Investor Profile: Zhichao Li
In this edition of our investor profile series, we’re spotlighting Zhichao Li, founder of Nestra, a firm focused on public equity value investing, option premiums, and venture capital. With a diverse background–spanning engineering, IBM, and machine learning–Zhichao brings a unique lens to the investment world, combining technical expertise with strategic capital deployment.
The Story Behind Nestra
Can you explain the history of your firm?
We started around May of last year. I come from a non-financial background, with degrees in engineering. After graduating, I worked at IBM in chip design. During my time there, IBM supported startups, which sparked my interest in owning my own companies. I also wanted to accumulate wealth, so I started learning about investing by meeting friends and absorbing as much as possible about how to do it right.
Our firm focuses on value investing. We analyze public companies by looking at financial data from the past 10-15 years, company filings, and our own understanding to assign valuations. These valuations consider a range of scenarios, from liquidation to earnings power and potential growth. Our goal is to find companies that are undervalued across a broad spectrum. The more undervalued they are, the more confident we are in achieving equity gains.
About 95% of our assets under management are tied to this value-investing approach. We dedicate significant time and resources to financial analysis, creating watchlists, and making informed decisions with our partners.
What are the other aspects of your firm’s strategy?
Beyond public equity investing, we have a second department focused on generating income through selling options. This provides near-term monthly income while we wait for ideal equity entry points. For instance, if a stock’s price doesn’t match our criteria, we’ll sell options until the market fluctuates to a point where we can enter at a favorable price.
Finally, there’s our venture capital branch. I’ve been an angel investor for about four years, writing checks, advising companies, and even joining boards. This is our long-term strategy, aimed at supporting startups while balancing risks and opportunities.
What makes your firm’s investment strategy unique?
Our public equity investments are concentrated, often with one or two major buys a year, each taking up 40-45% of our total assets. This level of focus allows us to deeply understand the companies we invest in. With options, we’re not just sitting idle while waiting for entry points; we’re earning monthly premiums. And with venture capital, we’re building relationships with founders and identifying long-term opportunities.
Angel Investing
What is your investment thesis for angel investing?
Angel investing requires a long-term perspective: 7 to 10 years. There’s a lot of luck involved, and success doesn’t always come down to capability. For me, the first thing I look for is face-to-face interaction with founders. I want to understand their mentality, resilience, and ability to handle challenges. Soft skills are crucial.
I’ve seen many founders use buzzwords like AI without fully understanding them. For example, I spoke with an AI company recently that claimed to have innovative AI capabilities, but it was essentially wrapping open-source models with little differentiation. On the other hand, some founders have a deep technical and financial understanding, which gives me confidence in their potential.
What excites you about investing in a company?
It’s a combination of the people and the product. My expertise is in semiconductors and machine learning, so I’m drawn to companies in these areas. For instance, I recently met a company working on solutions that directly addressed some challenges I faced during my time at Apple. Their understanding of the problem and their proposed solution resonated deeply with me.
The Importance of the Founder
What challenges have you observed with founders in your portfolio?
Overconfidence and financial mismanagement are common. One founder I worked with expanded too quickly, misjudging campaign costs and cash flow. They ended up needing a mini bridge round to stabilize operations. Delayed funding from a VC added to the pressure, but we managed to cover the gap in time.
The issue often comes down to not spending enough time on financial planning. Founders rely too heavily on external advisors or analysts without fully understanding their own numbers.
What advice do you often give to founders?
Pay attention to financial details. Founders should document and analyze their expenditures, income, and gaps proactively. In the case I mentioned, if the founder had done this earlier, they wouldn’t have over-expanded and could have avoided the cash crunch entirely. Confidence is great, but it shouldn’t lead to neglecting financial discipline.
Getting to Know Zhichao
What’s one surprising thing about you that most people wouldn’t know?
I love rock climbing, both outdoors and in bouldering gyms. My friends often say they see my problem-solving nature come through when climbing. It’s not just about reaching the next grade; it’s the process of overcoming challenges that excites me. If you want to know me better, climb with me!
Have you ever gone climbing with a founder?
Once. Founders are usually so focused on their work that they don’t have much time for hobbies. Hopefully, more founders will join me in the future.
How should founders reach out if they think they’re a good fit for your firm?
LinkedIn is the best way to connect!
