 23-year-old's journey from OpenAI to raising $1.5 billion for a hedge fund underscores the value of approaching opportunities obliquely rather than following the traditional finance career trajectory.
Key takeaways from this example:
Unconventional Pathways: Instead of the standard route (e.g., Goldman → PE → Tiger/Viking), this individual capitalized on their association with a cutting-edge innovation hub like OpenAI. This approach not only differentiated them but also positioned them at the intersection of AI and finance, a space currently attracting significant interest and capital.
Timing and Strategy: Joining OpenAI in 2023, when it was already a recognized leader in AI, demonstrates strategic foresight. While it may not have been a calculated move to launch a hedge fund, being at the forefront of innovation created opportunities to monetize expertise in a high-demand area.
Differentiation Matters: The concept of "different is better than better" resonates here. By aligning with a unique narrative (AI expertise), the fund stands out in a crowded hedge fund landscape. This aligns with broader investment principles like avoiding crowded trades and seeking blue ocean strategies.
Aesthetic and Branding: The comparison to building an investment vehicle out of a goat dairy highlights the importance of branding and storytelling. A unique, compelling narrative can resonate more with investors than a generic fund name or approach.
Challenges of Non-Traditional Approaches: While this path offers differentiation, it also creates friction with traditional players in the industry. However, as noted, this friction can be a positive signal, indicating a truly innovative approach.
This story serves as a reminder that success in hedge funds—or any competitive field—often comes from playing a different game rather than excelling at the same one everyone else is playing.
Sources: 26 Year Old Female to raise $200 million Short Hedge Fund, A 20-year-old who dropped out of NYU says he has raised $5 million for his hedge fund, Starting a small hedge fund, Ho-Hum to Hedge Fund, Math PhD hedge fund role
Who tf are these lps
Dude’s a clown - the fund is like half INTC - that’s really the big AI megatrend beneficiary according to some guy who got “pushed out” of OpenAI? And LPs are willing to pay for that? Wild stuff. This fund makes Cathie Wood look like Benjamin Graham by comparison.
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