Unpopular Ventures: Annual Report 2023

UV LPs,

Welcome to our 2023 Annual LP Update. As a reminder, at Unpopular Ventures we focus on “the best companies, off the beaten path.” We invest in exceptional founders who are building high potential businesses, that are non-consensus in some way.

To help us find great opportunities around the world, we leverage a “Scout Program,” through which we share significant portions of our carried interest with anyone who helps us to identify, evaluate, and diligence companies that we invest in. If you would like to refer an opportunity, please check out our Scout Program Guidelines. We were the first to do this publicly and systematically on AngelList, starting in 2019, and it has been a key factor in our success. Thank you to everyone in our community who has contributed to building UV into what it is today.

This excerpt from Jeff Bezos’ 2015 shareholder letter resonates with us: “Most large organizations embrace the idea of invention, but are not willing to suffer the string of failed experiments necessary to get there. Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right. Given a ten percent chance of a 100 times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of ten. We all know that if you swing for the fences, you’re going to strike out a lot, but you’re also going to hit some home runs. The difference between baseball and business, however, is that baseball has a truncated outcome distribution. When you swing, no matter how well you connect with the ball, the most runs you can get is four. In business, every once in a while, when you step up to the plate, you can score 1,000 runs. This long-tailed distribution of returns is why it’s important to be bold. Big winners pay for so many experiments.”

This aligns exactly with our approach here at UV, and with that, you should think of us as a particularly “high beta” fund and syndicate. We are probably going to be wrong more often than other leads you will find on AngelList. But because we are taking such non-consensus swings, we will also hit particularly big home runs. This is already showing up in our returns. Despite being only a little over 4 years old, we already have one investment up over 100x and several more up well over 10x (net of dilution). We aim to hold our best investments for 10 years, so we expect these (and other investments) to grow much further too.

Although our investments are risky, we are extremely diversified — not to mention uncorrelated from just about any other asset class you could invest in. We are currently pacing at about 160 investments per year from our fund. ~Half are in the US, and half are spread around the rest of the world. Internationally in 2023 we have invested in India, Mexico, Colombia, Morocco, Denmark, the UK, Nigeria, Spain, UAE, Indonesia, Sri Lanka, Australia, Brazil, Egypt, Ireland, Chile, Ukraine, and Canada. Within the US, although many of the companies are in California and New York, we have also invested in Austin, Miami, Chicago, Seattle, and Raleigh/Durham. So although our investments are each individually risky — we believe that an investment in our fund is not actually all that risky — because our portfolio is so diversified and uncorrelated from just about anything else you could invest in.

Speaking of: our deal flow is as robust as ever. We have completed 93 investments so far in 2023, and the companies we are seeing are *exceptional.* Capital is finally starting to dry up at seed stage — which has led to us seeing more high quality opportunities, at more reasonable valuations. Late stage VC valuations reset some time ago, but seed stage valuations took longer to come down. We think the reset has finally arrived at seed, and we are as bullish as ever on the opportunities we are investing in.

In the rest of this update you will find:

1. GRATITUDE

2. PORTFOLIO

3. MISCELLANEOUS THOUGHTS

4. RECENT CONTENT

5. APPENDIX

Thank you all for your continued partnership!

Sincerely,

The Unpopular Ventures Team

Reminder: you can invest in our Rolling Fund for broad access to our portfolio, which co-invests in every new company we invest in, and invests in many more companies than you see in the syndicate. Rolling Fund LPs also receive preferential access to limited-allocation deals.

1. GRATITUDE

We have a lot to be thankful for, so we’ll start with a bit of gratitude. Thank you to:

OUR PORTFOLIO FOUNDERS. Thank you to all 368 of our incredible portfolio Founders and CEOs who allowed us to invest in their companies, and have worked like crazy to build their dreams into realities. Great Founders have endless choices of investors to take money from. Thank you for choosing us, and for allowing us to ride along as a small part of your journeys.

OUR LPS. Thank you to all of our 4,300 syndicate LPs and 100+ rolling fund LPs who have entrusted us with your capital. There are endless places to invest your money: dozens of asset classes, thousands of VC firms, and hundreds of syndicates and funds just on AngelList to choose from. Thank you for choosing us, and sticking with us — especially through these challenging economic times.

