Unpopular Ventures: Annual Update 2024
UV LPs,
Welcome to our 2024 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.
This is our annual update, which will be slightly longer than our quarterly updates. In addition to an update on our portfolio and some miscellaneous thoughts, you’ll also find gratitude to our community, some disclaimers and an explanation about how we do our portfolio tracking, a list of our current top performing investments, and links back to some of our other past content.
Thank you all for your continued partnership!
Sincerely,
Peter Livingston and Thibault Reichelt
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 436 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 nearly 5,000 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 turbulent times in the market.
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:
Aatif Awan, Amadeo Pellicce, Chris Murphy, Cindy Bi, Daniel Bakh, Dave Fontenot, Dec Kelly, Eva Zhang, Flight VC, Gabriel Jarrosson, Gian Scozzaro, Jack Chapman, Jeff Cahn, Jeff Heitzman, Jeffrey Becker, Jeson Patel, Jonathan Hirsch, Jordan Isip, Ken Morimoto, Patrick McDougal Sterea, Patrick O’Brien, Raymond Rouf, Roman Rozengurt, Sean Strong, Sergii Zhuk, Sunil Pai, Tapa Ghosh, Tommy Leep, Volodymyr Medin, Walton Ward, Zhenya Oganian.
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 Fitz Light, Colton Smith, and Jack Plank — some of the managers at AngelList who we worked more closely with over the last year, who have been fantastic.
2. PORTFOLIO
SUMMARY: $71M of capital invested over the last 5.5 years has grown into $183M of portfolio value. This is down vs. last quarter ($69M/$184M) but up vs. one year ago, when $61M invested had grown into $160M of portfolio value. I.e. we added $10M of principal and $23M of portfolio value over the last 12 months, so ~$13M of appreciation year over year.
Of course, these numbers include lots of movement under the surface; some positions increased in value, while others declined. We would have liked to see more appreciation; these numbers indicate only ~8% year over year growth, compared to the 34% long term aggregate IRR AngelList currently reports for us:
But we also recognize that we remain in a bear market in the startup/VC market — and feel grateful for any appreciation in these challenging times.
As we’ve talked about in other recent updates, one thing that’s been weird to observe during this startup bear market period is that we get very little “credit” for our investments that are doing well. During the good times, companies that made a modicum of progress would instantly raise more money at a higher price, and we could quickly book that as an increase in the value of our portfolio. But now during these down times, we have some companies that are doing great, making incredible progress, and we know intuitively that they are worth more than their current paper value. But the rounds are not happening, so we don’t have a new/higher share price to mark to. As a result, our portfolio looks like it’s in the doldrums — barely moving year over year — at least in terms of the surface numbers.
Certainly, we have some companies that are not doing well, or are shutting down — and those are legitimate losses of value. But we have others that would ordinarily be pulling the portfolio up in a big way — and those are taking a long time.
As an example, we have one company where our aggregate position is valued at ~$10M as of their last round’s share price, but the company has made massive revenue progress since then, and is extremely profitable too. Because they are profitable, they wish to stay on the stealthy side, and they also know how tough the funding market is — they have chosen to not fundraise. It’s just not worth their time, and they don’t need it. Based on market comps, we estimate that if they did do a new round, it would value them at 3–6x their last round — adding another $20–50M of value to our portfolio from this single company alone. They are now thinking of doing an internal tender offer later this year, in which they will use accrued profits to buy out shareholders. If that happens, we will finally get an updated share price, we will be able to mark up the investment, and our portfolio will see a big step up. But for now, this value creation is hidden.
We are hopeful that the market will warm over the next year or two, and we will finally start to see the “credit” appear for all the hidden value creation in our portfolio.
DISCLAIMERS
As we do every year, we want to remind everyone of a few disclaimers about how we do these updates:
- Our updates lean positive. They go out to a lot of people (5,000 LPs), and it’s not appropriate to share negative information about our companies 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.
- There may be errors here. All of the internal portfolio tracking is done by Peter and checked by the team and some of 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.
- 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).
- 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.
PORTFOLIO DATA
With that out of the way, here are the statistics about how our portfolio is performing.
Our aggregate numbers, across every investment in UV’s life:
Numbers for only the UV Syndicate:
Annualized numbers for only the UV Rolling Fund:
Statistics about our investing activity:
Quarterly Breakdown for the Rolling Fund:
We rolled over $655k of uninvested capital from Q2, and raised another $1.4M in Q3.
