Sidney Nakahodo - Founder & GP, Seldor Capital

Welcome to another VC Wisdom pod. We have Sidney Nakahodo with us today. He's a founder and GP at Saldor Capital. He's building, uh, global space and frontier tactical systems, an investment advisor platform builder up in New York. Sid, welcome to the podcast. Tell us a bit more about yourself and what you're up to.

Thanks so much, Charles. Very happy to be here. As you mentioned, I'm the founder and general partner of Solar Capital. We are an investment firm based in New York City that focuses on the global space economy. And what we've learned over time is that space is one of those exciting areas and it only will grow from now on. At the same time, investors, they tend to look for the best founders that have the ability to seize that momentum. What we do at Seldar Capital, it is to back those founders that not only are excited about space, but are helping to build the new space economy.

Interesting. You were born in Brazil, right?

That's correct. I was born and raised in Brazil. And I've been here in the US for the past several decades.

And what's your background? How did a guy like you go from Brazil to World Bank to New York and into what you're doing nowadays? Seems like a pretty steady growth.

Yeah, it's been a long journey. My background is engineering and most of my life actually was not in the engineering sector but but in the international development area. I came to the US— yep— to study, and my focus was international development, international affairs. That's what led me to the World Bank. I've always been excited about the role that technology can play in development. And how transformative that role can be, especially for emerging economies. It's very similar to what we see in the space sector now, how transformative the space can be for so many different areas.

Right. So tell us about the World Bank role. I think that was your first big one, right? How did you land that? How did you go from Brazil to US as well? Make that bridge for us.

Yeah, coming to the U.S. to study has opened so many doors, and one of the things that, that helped me access opportunities here in the United States was definitely the group of people that I was surrounded with, particularly professors but also classmates. And by tapping into that community I was exposed to some of those opportunities and that's how things started in Washington, D.C. Nice.

And what did, what did you do specifically at World Bank? What was your role?

Yeah, initially I was hired to work with projects in Brazil. And what happened is that over time my activities involved Brazil, but in a broader context. Most of my projects that I was involved were related to sustainable development. And because of those projects, I had the opportunity to see how particular technologies, especially related to carbon mitigation, could be impactful for developing countries. So a lot of what I did was related to carbon finance, and that was before carbon was a hype or like a buzzword, so to say. And but more, I was very excited to see the role that technology can play. So I think in That's how I can explain how I used my technology background connected to international development and how that led me to be excited about the opportunity— the opportunities that were emerging in the space sector when space was becoming what we see today.

And where does Brazil stand on the tech side of things in the international scene? I've been to Brazil a couple months ago and seems like a pretty closed-loop ecosystem that doesn't invite a lot of cooperation from the rest of countries, like pretty independent as a country, which can be good, right? Like, um, where does Brazil stand nowadays? We've also seen like a bunch of very successful fintechs emerge from there. So do you see like, uh, skyrocketing growth in Brazil in the BRICS context of things?

I love the question because it allows me to reconnect with a different hat apart from being an investor. I'm an academic and I taught for more than a decade at Columbia University on topics related to international development, and I used Brazil as a case study, right? So the questions that are asking were pretty much related to what I used to experience in the classroom and what I used to try to convey to my students. So Brazil It's a country with immense potential, and quite often it's underestimated in a global arena. It's a country that tends to punch below its weight, I would say. And at the same time, there's some areas where Brazil is a huge player, major player, right? We're talking about sustainable development, but in some areas like energy, huge topic these days, Brazil is also particularly when you think about renewable energy. Brazil is a place where you start to see world-class initiatives, right? It's a, it's a big country, 200 million people, so anything that, uh, any solution that can help connect all those individuals have a huge impact on society. So you mentioned fintechs, definitely, because there was a large part of population that was underserved by the existing banking systems, right? So that's why you see companies like Nubank that skyrocketed very quickly in a very closed market, as you pointed out. Brazil is a country that tends to look too much inward, and a lot of the companies, they tend to focus too much on the domestic market because it's a very big market. We're starting to see, uh, some changes in that trend, particularly in areas where Brazil is more connected to the outside world. But you're totally right, I think there's a long way to go before Brazil becomes more integrated into the global economy.

And what was your first stint in the startup world like? Were you an actual founder? I see Antler here. I see Interloken. Like, yeah, what's your— what's been your first stint in the entrepreneurial world and how, how did that go for you?

