HOF Capital, a venture firm perhaps best known for its early investments in AI technology companies like Anthropic, recently broadened its reach into private-equity investing by co-leading an investor group in a recent EUR1 billion, or around $1.16 billion, acquisition of Porsche's stake in Rimac Group and Bugatti Rimac, an automotive joint venture Rimac had formed with Porsche.
The deal originated through a smaller multiyear direct investment in Rimac Group that dated back to at least 2022, said HOF Capital co-founder and Managing Partner Hisham Elhaddad.
Elhaddad spoke to WSJ Pro about the deal as well as how his firm is looking at the challenges and opportunities around investing in artificial intelligence. Responses have been edited for clarity.
WSJ Pro: HOF Capital is perhaps best known for some of its early-stage investments. How does this deal with Porsche reflect the firm's approach to backing more mature companies?
Elhaddad: Just to give you a sense of the firm's strategies, we have early stage, which does pre-seed to Series A [funding rounds]. You have growth-stage venture, which does Series B to pre-IPO [investments]. And today marks the second investment in our growth equity mandate outside of technology.
?We have two businesses outside the technology ecosystem, but this certainly marks an expansion into kind of a more complex financial, programmatic type deal, which makes up what we describe as our growth-equity mandate.
?In terms of how that fits, I would describe what we look for across all strategies as truly exceptional founders. If you look at our early investments in SpaceX, we invested before Starlink existed. Anthropic, we invested before they had any revenue at all.
WSJ Pro: What were some of the issues that made the Porsche deal a complex one?
Elhaddad: We were negotiating with Porsche, which is a publicly traded auto manufacturer in Europe. This asset was under their umbrella for almost 30 years. So it's just a deal of complexity. It took two years from ideation to completion. I would say the actual work took place over the last year.
WSJ Pro: There has been a lot of debate over whether we are in an AI investment bubble. Given your firm's experience with AI investing, how do you view that debate?
Elhaddad: It's very easy to have polarized views in today's world because a lot of the headlines are about the doomsday view and the bubble, and on the other side you've got the AI bulls. ?But I think we should all take a step back and look at the facts of the matter. The upside that this technology and the entire tech ecosystem around AI can bring to humanity is tremendous, in our point of view. I personally believe that we can solve so many of the world's problems, starting with medicine, where we are going to cure many of today's diseases with AI. We are going to potentially solve a lot of the bottlenecks that exist in the world today as it relates to resources, abundant energy.
Think about the potential of solving all the physics problems, all the universal problems that we haven't been able to so far, and what that can create for humanity. ?So, we think with the right ecosystem in place, with the right regulatory and public-private relationships over the coming years, we could be at the dawn of an age of abundance.
WSJ Pro: What do you see as the biggest challenges facing investors in AI-related companies today?
Elhaddad: I think on one hand, it's hard to predict the future, right? What we look for as a firm is defensible picks and shovels that are building this future that we just discussed. Alongside that, there's of course a lot of noise. There's certainly frothiness in the market, both in private and public valuations.
Our aspiration is to identify the number-one, category-defining companies. We're happy to pre-emptively pay there, because we're seeing regular growth in these companies. But what's probably challenging for a lot of people, and certainly not an easy job, is to filter through that broader noise, identify these companies, and gain access to them.