Why This Venture Capitalist's Values And Leadership Are Paying Off
Shima Capital's Yida Gao has been making his mark with a nine-figure and growing fund that has gotten the attention of the investment community
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Yida Gao, Shima Capital's founder and managing general partner, officially launched his new venture capital firm in 2021. While still a young venture firm, Shima has been making its mark with a nine-figure and growing fund that has gotten the attention of the investment community. Perhaps this is just the tip of the iceberg for Yida Gao and his team, given their prudent but assertive capital deployment even during a bear market. Much of this could be directly attributed to the team's penchant for backing the right founders but it also speaks to Gao's steadfast commitment when it comes to proper financial oversight adhering to the strictest of guidelines. He has taken this opportunity to set a high bar while maintaining his vision of backing the most avant-garde and cutting-edge entrepreneurs from around the world.
Gao, From Traditional Finance To New Horizons
After immigrating from China to the US at a young age, Gao and his family settled in Atlanta, Georgia. In fact, they originally moved from a small town called Shima, in the Fujian Province, which is a place that all these years later remains near and dear to his heart and is the namesake of his firm.
Gao obtained a Bachelor of Science degree from MIT in Mathematics and Computer Science and held research and programming positions at MIT's Sloan School of Management under professor Paul Asquith and at McKinsey & Company in Boston. Topics of research included landscaping the high tech enterprise verticals to identify pockets of likely consolidation and testing IPO theories using reverse mergers. After graduating Phi Beta Kappa, Gao started his career on Wall Street with Morgan Stanley as an analyst in the Mergers & Acquisitions group where he advised on over $15 billion in aggregate deal value.
As the long hours churning out financial models for public companies took a toll on his sanity, Gao felt the traditional financial sector needed to be more attuned with the times. Recognizing that the prevailing Wall Street culture would be slow to embrace innovation, he ventured elsewhere.
A Taste of Venture Capital
While there were several entry points into the new technologies he sought, venture capital seemed the most enticing given Gao's vision. It is after joining New Enterprise Associates (NEA) as a venture investor that he started cutting his teeth on identifying unique projects that have potential for big time success.
One area of focus for Gao was FinTech, which for him seemed to innovate - with more efficient technology and products - on the hardened Wall Street culture and practices at the time. Within FinTech, Gao found blockchain technologies especially disruptive but had a hard time getting these types of deals through the partnership of NEA - one of the largest, most established venture capital firms in Silicon Valley. Gao realized he needed to venture off on his own to capture this new market opportunity.
Then came Shima Capital
While May 2021 certainly wasn't a full bull market, Gao believed then and still believes now that there are solid investment opportunities that will flourish regardless of market timing, especially in early stage where there can be a larger margin of safety for invested capital and fewer institutional competitors. Gao saw a pocket of opportunity to be the first institutional partner for web3 founders. Notwithstanding market uncertainties and the onset of the COVID pandemic, Gao pushed forward.
An inaugural closed-ended VC fund of $200 million got people's attention. Gao brought in marquee names who believed in his vision and his execution. He was off to a solid start with Shima Capital.
Now counting 15 team members, Shima Capital has already had a promising whirlwind over the past few quarters. Their portfolio has grown to more than 100 companies including Magna, Open Forest Protocol, and Tribal Credit. Half of Shima's team is focused on supporting its portfolio companies with functions like talent acquisition, marketing, fundraising and technical advisory.
Making the Most Out of Opportunities With Shima Capital
Confident with the direction of Shima and his team, Gao also recognizes the importance of strong leadership. Gao is not deterred by the mood of the market currently dictated by the bad actors who have recently shaken up the space. Like with all innovation, there will be failures. "The industry has some very intelligent people who will make the right moves. I'm in this for the long haul," adds Gao. While many investors are leaving the web3 space, Gao sees this bear market as an opportunity to double down both in terms of making new investments and hiring tier 1 talent at Shima.
Investing Strategies and Philosophies, Now and in the Future
When Yida Gao founded Shima Capital almost two years ago, he did so with a high-level investment thesis in mind, albeit a relatively straightforward one: back great founders.
Great founders, of course, who are building projects and ecosystems that will appeal to a large number of individuals or organizations. More specifically, areas of focus were to include but not be limited to, consumer projects such as those based around identity and content ownership; gaming and mobile gaming; composable financial systems like sustainable finance, regenerative finance, and payments & settlement; infrastructure in the form of data platforms and automation; and next-generation technologies such as zero-knowledge proofs and security.
Moore's Law - the principle that the speed and capability of computers can be expected to double every two years - has been the standard bearer of hardware and software production for well over 50 years. This was true all the way through the end of Web2. Today, the speed at which technology evolves and iterates can no longer be measured in years. What's impossible today will most certainly be possible six months from now, if not much sooner.
For Yida Gao and Shima Capital, investing in these new and exciting projects means having to do so with a focused eye on the future and where the technology is heading. On the flip side, it also means taking an educated guess that today's technology will still be relevant six, twelve, even twenty-four months from now.
While there is no foolproof way to know the future, the best safeguard for Gao and his team is to constantly be learning. Shima Capital sees and hears hundreds of project pitches each month which keeps them up to date on the latest developments in the industry, whether they choose to invest or not.
In such a fast-moving industry, Yida Gao has found that the best move for ensuring his fund's long term success is building out a knowledgeable investment team of experts in a particular field. That's why many of the investors at Shima Capital hold additional titles such as Chief Technology Officer, Head of Research, and Head of Gaming. Each member of his staff brings a plethora of skills, experience, and expertise that makes them uniquely qualified to identify strong projects and teams that stand a high chance at success.
However, in the end it's important to note that no amount of due diligence can determine with 100% accuracy whether a company will be successful or not. But for Yida Gao, building the strongest team possible with a diverse skill set has put Shima Capital, he believes, at the head of the class.