OUR SCOUTS, GUEST LEADS, AND VENTURE PARTNERS. As you know, we share carry with our LPs, Portfolio Founders, and friends — for their assistance in identifying, assessing, and negotiating one or more of our investments. Thank you to our extended family of contributors who have helped us to do more than we would have been able to on our own, in the last 12 months:

Alex Kwon, Amer Baroudi, Andres González-Olaechea, Ashley Flucas, Brent Carlson-Lee, Burak Buyukdemir, Conor Sharpe, Cossi Achille Arouko, Daniel Petz, Daphne Carmeli, Declan Kelly, Dilraj Ghumman, MD, Edward Ridgely, Elizabeth Yin, Eric Feldman, Eugen Gitin, Eva Zhang, Faizan Khan, Gian Scozzaro, Hannah Oldknow, Idris Ijadunola, Ivan Montoya, Jeson Patel, Johnny Hwin, Jordan Isip, Jordy Koski, Nathan Lustig, Nicholas Daniels, Nikolaus Volk, Patrick Sterea, Ryan Li, Sahil Chopra, Sean Mahsoul, Sergii Zhuk, Snigdha Sur, Steven Coulis, Sumukh Setty, Thomas Stewart, Tiago del Rio, Walton Ward, and Weston Moyer.

Note that we have kept several contributors anonymous, who wished to keep their identities a secret. And some contributors listed here did not accept carry when it might have presented a conflict of interest — particularly VCs who are compensated via their own firms.

THE ANGELLIST TEAM, who make the magic happen behind the scenes. Special thanks in particular to Max Kilberg and Sam O’Driscoll, our direct managers within AngelList over the last year, who have been absolutely amazing.

2. PORTFOLIO

SUMMARY: $61M of capital invested over the last 4.5 years has grown into $160M of portfolio value. This is up vs. last quarter ($58M/$152M) and ~flat vs. one year ago, when $49M invested had grown into $148M of AUM (i.e. we added $12M of principal and $12M of portfolio value over the last 12 months — so no net appreciation). Although we would have liked to have more appreciation, we think that being flat through this bear market is actually pretty darn good.

As we do every year, we’ll start with a few DISCLAIMERS:

1. This leans positive. These reports go out to a lot of people (4,300 LPs), and it’s not appropriate to share negative information about our companies so publicly. Furthermore, VC is a game where only the extreme positive outcomes have a meaningful impact on portfolio performance. So let’s focus on those.
2. There may be errors here. All of the internal portfolio tracking is done by Peter and checked by the team and our biggest LPs with a spreadsheet. It’s very possible we got something wrong. If you notice an error, please let us know. We strive to make this as accurate as possible.
3. Startup valuation is tricky and complex. Different people do it in different ways. We explain our methodology in the appendix. You may disagree with it. You are welcome to run your own analysis and arrive at your own conclusions, using the raw data (linked below).
4. The only thing that actually matters is cash on cash returns. But in startup investing, those take a long time to materialize. The intent of this analysis is to estimate how we are doing in the short term, to evaluate if we are on the right track. You can’t take any of these numbers to the bank.

If you are a major LP of Unpopular Ventures, have invested at least $250k to date, and are willing to sign an NDA, we will share the complete portfolio data with you. Please submit a request via this form: link

For everyone else, you can access the de-identified data here: link

With that out of the way, we’ll break this into 3 sections:

A. Our own data about how our portfolio is performing.

B. Share AngelList’s metrics — for 3rd party validation.

C. Highlight some of our top companies.

A. PORTFOLIO STATISTICS

Here are the numbers for the UV Syndicate:

Here are the annualized numbers for the UV Rolling Fund:

And here are the numbers combined:

Here are statistics about our investing activity:

And here’s the Quarterly Breakdown for the Rolling Fund:

We rolled over >$400k of uninvested capital from Q2, and raised another $1.4M in Q3 — which we are investing now.

B. ANGELLIST DASHBOARD

Here are some snapshots of the new performance dashboard that AngelList has given us.

