Altos Managing Director Ho Nam: The Essence of Equity Investment is a Third Asset Class, Priced by What It Can Produce
Ho Nam, co-founder and managing director of Altos Ventures, stated that the essence of equity investment is a third asset class: priced by what it can produce. When people are in a hurry or liquidity is high before value is produced, they can cash out, turning the third class into a second class—priced like gold or cryptocurrencies based on what others are willing to pay. He also categorized the iconic institutions and valuation markups in contemporary venture capital as a second class.
Altos was founded in 1996 by classmates from Stanford Business School in Menlo Park and is now a registered investment advisor managing over $10 billion in assets under regulatory standards, with a portfolio that includes Roblox, Coupang, Toss, and Woowa Brothers. Nam moved to the U.S. from South Korea at the age of nine, holds a degree in engineering from Harvey Mudd and an MBA from Stanford, and has experience with Silicon Graphics, Bain, and Trinity Ventures. After failing to raise new funds for five years post the internet bubble, he went to Omaha to learn from Buffett, transforming the institution from a "passive investor for frontline funds" to one that accompanies founders throughout their lifecycle.
The fund's first check typically represents about 5% of the fund, and after gaining confidence, they may increase investment through cross-funds or special vehicles, with follow-up investments potentially reaching 10 to 100 times the initial check; there was a project that saw a 211-fold increase in share price after twelve years. Nam stated that innovation does not follow a financing calendar, and when the intervals between rounds shorten, the belief in the next round can easily become an illusion. The strategy is to invest less but deeper, focusing on hedgehog-type founders, and to strive for self-sustaining growth rather than preparing for brand markups for the next round.
Those buying are long-term investors willing to lock in terms for output, while those selling treat shares as tradable chips in a fast turnover fund. During high liquidity cycles, funds flow from operational equity to iconic rounds and secondary markups. Beneficiaries are funds that can run with cross-period capital and a few companies that are marked up, while those under pressure are investors who treat logos as due diligence and crypto-style valuations as equity.
He emphasized that many third-class investments will slide into second-class during periods of excess liquidity. Altos operates simultaneously in Silicon Valley and Seoul, without pursuing asset management scale as its main business.
Source: Public Information
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Nam integrates Buffett's three-part asset classification into venture capital: consumption, speculative premium, and productive equity. During the internet bubble, Altos engaged in a lottery of "discovering companies and handing them over to branded funds for markup," but after the crash, they learned from Omaha, using longer durations and cross-fund markups to exchange for a few big winners. Roblox was scaled from about $86.5 million to several hundred million, and projects like Coupang demonstrate that geography does not need to be in the spotlight to hold based on output. This is a strategy of using primary market lock-up periods to counteract secondary market instant pricing.
The capital path treats liquidity as a disturbance. Cryptocurrencies and gold lack operational cash flow, with prices entirely dependent on the next buyer; high liquidity venture capital allows shares to clear before products are fully formed, thus logos and markups replace unit economics. Altos conducts initial checks small and follow-ups large, effectively postponing due diligence to after investment, using a ten-year hold to counter a two-year exit. Management fees are not the goal; the company's legacy is, allowing both investors and managers to account based on enterprise output rather than fund vintage rankings.
This is analogous to Berkshire buying operating companies rather than collectibles, and the focus of funds heavily invested in the Korean consumer internet in the 2010s. Contemporary branded institutions co-invest more like the art market: trading signatures before the work is completed. The industry phase is venture capital sliding from "building equity" to "tradable shares"—tokens and secondary sales bring exits forward before value production. The failures are a reminder of the companies from 2000 that were packaged for the next round.
Structural changes signify a transfer of pricing power. Pricing power shifts from free cash flow of enterprises to the brands leading the next round. The mechanism is: when liquidity is sufficient, holding costs decrease, turnover expectations rise, and productive assets are valued as collectibles; those who can refuse early cash-out keep third-class assets on the books, while those relying on logo markups are market makers for the second class.
ABAB News · Laws of Cognition
Once cashable, output will be replaced by the next buyer's price.
Pursuing iconic institutions turns equity into gold.
The denser the markup rounds, the more due diligence occurs after investment.