And that's a good question, right? Because, uh, while I was teaching at Columbia, I was observing the evolution of the space, commercial space ecosystem, and I decided to create a study group and invited some founders from the New York ecosystem to discuss what was going on. So that was my first exposure to the entrepreneurial ecosystem, and that led me to— that motivated me to get involved into several entrepreneurial ventures. What I figured out was that as much as I loved the idea of running a company, I was even more excited about helping founders, uh, make their companies prosper and flourish. So my participation in the space economy and the entrepreneurial ecosystem more broadly was as a community builder, as an ecosystem enabler, and that's what led me eventually to becoming VC.

So has it been successful, your stint as a founder, or did you get mostly lessons? And then what justified your switch from founder to VC? Is it just like, oh, I can have my money actually work for me, it's more like time and energy efficient, and/or there are founders that are way more savage than me out there that can just like outcompete me? What was the, the mindset back then?

I learned that— I do believe that the best way to learn is by doing, right? And learning about yourself, learning about markets, and becoming a founder helped me understand like what are my strengths are and what my weaknesses could be, right? Maybe because of my approach to professional life, that involves so many different areas, the academic part, the technology part, but also the investor perspective that I have now as a primary activity. What I've learned is that I like to get involved in several different areas. I like to see things from a broad perspective. As a founder, that's important, but you really need to be very focused on your mission of building your company. And sometimes you have to be very strategic about how you use your time, and you spend a lot of your time on building something in a very particular field instead of getting exposed to all these different experiences, right? So for me, it was more like a life choice than someone who likes breadth. Rather than that sometimes. And as a founder, you end up getting involved a lot on, as particularly as a company scales, right, on things that are not necessarily related to my strengths. So to put it, I think, very, very honestly, I think it was becoming an investor that allowed me to do things that I wouldn't be able to do as a founder of a company. At the same time, yeah, if you allow me to just add to that, launching a VC firm is not very different from launching a startup in many ways, right? It's just the product and the outcomes tend to be different.

Well, I mean, I think it's very— I mean, there are some parallels, but I think it's a minority, and I think it's because Yeah, one, you don't hustle like a founder, right? You don't— it's less burning. It's that me, I'm obsessed with energy efficiency, right? So I do think that being an investor, I, I'm pretty good at a lot of things, but take a kid like, I don't know, a Bill Gates, a Mark Zuckerberg, like these guys are so much more talented than I am, and I can just bet on them instead of try to outcompete them. Or take an Elon, right? It's like, how can I compete against Elon? Is like, this guy is a total savage. Like, he's playing at least 10 leagues above me, right? Um, so I think it's like, you take the skills that you have to an energy efficiency equation, you grind way less, right? So that's like different. And I think being an investor is less about the day-to-day, is way more patience, and I need to learn that. I think it's like over 5, 10 years, obviously we're seeking like quickest return as possible, right? But it's more about betting and intellectualizing and having brain sparing. You can think of Charlie and Warren, right? And trying to make the best decisions ever. I think it's a different game. It's more like playing poker, yes, trying to play chess, if you know what I mean.

That's a very interesting analogy, right? So if you allow me to elaborate a little bit on why I think that the role of investors have evolved over time. I agree that to a great extent investing is making bets, and I might disagree on the hustling side because I mean, I totally get that it is so hard to build a company, and one of the reasons I became an investor is because I developed this strong appreciation for, for founders, because it's so hard. Launching a VC is hard in a different way, right? Especially if you don't have access to certain networks that could open doors for LPs. But the role of the investors, particularly investors in the early stages, is less about gambling and more about understanding how you can help those companies at the stage where they need a lot of support, particularly in the space sector where quite often they are operating in not mature markets, right? So you have to play a very active role in making sure that you're smoothing the path for those founders as they validate their technologies, as they start connecting with potential partners, as they need to understand how the ecosystem is evolving. I like to compare the role of a VC as the role of an educator in many ways. You don't measure the success of what you do based on how smart you are. You measure the success of your activities based on the success of your students. And for me, I like to think that my success will be reflected on how the founders that I support can grow and can scale. And if I can play a minor role in helping them unlock their potential, that's for me the definition of success.