Important reminder: these numbers differ slightly from our own numbers above, for the following reasons:

• They don’t include syndicates we co-led, but were hosted in other syndicates.
• We mark to SAFE caps — both up and down. AngelList only marks to priced rounds. We do this to provide more accuracy. For example, there are some investments that we have marked down, but AngelList still holds at the last priced round valuation.
• AngelList lags us by a month or two — it takes them time to process updates.
• They use a different dating system for the syndicate. We count a syndicate within a calendar year based on when we closed it to investors, but they count from when they finished their back end paperwork (often several months after an investment closed). This is why, for example, they say we invested $4.18M in 2019, whereas we say we invested $4.9M.

Everything, including syndicates and rolling fund, over the life of UV since inception:

IRR is down slightly from last quarter, but as we discussed last time — our IRR is still unrealistically high for the long term. 53.4% IRR compounded over 10 years implies a 72x. We might have one cohort or two that does that if we are extremely lucky, but we are not expecting anything close to that on a consistent basis. 3x net is considered top decile for a VC fund, and most seed funds target 5x net. So as the years go by and UV continues to mature as a firm, our aggregate IRR number is likely to trend down from here.

2019 and 2020 (syndicates only — because we had no fund then):

2021 syndicate:

2021 fund:

Important reminder: the syndicate numbers are slightly outperforming the fund numbers because they include follow-on investments that were only offered to fund LPs, like the Jeeves and 99Minutos follow-ons. At that time, we were not doing follow-ons from our fund (only first investments), because it was too small. The Jeeves follow-on in particular is up 16.5x — it was only available to fund LPs, but it is technically a “syndicate” investment and we didn’t do it from the fund. I wish we had. If you remove that investment, the fund is outperforming the syndicate.

Over a longer timeline, we expect the increased diversification of the fund to produce superior (and smoother) returns vs. the syndicate. Particularly now, when we are currently investing in ~4–5x as many companies from the fund as we are from the syndicate.

2022 syndicate:

2022 fund:

Keep in mind that not enough time has passed for the 2022 numbers to be meaningful. The fund has a bit more of a J curve because of the management fees — which is why it’s slightly lagging the syndicate — but it appears poised to catch up to and surpass the syndicate soon.

Most investments need at least 18 months to get their first meaningful markup — and probably even more time than that in the current icy market. We swung from extremely high valuations in 2021/2022, to extremely low valuations now. Over the 10 year timeline we expect to hold our investments, we think that swing will be less consequential. But when measuring over this short period of time — it’s unlikely we will see a 2–3x fund markup in 1–2 years like we saw for 2019/2020. It’s just going to take a little longer for the 2021/2022 vintages.

C. TOP COMPANIES

Here are some of our highest performing companies, by vintage, so far. Note that we have far more companies than these that are doing *GREAT.* But for the purpose of naming at least a few very top performers, we decided to single these out:

2019:

• Yassir is a super app for Francophone Africa. We led their seed round in 2019 on a $15M cap, and then were the first investor (and one of the biggest) in their seed+ in 2020 on a $35M cap. They last raised a $150M Series B led by Mary Meeker’s Bond Capital. While the round size and valuation sound big, we actually believe it undervalues the company when you consider their revenue and rate of growth.
• Kyte makes it as easy to get a rental car as it is to order an Uber. We invested in their pre-seed in 2019 on $8M post money, and they last raised a $60M Series B. The company has a ton of revenue, great unit economics, is operating in 13 cities across the US, and is growing rapidly.
• Stealth — this company recently started to break out in a big way, and they are the only player in a massive space. As a result, the company asked for more secrecy so as not to inspire competition. Those who are invested in our SPVs for the company know which it is. Based on the latest priced round, this investment is now marked at 38x for us, net of dilution. Considering the company’s traction and long term potential — there is a high chance it will end up being one of UV’s biggest winners, ever.