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
TOP COMPANIES
Here are some of our highest performing companies, by vintage, so far. Note that we have many 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.
The bar for this list goes up over time. For 2019 for example, it’s becoming clear which companies are going to really drive the returns of the portfolio — so we are only naming those. These older top investments have been marked up at least 20x net, have the fundamentals (i.e. revenue, unit economics, moat, etc.) to support these paper values, and in fact: we think the current marks actually undervalue the companies.
Whereas for the more recent vintages, it’s not as clear yet, so we are opting to mention companies that are merely on promising trajectories. We have un-named companies from 2019 and 2020 that are probably doing better and are worth more to us than companies we are naming in 2022 and 2023.
2019:
- Stealth — this is a portfolio company that is doing extremely well, but wishes to fly under the radar. We were their first investor at a single digit valuation and own 6% of the company. They now have large double digit $M annual revenue that is growing rapidly, they are extremely profitable, and are the only credible player in a massive space. They are so profitable, in fact, that they are preparing a tender offer for later this year in which they will use accrued profits to buy out shareholders who wish to exit. We are very bullish on the company, so don’t intend to sell at this time. We think this company may not only end up being our most successful company from 2019, but could eventually become UV’s most successful investment ever.
- 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. Their last round valued them at $600M, and there is some very positive news coming soon that we are not at liberty to disclose. Without sharing anything confidential, we can point out that according to Linkedin, their headcount has continued to grow rapidly — recently surpassing 1,350 team members — which is often (albeit not always) a sign of underlying business growth. Hat tip to Thibault Reichelt for this one — it was the first investment he ever brought to UV.
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 (besides YC), 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. According to recent public posts from the company, they achieved positive contribution margins across all their business lines last year, and are now on a growth trajectory again in 2024, while launching numerous new product lines too. The company has chosen to stay relatively lean during this challenging time in the market — which we think has been a smart move, considering that many of their customers are startups (who have been downsizing themselves). As a result of their prudence, the company has lowered burn and extended runway, and we expect will be well positioned to accelerate into the next bull market cycle.
- 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. The public information indicates the company is doing well — with 915 current team members according to Linkedin and continuing to grow. H/t to Ed Roman and Anish Acharya for collaboration on this.
- Prodigy digitized the auto buying process to save customers’ time while improving trust and satisfaction. This was a quick exit (acquired by Upstart), that enabled us to return 5x to our LPs in 12 months. H/t to Thibault.
2021:
- Zepto, a rapid grocery delivery company in India, is emerging as our giga winner from this year. We invested in their pre-seed on $13M post money, and they have recently raised two unicorn rounds — first at a $1.4B valuation, and then very recently at a $3.6B valuation. We were only able to invest $25k from our fund (the round got competitive and our syndicate allocation was pushed out) — but even that tiny investment is becoming quite valuable: $1.6M as of this recent round. As a result, this investment is already worth 3x that quarter’s fund (Q1 ‘21), and with one more doubling of valuation will reach >1x the entire 2021 year for our rolling fund. Not bad for only 3 years in. Over the 10 years we expect to hold this investment for, we could see Zepto growing to become one of India’s most valuable companies — and in turn, produce a sizable return to our fund LPs. H/t to Thibault.
- 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. They recently launched a product to encrypt AI model weights, a very exciting breakthrough. H/t to Thibault.
- Community Phone provides simple, reliable, phone service for businesses. We invested in them multiple times, and they are doing very well with significant revenue growth. H/t: Rohit Taneja.
- Flint is a global healthcare talent recruiting platform. We invested in their seed, followed on in a subsequent round led by top tier VCs, and their traction is continuing to grow nicely. VCs. H/t: Safee Shah.
- 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. H/t: Thibault.
- Albedo is building optical and infrared Earth observation satellites. Their images will have a higher resolution than anything on the market. We invested ahead of Bill Gates’s Breakthrough Energy Ventures. Albedo is expecting to launch its first satellites to space next year. H/t to Thibault and Tommy Leep for collaboration on this.