I like that very much, that definition. You're betting on humans as well. You're also betting on their backgrounds, their systems, right? How do you make your decisions on founders and the systems that they've built? And if this meets the market demand for it, tell me about your criteria.

Absolutely, right? So in the end of the day, it's all about people, right? And people, and we commonly hear that the relationship between investors and founders, they tend to last longer than marriages. I know that this is a joke, But what is very true is that those relationships tend to last very long, even beyond the period where the companies are part of a portfolio, right? And the way that we see the founders that we like to bet are the ones who understand that the technology is not the main, factor that will ensure success. It is the ones that are— ones that understand that there are some preconditions in the market for a particular business to thrive. And if they understand that building a business, especially in the space sector, is less about what you're doing as a company and more about how you align your company with other stakeholders, with your customers, with policymakers, with regulators, with suppliers, with business partners. And the best founders understand that everybody wants something different and everybody operates in a different time scale. At the same time, The founders that have the ability to align the company with these different approaches and priorities are the ones that tend to maximize their potential for success. And those are the people that we would like to work with.

Right. Give me examples. Give me case studies, portfolio investments of your mindset at a time when you were evaluating a company And yeah, has it— as it has grown over the years, like 5 years in and eventually some exits, hopefully?

Yeah, well, hopefully we've learned some lessons. And of course, over time the industry has changed too. One example that I like to highlight is that we— and if I may, like, I like to brag about the fact that we invested in space data center company before space data centers became a buzzword, right? So now everybody's talking about how data centers in space, in orbit, are the next frontier for, for, so for to support AI. And we were on one of the first investors that, that did that. With a company called, uh, Lone Star. And the company is doing very well because they had the ability not only to understand where the market was going, but also to be an early mover and validate a series of steps, including on the technology side, that are positioning them to take advantage of the— of this growing trend. Another example that I like to highlight is that we believe that going to space, it is what will enable human species to thrive in the 21st century. And the ability to live in space is part of that goal. So one of the companies that we supported called Interstellar Lab, that's exactly what they're doing, like how we grow food in space, how we create abilities for people to live in space for a long period of time without relying on, on Earth, to say. And that's the ultimate goal, right, in the long run. At the same time, this is a company that is developing technologies that If you can grow food in extreme conditions, you can always— in space, you can always do the same here and apply those technologies to improve food production here on Earth. So we like this connection between things that happen at the frontier in space that also have an impact on our day-to-day here on our planet.

You pulled out what, like 10 to 20 investments so far? And the nature of your space is that you won't have exits anywhere up until like 5 years from now. Is that the logic?

Yeah, we've invested in 10 companies so far. We've been halfway through the lifetime of a fund and we expect some of our first exits to happen in the next couple of years.

Um, any comments on the SpaceX IPO?

Yeah, well, first, it's— that's very exciting for the space industry in general, but more exciting for the employees and former employees who are part of the SpaceX journey. I see some ripple effects, uh, that are already starting to emerge. The first one is that, uh, A lot of people are talking about space that were not aware of how big the space economy is becoming. So space is not an exotic topic anymore, at least from the commercial perspective. When we started 5 years ago, we still had to explain why there was so much potential for investors in the space sector. That's not the case anymore. It's an industry that's much more mature, and at the same time, the stakeholders are becoming more mature about how they evaluate opportunities in the space sector. The second thing is that a lot of people that who make money with SpaceX, they tend to be people who like to stay involved in the space sector. So we start to see people that are putting money in other space companies. We're starting to see founders that benefited from that windfall and are building new space companies. And so that's creating this virtual cycle and that will feed the space ecosystem and we'll see things moving even faster. From now on because the IPO.

And tell me about, you know, the— when exactly we'll have like, uh, colonies on the moon, for example, which, which seems like the most logical step, right? Is that the next big thing in space, or is, is it what Elon is referring to, like the space data center? Like, what is the low-hanging fruit that will cause like a massive flood of investment from investors in space?