2020:

• Jeeves is a global business bank that provides a complete financial stack for fast growing businesses that operate in more than one country. We were their first investor, and the biggest investor in their first two rounds on $10M and $13M caps. They last raised a $180M Series C on $2.1B post money from Tencent, A16Z, and CRV. Here’s some recent news about them.
• 99Minutos is an eCommerce delivery company in Latin America. We were one of the biggest investors in their seed round on a $35M cap, and they last raised an $82M Series C from Oak HC/FT and Kaszek.
• CopyAI makes AI copywriting tools for business customers. We invested in their pre-seed on $10M post money, they went on to raise multiple more rounds from Craft Ventures, Wing, and Sequoia, and we recently received a secondary buyout offer for our shares at a $200M valuation (which we declined).
• Startchy makes natural coatings that increase the shelf life of fruits and vegetables. We first invested in them in 2020, and the company is doing really well — profitable, growing, and well on the path to success. They haven’t raised a big priced round yet to update the mark on our shares, but this is a good example of a portfolio company that is doing well “under the hood” — even if the price doesn’t reflect it yet.
• Decentro is an API platform for banking integrations in India. They last raised a Series A and are doing really well under the hood. Here’s a recent article.
• Landis helps renters transition to homeownership by telling them what they need to do to get a mortgage and buy a home. Peter invested in their seed, we as UV invested in their Series A with Sequoia, and they last raised a $40M Series B from GV.
• We also did several follow ons in our 2019 stars — which are performing well too.

2021:

2021 onward still feels early, and we have a lot of companies that are looking promising, with 55 markups in this cohort already. But if we had to pick out a handful that seem particularly promising at this early stage, here they are:

• Zepto is a rapid grocery delivery company in India. We invested in their pre-seed on $13M post money, and they last raised a $200M Series D on $900M post money from YC Continuity. There is some more very positive news coming soon that is not public yet.
• Albedo Space designs and operates satellites that capture imagery at a higher resolution. We invested in their seed round in 2021 and they last raised a $48M Series A led by Breakthrough Energy Ventures.
• Houm is a LatAm real estate marketplace that helps property owners rent/sell faster. We invested in their seed round during YC on a $38.5M cap, and they subsequently raised a $30M Series A from Fifth Wall at a much higher valuation.
• Community Phone provides simple, reliable, phone service for businesses. We invested in them multiple times, and they are now doing *extremely* well under the hood.
• Vaultree is a fully functional data-in-use encryption solution that solves persistent data encryption. We led their pre-seed round, and they are doing really well. Here’s a recent article about them.
• Flint is a global healthcare talent recruiting platform. We invested in their seed, they executed a successful pivot, and now their traction is absolutely ripping. They raised a follow-on round at a much higher price from top tier VCs.
• Wyvern Space is developing the highest resolution hyperspectral imagery of Earth from space. We were one of their first investors, and they recently got their first satellite into space.
• Turion Space provides space domain awareness data and space logistic services. They also recently got their first satellite into space.
• Stepful helps those without college degrees train for and find entry-level healthcare jobs. They are doing really well, and have rapidly grown booking value since we invested in their seed round.
• Constrafor is a construction procurement company that offers financing and software for general contractors. We invested in their first round, and they have been doing really well since.
• Prodigy digitizes the auto buying process to save customers’ time while improving trust and satisfaction. This was a quick exit for us (acquired by Upstart), enabling us to return 5x to our LPs in 12 months.
• Stealth Healthcare company that wishes to remain anonymous. We invested in their first round and they recently surpassed $10M ARR.
• We also did several follow ons in our 2019 and 2020 stars — which are performing well too.

2022:

Same as 2021 — super early (and probably too early to even be talking about). Lots of investments that are looking promising, with 29 markups already. But here are a few that seem particularly promising at this early stage based on traction and/or follow on funding:

• Flagship enables creators to set up their own curated boutiques.
• Farcana is a gaming company building a high-quality third-person team-ability shooter on Unreal Engine 5 for PC.
• NewHomesMate is a marketplace to find, compare, and buy new construction homes.
• Kashin is “Square for LatAm” with working capital for micro-merchants.
• Brown Foods makes “secreted real human milk in a lab,” and has made exceptional R&D progress since we invested.
• AltScore makes a Lending-as-a-Service toolbox that allows any company in LatAm to embed and deploy credit products.

3. MISCELLANEOUS THOUGHTS

(written by Peter, hence the switch to first person)

MARKET

I feel very lucky that we are doing as well as we are. The market environment has been tough for startups lately, and valuations are down as much as 80% from where they were in 2021. Amidst that headwind — to be effectively flat year over year — I think is pretty darn good. Plus, we have A LOT of investments that are doing extraordinarily well, making excellent progress, and steadily growing revenue. I’m confident that when the market starts moving again, we’ll see resumed appreciation in the value of our portfolio.

