I had the pleasure to interview David Moradi. David is an entrepreneur, investor and advisor to numerous market-leading technology companies. He is Founder and CEO of Sero Capital, LLC, a private investment firm that focuses on growth opportunities in the technology sector. David is also Co-Founder and Executive Chairman of First Contact Entertainment Inc., a leading virtual reality (VR) video game development studio. David spent 10 years as Founder and CEO of Anthion Management, a technology focused fund which grew to $1B of assets. In 2013, Anthion was converted to a family office investing in various asset classes including early stage technology companies, public equities, corporate debt and real estate. Prior to founding Anthion in 2008, David was a Portfolio Manager at Pequot Capital Management and an analyst and Portfolio Manager for Soros Fund Management. David started his career as a special situations analyst for Imperial Capital LLC in 2000. David graduated with a B.A. in psychology from the University of California, Los Angeles in March of 2000. He is Founder and Chairman of the David Moradi Foundation, a charitable foundation supporting education and veterans.
Thank you so much for joining us! Can you tell us the story about what brought you to this specific career path?
Picture yourself in the late 90s and the dot com boom is fully underway. Everyone around me was getting in on the action. After doing a bit of research, I decided to take my entire savings of $5,000 and invest it. In a year, that netted me $50,000. I was blown away. At first, I thought I had been very lucky, but then it hit me that I could make money with my brain, instead of working long hours laboring as I had previous summers. This realization was transformative and set me on a path from potentially studying medicine to researching investment strategies and analyzing stocks. Warren Buffet, George Soros, and Jesse Livermore captivated my attention with their investment strategies and made me realize I had a lot to learn if I wanted to do this for a living.
Unlike most entrepreneurial CEO stories, I graduated from UCLA with a degree in psychology, which would later serve me well as an investor. As the dot com boom began to show signs of trouble, I had the unique opportunity to join an investment bank which focused on troubled companies or “distressed debt.” High-flying technology companies eventually became distressed due to their high-cost structures and excessive debt. I would get to the office at 5AM every morning and analyze companies, write research reports and present my findings if a company was a buy or a sell.
The work was exciting and very fulfilling. My reports were published and read throughout the industry, including by some of the biggest investors in the world such as Soros Fund Management. However, as time went on, I realized that I wasn’t satisfied standing on the sidelines publishing research and recommendations on securities. I wanted to get into the arena and make actual investment decisions with my own skin in the game. This desire led me to leave research and pursue direct investing by joining a hedge fund.
I cut my teeth working long hours for two industry leading hedge funds — Initially at Soros Fund Management and then at Pequot Capital. After a few years of a combined winning track record at these funds I fulfilled a dream — I moved from player to owner and launched my technology-focused fund, Anthion Management, with $80 million in July 2008. Similar to how I started my career during the internet bust, the market had taken a much larger turn for the worse in 2008. This was at the onset of the global financial crisis, given my prior experience of analyzing distressed companies during the internet bubble burst of the early 2000s, I was able to navigate an extremely challenging environment. In 2013, Anthion became a family office which allowed for flexibility to invest in private companies. To move from running a hedge fund with a highly analytical focus to a private equity firm with a people-centric approach, has resulted in financial and personal growth I did not anticipate. In fact, it has allowed me to expand my horizons into emerging media, education, and enterprise technologies. In my career, I have found emotional intelligence to be the key to my success in all aspects.
Can you share one of the major challenges you encountered when first leading a company? What lesson did you learn from that?
There are two major challenges and subsequent lessons I can share:
The first challenge that I faced is when I founded Anthion Management. Considering the network I had developed over the years of investing, I believed I could raise $300MM to launch the technology fund, but my timing couldn’t have been worse. I launched Anthion on July 1, 2008, when nobody — and I mean, nobody — was willing to invest in hedge funds due to underperformance and liquidity coming out of investing strategies. With only my anchor investor, I launched Anthion during what would become the global financial crisis, with $80 million. That was certainly humbling and scary, but it taught me to hope for the best and be prepared for the worst. Key to this approach is to carefully budget expenses and manage employee morale accordingly.
The second challenge came when I founded First Contact Entertainment, a next gen Virtual Reality (VR) video game developer studio. In 2016, the first commercially affordable Virtual Reality headsets became available and struggled to gain wide adoption. Without an established base of headsets and consoles to sell into, our first game called ROM Extraction, underperformed our expectations. We had to make a decision — continue developing ROM Extraction or pivot. This is never an easy decision in an early stage company when you have already invested capital and sweat into a specific product. We called an audible on the field and we pivoted our strategy. We noticed a gap in the market for a true multiplayer First Person Shooter Game (FPSG). Crucial to running this play quickly was finding a publishing partner for our game which was in prototype, Firewall Zero Hour. To our good fortune, we landed a deal with Sony. Firewall Zero Hour blew the doors off our expectations earning “Best PSVR Game of 2018” by UploadVR, declaring it “the future of gaming.” Had we stayed the course, we would have continued burning cash without a developed market to sell into, and ultimately closed our business. Pivoting a company’s strategy is never easy, but if you decide to do it, make sure you do it fast to keep your momentum going. Otherwise, you run the risk of missing the market and your shirt!
What are some of the factors that you believe led to your eventual success?
I hold myself to a very high standard by the amount of time, resources, and energy I put into everything I do. A team is only as good as its weakest player and for that reason I invest in people who can compete at the highest level. As a hedge fund analyst and eventually as a Founder and CEO, I can say that burning the midnight oil is essential to success. Above all else, hard work will increase the chance of success. Full stop. People who love what they do will give it their all, so I continue to encourage open and direct communications to provide a fair playing field to make the best decisions based on multiple perspectives.
