I had the pleasure of interviewing David Moradi, Founder and CEO of Sero Capital, LLC. He directs Sero’s overall investment strategy and firm governance.

Thank you so much for taking the time to chat with me today, I’d like to start from the very beginning of your career to get a sense of where you started to get to where you are now. Upon graduating with a degree in psychology, what turned you on to finance?

I became interested in the stock market during my Junior year of college. This was during the late 90s while technology stocks were experiencing a meteoric rise. I enjoyed the constant fluctuations in the market and trying to predict the future value of a company.

Where did you first work in finance and what did you do?

I worked as an analyst at a distressed debt firm called Imperial Capital. I was given the opportunity to work with the Director of Research, Stephen Moyer, and assisted him in writing reports. He has written books on distressed investing and is a frequent speaker on the topic. He was my first mentor and within a year, he let me write my own research reports on companies. I would research a company, value it against the rest of the industry and develop a forecast for the company. The reports were published and read throughout the industry, including by some of the biggest investors in the world.

Why did you want to move to a hedge fund?

It became clear to me that I wanted to make actual investment decisions and not just publish recommendations about securities. This led me to join a hedge fund rather than work at an investment bank.

What attracted you to hedge funds like Soros and Pequot earlier in your career?

Throughout college, I read various publications and books, including the Alchemy of Finance, by George Soros. I was very fascinated with his investment approach. Soros was and still is one of the largest and most respected hedge funds in the world. The fund also had the best track record recording returns of over 30% annually for 30+ years.

Pequot was also one of the largest hedge funds at the time, specializing in technology. It was a logical choice since I was particularly interested in technology companies.

Did you enjoy being at a hedge fund?

Yes, working at a hedge fund is like professional athletics for your brain – you compete with others on how much bottom-line performance you deliver.

When did you begin as a Portfolio Manager and what was your progression?

I began running a portfolio at Soros in 2005 and was able to deliver returns of 20% that year. At Pequot, I was able to deliver returns in the mid 20% range. After 3 years of a combined track record at these funds, I launched Anthion Management, a technology-focused fund. After launching with $80 million at the onset of the global financial crisis in July 2008, the fund eventually grew to over $1B.

How did you come to focus on technology? Did you trade mostly tech stocks?

I began my career in finance after the technology boom ended by analyzing former high-flying technology companies, which eventually became “distressed” due to high-cost structures and debt-heavy balance sheets. In order to survive, they needed to right-size their businesses and restructure their balance sheets. I analyzed the corporate debt of these distressed companies and made recommendations on which issuers would survive and which would thrive.

What brought about your interest in VC investing?

I have been investing in technology companies for over 20 years and love being at the forefront of cutting edge technologies which can impact and improve the lives of others. The feeling of watching a company grow from an idea to reality and then to a successful company is hard to beat. What sets me apart from other VC investors is my deep experience investing in technology companies at all stages (including turnarounds and distressed opportunities).

Are you still trading stocks alongside VC investing?

Yes, however, my stock investments are also an earlier stage with longer holding periods than when I was running a hedge fund. The holding period for my hedge fund investments typically averaged 3-12 months. However, now using only my personal capital, my investments tend to average multiple years.

Have you found any early-stage companies?

Yes, I have co-founded 2 companies – one in the virtual reality video game space and the other in education.

In terms of VC, what areas of technology do you see having the most growth in the next 5-10 years?

I believe Augmented Reality/Virtual Reality (AR/VR) will experience exponential growth over the next few years. I believe it is a game-changing medium since users can completely transform their sense of reality and immerse themselves in a completely different experience by simply putting a headset on. We are still early in the technology cycle for AR/VR and the devices will continue to get much more user-friendly and the content for the devices will become more pervasive.

What types of investments are you working on now?

I am working on the following:

VR/AR

SaaS

Enterprise software

Education

Do you take more risk as a VC investor than you do in your trading portfolios? Can you explain?

Yes, the companies are an early stage in what is called “frontier” markets. In addition to making sure the company is executing on its strategy properly, being correct on the underlying macro trend in a frontier market is very important. Risk is elevated as there is no opportunity for liquidity until an exit, which can take several years.

What are the most important characteristics you look for in a start-up prior to investing?

Three things – Management, macro landscape and potential of the product to be successful.

What do you look for in terms of C–suite management/Board management for start-up investments?

I look for a history of proven success in prior roles with increasing responsibility. Being extremely driven is critical, as is having a clear, logical thought process and being able to work well with others.

You announced a Foundation last summer with inaugural gifts to a children’s charity and to a military fund. Why these charities?

Providing educational funding for underserved children and the children of fallen military heroes is something that is near and dear to me. I will likely expand my Foundation to include other charities focused on these causes.

What do you find important about “giving back”?

I have been very fortunate to have had tremendous success in my career and to make it all really mean something it is important to me to give to others who need our help, especially children.

Since it is the season, what advice would you have for graduates as they go into the world and decide what they want to do with their lives? (at least short term)

My advice is to follow your passion. If you don’t love what you do, chances are you will not excel.