You’ve seen this projection from me multiple times before, but I’ll post it again. These are the two paths that I thought our portfolio might follow over the course of the bear market:

We saw rapid appreciation up through 2021/early 2022, and then I expected that our portfolio value would flatten out for a while or possibly decline during the bear market, as write offs/markdowns either balance our outweigh markups. Eventually, once the market thaws, I expect we will see a resumption of the uptrend. So far, we’ve ridden the blue line (we had a brief dip earlier this year, but we are already back to flat). Not all VCs are so lucky; many others are deep in the red.

As I wrote in our last quarterly update, the public market seems to have turned up — and has continued to trend upward since. If this public market price action continues, the private market will inevitably follow. I hope it continues. But either way, we have plenty of portfolio companies that are doing really well under the hood — making steady progress and exponentially compounding their value. Regardless of what happens with the short term pricing in the market, I am confident that over the long term we will earn outstanding returns from the portfolio of investments we have made.

Lastly, I feel incredibly grateful to our LPs, so many of whom have chosen to stick with us through these challenging times. Our LPs’ steady support has enabled us to continue investing aggressively through the downturn — which has allowed us to invest in exceptional companies at very reasonable prices. We haven’t slowed down our investing pace, while many other VCs have. And with that, we are proud to have been named the #3 “most resilient” VC, after Sequoia Capital and Y Combinator, based on an analysis of AngelList data. So to our LPs again: THANK YOU for your unwavering support. I am confident that your steady support will lead to you receiving outstanding investment returns from us over the coming years.

OTHER LEADS ON ANGELLIST

Our LPs frequently ask me for recommendations of other syndicate leads and funds on AngelList. Given that I respond to this question so often, I thought I’d share my answer publicly here:

I don’t currently recommend any other leads on AngelList.

What would it take for me to recommend others? Very simple: I will recommend leads who publish their numbers — in detail, with the math and methodology to back them up. Or, publish their AngelList dashboards (which are produced by AngelList — a trusted third party).

Why? A heuristic I’ve developed after looking at tens of thousands of startups over the years: whenever a startup has good numbers, they scream about it from the rooftops. Whenever the numbers are weak, they quietly hide them. In cases when the numbers aren’t presented up front, and I’ve had to ask for them, 99% of the time the numbers are bad. I believe it’s the same for VCs.

If the numbers are good, the obvious incentive is to openly share them. I’ve been surprised at how few AL leads share any detail about their performance. Occam’s Razor suggests that the reason for this is: most leads’ performance is bad.

Some leads do share surface numbers. I.e. they claim that a past fund or investment is up 7x, 10x, or whatever. But they never seem to share any detail to back these numbers up, nor share AngelList data — which makes their numbers suspect. After looking carefully at these cases, I’ve concluded that there’s usually a good reason they don’t share detail. In many cases they don’t factor in dilution; most startups end up with 75%+ dilution after several rounds. So that 10x “multiple” or “valuation delta” is often only a 2x or 2.5x in terms of actual investment return. In other cases, it’s because the past returns are not representative of their current investing strategy. I.e. they did well with a small portfolio or a single late stage investment, but now are investing at seed. And in some other cases, they highlight a single fund or investment that did well, while neglecting to share the rest of their track record. This is always a red flag for me.

So here’s my challenge to other AngelList leads: show your numbers! I’ll happily recommend you to our LPs if you do, and the numbers are good.

4. PAST CONTENT

Here are links to past content:

We were named the #3 “most resilient VC”, after Y Combinator and Sequoia Capital, according to AngelList data.

Quarterly LP updates from the last year:

• Q2 2023
• Q1 2023
• Q4 2022

All annual LP updates since UV inception:

• 2022
• 2021
• 2020
• 2019

A Word of Caution to AngelList LPs (10/2022)

Is Winter Coming? (1/2022) — Our post calling the onset of the bear market. We were right.