What are your “5 Things I Wish Someone Told Me Before I Became CEO”?
1 — Focus on your product and customer feedback. It’s critical to invest time and effort into not just the development of your products but listening carefully to customer perception and feedback, real time. Do they like the product? Is it something that fulfills a need and reduces a pain point? Always solicit and listen to the feedback of customers and don’t make costly assumptions. Invest time and effort into marketing to customers and surveying their opinions, needs and desires. Many companies fail because they assume customers want something but don’t actually validate these assumptions in the marketplace. When it comes to product strategy and product roadmap decisions, you must always be thinking about where the puck is going. It will enable your team to make decisions that future-proof your product and its value in the marketplace.
2 — Always check references. A candidate’s resume may be stellar, and they may have aced their interviews. But the only way to know if someone is a strong leader or employee is if you speak with people who have worked with or for them in the past. Without exhaustive reference checks, you could miss key commentary on the candidate’s past and undermine the progress of your company. In addition, in the words of Ronald Reagan, “Trust but Verify”. Even after an employee is hired, you’ll want to closely assess them in the first 90 days to ensure consistency in their words and behaviors compared to what was represented to you during the interview phase. Inconsistencies are a huge red flag.
3 — Keep calm and smile — it’s good for morale. Employees are very in tune with their leaders and can sense if leadership is worried or nervous about a situation. However, I’ve learned that my issues are not their issues. It is better not to share your stresses with employees — which doesn’t mean you should be dishonest. When you’re dealing with employees in a company, especially in the smaller startups I work with, they feed off your mood. If you’re stressed, they become stressed and won’t focus. A loss of focus leads to a drop in productivity, which benefits no one.
4 — Plan for the good, the bad and the ugly in business. Most businesses especially startups do not behave in a linear trajectory and the path to success is never straight. As a leader, you must plan for all outcomes — a good outcome, an acceptable outcome or even a drastic outcome and be ready to act if needed. Always budget enough time and money (and blood, sweat and tears) to get through a rough patch. If you prepare yourself for everything, you’ll have a cushion in your business plan to prevent a “downside” from becoming a “downfall”.
5 — If you can, invest in a management team that you know and trust. It’s impossible to be in multiple places at multiple times so having a team that you know and trust to work with is crucial. I have entered situations where an existing management team was present, and I didn’t do enough due diligence before deciding to keep them on. This has ended up costing me money and more importantly time dealing with difficult situations. Before you invest, really “check under the hood” and make sure any team you inherit takes you through their thought process and strategic plan before you make any decisions. Like the advice I gave earlier on always checking references, “Trust but Verify” applies here too.
What advice would you give to your colleagues to help them to thrive and not “burn out”?
To thrive means to grow or develop aggressively. Growth at times can be very painful and other times highly gratifying. My advice is to always follow your passion to truly give it your all. You must love what you do if you’re going to succeed. If you don’t, chances are you will not succeed in the long term.
None of us can achieve success without some help along the way. Is there a person who you are grateful towards who helped get you to where you are? Can you share a story?
I would say Steve Moyer, my first boss out of college, is someone I will be forever grateful to. He gave a 22-year old kid right out of college a chance to present an investment thesis and research to an entire group of (skeptical) sales and traders. It was wild, almost surreal. I was standing there in front of a ferocious salesforce, telling them what to tell their clients. I could see they were itching to tear me down and Steve stuck with me — he was incredible supportive and encouraging. He was my boss, but he also became a mentor and a friend in the end.
What are some of the goals you still have and are working to accomplish, both personally and professionally?
Over the last few years, I’ve been more involved with private companies and venture stage companies. I recently launched an investment fund which focuses primarily on earlier stage companies, Sero Capital, which is a departure from the hedge fund investing and securities analysis I did earlier in my career. I enjoy seeking out technology companies that are in the early stage of their development and helping them find the right management teams and partners. Instead of owning a stock or a share in a company, I have more concentrated ownership and substantially more input. It’s a different mindset and can be challenging with the various personnel and leadership decisions I must make every day. But I enjoy it and I’m excited to see how some of the investments I’ve made develop over the long term.
What do you hope to leave as your legacy?
Steve Jobs left an incredible legacy as an innovative CEO and investor by focusing on the problem at hand to lead his team to accomplish incredible break-through solutions. As he once said, “you have to be burning with an idea, or a problem, or a wrong that you want to right. If you’re not passionate enough from the start, you’ll never stick it out.” In 2018, I launched the David Moradi Foundation to right the wrong of underserved children, military veterans, and people who do not have access to education, resources, and assistance to live their lives with dignity. These causes — and others — are very important to me. Growing up, there were times when we could barely afford to put food on the table. I understand what it is like to be dealt a tough hand with no opportunities on the horizon. Both charities we support are special because they revolve around creating opportunities for people in need. People, outcomes, investments, planning, and operational commitments are the keys to my success as a business leader and it is the same approach I bring to my Foundation. In the same way, my goal is to deliver sustainable growth to help as many people as I can, for many years to come. Giving back to communities, educational institutions, children and military families is how I want to build my legacy.
You are a person of great influence. If you could start a movement that would enhance people’s lives in some way, what would it be? You never know what your idea can trigger!
Movements are built upon many small personal wins. I would like to see every child of a fallen veteran be given an opportunity to attend college. When a parent makes the greatest sacrifice, giving his or her life for their country, there really is no way we can ever repay their family. Guaranteeing a scholarship fund — with a mix of public and private funds — will go a long way to making this a reality. Let’s start a movement together and go on a winning streak.
How can our readers follow you on social media?
Please follow me on Twitter @davidmoradi4 and my foundation @davidmoradifoun.