2022:
We are now getting into territory where it’s probably too early to really know which investments will have an outsized impact. But here are a few worth mentioning:
- Farcana is a gaming company building a high-quality third-person team-ability shooter on Unreal Engine 5 for PC, that involves crypto rewards. They launched their token publicly earlier this year, and the fully diluted market cap of the token briefly exceeded $1B, before coming all the way back down to ~$66M today. We invested from our rolling fund in both 2022 and 2023 at $15–20M valuations. The volatility in the value of our token ownership contributed to recent volatility in the apparent value of our 2022 and 2023 fund portfolios. Although the value has come way down from where it was, our 2022 investment is still up >4x, and we also continue to believe in the company’s prospects. A challenge here has been that we have been restricted from selling our tokens for 6 months — so we were not allowed to sell anything near the highs. Now that the price has come down (and is probably closer to fair value) we think it’s better to hold on to it — at least for now. H/t: Thibault.
- Chowdeck is building the “Rappi of Nigeria.” We first invested in their seed round during YC, and recently followed on based on their extraordinary traction and growth. H/t: Thibault
- nSave (fka Masref) is building “Swiss bank accounts for everyone” — especially for citizens of emerging economies who can’t trust their local banks. We invested in their seed round, were followed by top tier VCs, and they have made great progress since then.
- AltScore makes a Lending-as-a-Service toolbox that allows any company in LatAm to embed and deploy credit products. We invested in their seed round, were followed by top tier VCs, and they have made great progress since. H/t: Ivan Montoya
- Polymath Robotics is building autonomous navigation for off-highway vehicles. We first invested in their seed round out of YC, recently followed on, and they have been making excellent progress. H/t: Thibault
- Flagship enables creators to set up their own curated boutiques. We first invested in their seed round, participated in their subsequent Series A led by top tier VCs, and they have continued to make excellent progress. H/t: Nikolaus Volk.
- Erithmitic is re-imagining commercial real estate lending, leveraging AI, among other tech. We first invested in their seed round, recently followed on in a strategic-led up round, and they have continued to make excellent progress.
2023:
Even more than 2022, in 2023 it is definitely too early to know which of our investments will be home runs. Having said that, here are a few we felt like mentioning:
- Hapi is building the “Robinhood of Latin America.” We invested in their seed+ round, and they have seen extraordinary user and revenue growth since then. H/t: Tiago del Rio
- Felix Pago facilitates instant money transfers through Whastapp in Latin America. Excellent progress since our investment.
- Yola Fresh is re-inventing the fresh produce supply chain in North Africa. We led their pre-seed round, the company has made excellent progress since then, and recently raised an up round. H/t: Idris Ijadunola.
- Revv makes software for car repair shops. It decodes VINs and generates detailed calibration reports. The company just crossed $4M in ARR. H/t: Thibault.
- Pippin Title is building the first searchable national database for real estate titles. We invested in their seed+, and the company has grown significantly since then. H/t: Walton Ward and T-bird Capital for collaboration on this.
- Stellar Sleep has the leading app to treat insomnia. They are already at a $3M revenue run rate. H/t: Thibault.
3. MISCELLANEOUS THOUGHTS
(written by Peter, hence the switch to first person)
MARKET
You’ve seen this chart from me a few times now, but I really think it’s the clearest way to think about the current time in the market. So I’ll post it again:
As we discussed further up, it has been recently frustrating to not see our portfolio continue to appreciate at a rapid rate of 30%+ year over year. Those first few years of 2019, 2020, and 2021 felt amazing — many of our companies were getting marked up rapidly, and each of our vintage portfolio multiples would jump to 2–3x in 1–2 years. But the market inevitably goes through cycles, and we are currently in a down cycle.
The question from the beginning of the downturn has been: how bad will it be? It was very possible we could get the red line in the chart above, where we would have so many mark downs that our portfolio value would decline precipitously for a while. Thus far, we have had something closer to the blue line — where the portfolio has been a wobbly line with a slight uptrend. This last quarter we are down, but over the last year we are up about 8%. We are grateful to have been close to the blue line so far, and are looking forward to eventually reaching the other side of the market downturn. Bull markets are much more fun.
One thing that’s been a bit weird is that the public markets seem to have been doing well — at least on the surface. The S&P 500 is up 19% year over year:
However, what’s missing from this chart is that the majority of the returns came from only the “Magnificent 7:”
So the returns of the “market” have been concentrated in a handful of the biggest companies — and everything smaller has been slow.