Yeah, that's a very good question because we can answer that from different angles. From a commercial standpoint, the next frontier in space is something that we're starting to see right now. It's what we call space-for-space applications, meaning that increasingly we're starting to see space companies providing services for other space companies. They are helping build the infrastructure where the space economy will thrive. Before that, most of the space companies that we saw emerging were companies that were providing services for the Earth, right? Earth observation, telecommunications, weather forecasts. The expansion of this trend, it is to enable companies like those that I just described to operate in an even larger scale. So when you think about telecommunications, the orbital data centers are one example that will provide— continue to be providing services for Earth. At the same time, we need to build infrastructure that enables those space data centers to be built in Earth's orbit. And this is not something new. SpaceX, or companies like SpaceX, they are already providing services for other space companies, like satellite companies, for example. But what we're starting to see from now on is that that trend will continue and move even faster. Just to give a couple of very concrete examples, We're going to start seeing companies that will be operating with maintenance of satellites, right? Satellites that are in geostationary orbit that provide services like satellite TV. If something happens to those satellites, like you lose a very expensive asset. What we're starting to see is that you can fix a satellite like that and extend the life of that spacecraft in a way that we were not able to do before. So think about that, the impact that can have for operators, for insurance companies, for capital providers, and for customers themselves. That's this entire sector of the space economy. That's related to on-orbit services that will flourish. Things like colonies on the Moon and beyond are very important when you think about policy goals. The space race that helped us get where we are right now was a result of a policy goal. So when the US defines that we need to be— to have a permanent presence on the Moon again through Artemis, that has ripple effects on the value chain of the space sector. So companies start developing the technologies that will enable us to live for extended periods of time on the Moon, at the same time, they are creating base technologies that will, will produce an impact on Earth and on things that, that affect us more directly, right? So that's why it is important to think about the long run and at the same time understand what are the short-term effects that those long-term goals can have for our activities. Whether we see this from the perspective of an entrepreneur, or from an investor, or from the perspective of an operator.

Interesting. So how would that impact your funds? Like, what's your fund strategy, your thesis? Has that changed this year? What are your objectives?

No, absolutely, right? So as we evolve as investment, We are increasingly more excited about this side of the space economy, the frontier aspect of Space for Space. As I mentioned before, we bet on founders that understand that they cannot only create a company and develop technology expecting that the market is ready to absorb what they are doing. They really need to work directly with their customers, they really need to work directly with other stakeholders that will help the market mature. It's very different if you're doing e-commerce or something that is more established, right? And that impacts the way that we think about portfolio construction, right? In terms of choosing or selecting companies that are— will be operating with within this mindset of market formation. Also, how we decide to work with founders that are willing to play a larger role in not only building a company, but helping create a market. And the way that these long-term goals impact the industry as well is very important because that, that's where funding from the government, for instance, is going. And that's how we're starting to see like a lot of partnerships forming that will enable companies to take advantage of these opportunities.

Yeah, I like this a lot, and I have a couple of founders that have been on my pod that I think could be a good fit for the investment itself. How much do you invest in them? For what kind of equity, right? Like at which stage? Can you give me a a bit more info if I refer them to you?

Oh, absolutely, right? So we invest in very early stage, pre-seed and seed stages. Our first fund, we were making small allocations, but what I like to talk about is like how we plan things down the road, right? I mentioned to you that our activities have evolved and we like to think about ourselves beyond the lens of a VC. We are now an investment firm that works with capital formation, and we identify the partners that we can bring on board to support companies from the early stages to growth stages, and from the stage where they are taking small checks of $50K, $100K, all the way to the stage where they are ready to work with much larger investors. And we are playing the role of facilitating their access to these large investments in many, many different ways. But the most important thing is that we like to work with companies at the stage where they need the most assistance. And assistance not in terms only of checks, but in understanding how the ecosystem is evolving and what role that they can play in helping create this market.

Interesting. How do you raise capital from LPs? Any strategies to share on that level?

Yeah, absolutely. Because it's one of the things that emerging managers, they struggle with. If you're doing your first fund, it's always relying on your immediate networks. Family, friends. And I would, I would say that cold calls probably worked within certain constraints, but the entry barrier to launch a fund is so much lower these days, and there's so much more competition for LPs' attention. So the strategy has to evolve as well. In our case, We prefer to think that we are creating the conditions for— through which LPs understand the value that we are creating, and when we talk to them, there's already this alignment between what we can offer and what they are looking for. So we spend a lot of time on developing a relationship that's mutually beneficial, right? So this is one approach that as an investor, I like to think about in terms of long-term partnerships. So we start cultivating those relationships by introducing deals, by through co-investment and giving them access to opportunities in terms of investment, but also knowledge that they wouldn't have otherwise. The second thing is that, uh, this is more like in my particular case. I mentioned to you that I wear different hats. There's the academic hat, and I believe that, uh, being involved in the education initiatives gives me a different perspective as an investor, right? Because I have to think about the big picture but also to help to translate that into operational execution. So I'm working with the United Nations, for example, now to help educate space founders in emerging space economies. And for me, this is fascinating because you cannot think about launching a space company in a developing country the same way that you think about launching a space company in Silicon Valley or New York. So, uh, and that's how my hat as somebody who has worked with international development has helped me a lot because then it brings me, brings my experience at the World Bank at service of this emerging industry.