Interview between Peter and our portfolio CEO at Almanac, Adam Nathan

5. APPENDIX

How We Calculate Our Self-Reported Numbers

As mentioned in the Q4’22 update, we have revised how we present our numbers from the last annual update. The intent is to be in line with the SEC’s new guidance that if fund managers present gross performance numbers, they must also present the numbers net of all fees. This is a bit tricky for us, because we offer numerous fee options to investors in our rolling fund — each of which would require a different calculation. 2 and 20 is the default option, but we also offer 1 and 30, and even 0 and 20 with a 6 year commitment. That last option is our favorite (we prefer long term stable capital) but recognize that 2 and 20 is the market standard. Most LPs prefer a shorter commitment duration — so we have set that as the default choice.

To produce “net” numbers, we are standardizing them along the 2 and 20 fee structure. To do this, we are starting with the amount that we actually invested into companies, which is “real” — regardless of whether you are signed up with management fees or not. We are then creating an “imaginary” number for capital raised, which is the amount of money we would have had to raise based on how much we invested, if all of our LPs had signed up with 2% annual management fees. But because some of our LPs are signed up without management fees — this imaginary “raised amount” does not actually represent how much we raised. It just serves to facilitate proper calculations net of 2 and 20 fees. Keep in mind: if you have a different fee structure than 2 and 20, the net numbers are different for you.

We are also separating out our syndicate and fund investing. We kept them together in the past, because our intent was to simply measure ourselves — to make sure we were doing a good job investing — and we didn’t really care about which type of vehicle the capital came from. But because the fees on these two entities are different, we have to separate them in order to produce numbers that are net of fees.

Marking to SAFE Caps

In addition to incorporating fees, dilution, and carry into our calculations, one thing we do that differs from AngelList is that we mark to SAFE caps — both up and down.

The intent is to produce more-accurate reporting. For example, we have some companies that have raised a down round after an equity round on a lower valuation cap SAFE. AngelList still holds those at the last equity round price, but we value them lower. We do it in the upside direction too.

We approach this with some nuance:

• Must be within reason. If a company raises on an outrageously high cap (or uncapped) or with a huge discount — we don’t count it. It only counts if the discount is zero/minimal, the cap is commensurate with the company’s progress, and reasonably close to what the valuation would be if it had been a priced round.
• If it’s a post money cap, we treat it as the post money valuation. If pre, we treat it as the pre-money valuation.
• We track and incorporate all of the dilution that would occur between the rounds, to the best of our ability. For example, if we invested on a $5 M post money SAFE, and the company then raises $2 M on a $12 M post money SAFE, we would mark that as a 2.0x — the delta between our post money (5) to the next pre money (10). If they then took $3 M more on an $18 M pre money cap SAFE, we would mark it up to a 3.0x → (10/5)*(18/12) = 3.
• If a priced round is signed but not closed yet, we use similar math, but also add extra dilution to account for potential option pool expansion. If there has been no priced round for a long time, we add an extra 10% dilution. If there was a priced round very recently, with the option pool already refreshed, we incorporate less.
• As soon as we receive a pro forma cap table or the exact share price, we revert to the official share price multiplied by the number of shares we have.

There is some debate about whether you can mark to a higher cap SAFE/note, or if you have to wait for a priced round before updating the valuation. AngelList, for example, only marks to priced rounds. However, other seed stage VCs say it’s common practice to mark to caps. In fact, the NVCA appears to believe it’s acceptable to use a cap as the effective valuation:

Historically, it made sense to only mark to priced rounds, because most rounds used to be priced rounds. And particularly for AngelList, with thousands of investments and a lean team — it’s most efficient for them to only mark to a share price. However, with the growing use of SAFEs, we are increasingly seeing early stage startups do 2–6 SAFE rounds over 2–4 years before eventually doing a priced round.

We certainly could wait for only priced rounds before updating our marks — but that means there will be no meaningful data to report for years. We (and probably you too) would like to estimate our investment performance on a more granular level. We think the best way to do that is to mark to reasonable caps as rough markers of valuation, while calculating the effect as if they had been priced rounds.

If another investor is investing on a higher or lower cap SAFE — they are legitimately investing on a higher/lower valuation — and we think it’s reasonable to incorporate that.