It’s amusing to see the public market recently behaving like a venture capital portfolio, where only 7 out of 500 companies in the S&P 500 are driving most of the returns. In VC, we expect that only a handful of our investments will drive most of the returns — that’s just the nature of startups; most go to zero or have a mediocre outcome, while a small number go crazy and return 100x+ or even 1000x. But I never expected to see such a power law in the distribution of returns across the largest companies in the US.
I don’t think it’s going to last. Just as the market goes through up and down cycles, the segments go through cycles too. Sometimes the large caps are in favor, sometimes the small caps. In a sense, startups are “extra-small caps” (with structural differences too) — and when you look at it this way, it makes sense that the venture market has been performing similarly to the small cap segment of the public market. At some point, the pendulum will swing the other way, we’ll see the giants stagnate, and growth will return to everything else. No tree grows to the sky.
IRR
You’ll notice that our aggregate lifetime IRR this year has dropped quite a bit from our annual update a year ago, *despite* the portfolio value continuing to increase.
Today AngelList reports it at ~34%, whereas a year ago they had it at 53%. In late 2021/early 2022, it even reached over 100% — which was ludicrous. A 100% IRR for 10 years (basically the minimum time you can expect to hold an early stage venture portfolio for) equals 1024x. That happens sometimes for individual companies, but as far as I know, it has never happened for a fund. The best I’ve heard of is Chris Sacca’s Lowercase Capital Fund I, which invested in Uber on a $5M cap, and ended up with a fund return around 250x.
Investors often see a high IRR in a short amount of time, and think that should be repeatable. Particularly in angel/venture investing, where it’s common (particularly in bull markets) to make a few good investments, get lucky with some big markups within a year or two, and see the portfolio value go up 2–3x in that short amount of time — resulting in an “IRR” around 50–100%. But of course you can’t sell, and inevitably the markups slow down in the subsequent years. So the IRR declines, despite the value of the portfolio continuing to increase.
Even a 34% IRR is still unreasonably high to expect to achieve in aggregate over a long period of time. Sure, it might happen for individual funds or vintages — especially if we get an “Uber” in there. But 34% for 10 years equals 18.7x — an extraordinary return. Compare that to this chart I shared last quarter, showing how rare even 3x funds are in Venture Capital:
A question I often think about is: would you rather get a 100% IRR for one year, or a 20% IRR for 10 years? Sure, that 100% would be nice, but then you’d have to pay taxes and go find another investment to put the money in — which at best will be more like the traditional market return of 7–10%. 20% for 10 years equals 6.2x. Whereas if you get 100% for one year and then 10% after (at best), you end up with 4.7x.
And don’t forget about the QSBS tax incentives for VC/angel investing investing, where if you invest early and hold for at least 5 years (post equity conversion), you owe zero taxes on up to $10M per investment per year. The returns are hard to beat, especially post tax.
This is why I like early stage venture, where we play. I believe that in aggregate, over a long time with a big portfolio, a 20% IRR is achievable. If we keep at this for 10 years, or even 20–30 as I intend to — we are going to make a lot of money. We just have to be patient, ensure we pace ourselves, diversify, and know that the market will go through cycles. That’s the trade we make: we accept illiquidity and volatility, and in exchange for that we get higher long term returns. Some years will be good and the portfolio will appear to appreciate quickly, while others will be slower. But in aggregate over a long time, I am confident we will do extremely well.
4. PAST CONTENT
Gathering some of our past content here so it’s easy to find:
Quarterly LP updates from the last year:
All annual LP updates since UV inception:
Advice to First Time Founders (and Maybe All Founders) (8/2023)
Recent Interview Between Peter and Prashant Choudhary (7/2024)
A Word of Caution to AngelList LPs (10/2022)
Is Winter Coming? (1/2022) — Our post calling the onset of the bear market — before anyone else.
Interview between Peter and our portfolio CEO at Almanac, Adam Nathan (2/2023)
Thank you for reading, and thank you for your support of Unpopular Ventures!
5. APPENDIX
Portfolio Tracking Methodology
As we originally explained in the Q4 ’22 update, we now present our numbers to be in line with the SEC’s 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 standardize 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. If you have a different fee structure than 2 and 20, the net numbers are different for you.
We also separate out our syndicate and fund investing. We kept them together before Q4 ’22, 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.