What does a day in your life look like? What habits you entertain to get better and choose the right picks as an investor?

Yeah, it's— that's a very good question. In my early days as an investor, I used to spend a lot of time trying to understand the space industry, right? So I was in many ways immersed in, in the space bubble. What I figured out that is, in order to become a better investor, I need to understand how investors think. Nowadays, I spend a lot of time sharing information and talking to other investors, both co-investors but also LPs. And when you talk about LPs, it's a very diverse group. You can have angel investors that end up becoming small allocators. You have family offices. You have funds of funds. You have sovereigns, you have corporations that tend to allocate money also in funds directly from the balance sheet, or they have a more structured approach through corporate venture capital arms that they create within their organization. So that in itself takes up a lot of my time. Which I think that even though I wish I could spend most of my day reading and talking to founders and being immersed in the space ecosystem, in order to be more effective as an investor, I need to expand the role of my activities and understand how capital providers think so that I'm well positioned to make that connection between the large allocators and the startups.

Who do you learn from nowadays? What great investors do you actually study? What newsletters do you read? Tell me a bit more.

Yeah, that's a very good question. Everybody in the space or in the VC community, they tend to follow some, some blogs or some resources. There are some organizations that have helped me a lot and have been exposed to that community. So the National Venture Capital Association, VC Lab, they are all fostering the next generation of investors. So the people that I tend to interact with or I tend to follow sometimes are not the most popular people that you would see on the internet, but are the ones that are connected to these networks that I admire. One of them you might not have heard about, but for me, it is a role model. His name is Jeff Clavier. He is considered the godfather of microinvesting. He was one of the first— he was the founder of one of the first micro VCs. In Silicon Valley 2 decades ago. So, and I've had the chance to interact with him as a mentee of his. So this one example of the people that might not be known in the broader sense but are hugely impactful in, in our ecosystem.

Ecosystem. And why? How does micro investing relate to your investing style nowadays?

Well, we started as a micro VC, right? What's a micro VC? They tend to be smaller funds, they tend to allocate smaller checks, but more importantly, the micro VC movement has been very, very relevant for the entire ecosystem because micro VCs tend to be very specialized. In our case, we focus on a niche sector, which is space sector, but we see micro VCs that operate in very several different verticals. And why that's important? Because things are moving so fast and they tend to demand— and certain kind of expertise and access to networks that helps you differentiate yourself in terms of accessing the best deals at the very early stages. And also because you develop this very specific knowledge, it can help you on due diligence. And a lot of the larger funds, they tend to pay a lot of attention to what specialized micro VCs do, because we serve as a first filter to the best opportunities. In fact, I end up talking to a lot of larger funds that are— that when they are doing due diligence on a company that gets to the stage where they are ready to invest, and they want to know like how they've interacted with us as early-stage investors, we can provide feedback both in terms of how they have matured as founders, but also on the company that they're building, the level of maturity of the technology, right? So micro VCs, they operate at a layer where larger VCs don't want to get involved because it's a lot of work People say that investing $1 million is as much work as investing $100 million, right? So you have to do the whole due diligence process and you don't get the same return for your investment. But that's how micro VCs can operate in a niche where other investors don't have an interest or are not prepared to get involved.

I love it. Well, thanks for showing up today, Sidney. Where can people find out more about you?

Please feel free to contact me through LinkedIn. You need my email, sidney@southerncapital.com. Very easy. I'm not very active on social media, but I tend to respond well professional connections on LinkedIn, through our webpage. But more importantly, I think if there's something that you're building and it aligns with what we talked about today, then I'd love to speak to you.

There you go. So I was