Unpopular VC
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Unpopular VC

UV Portfolio Update: Q2 2022

Unpopular LPs,

Welcome to our second quarterly update of 2022. We’ll cover a few topics in this update:

  1. New Partner: Gian Scozzaro
  2. Portfolio Metrics
  3. Portfolio Company Snapshots
  4. Market Check
  5. Note about our Rolling Fund

Thank you to all of you, our Limited Partners (both in our Rolling Fund, and our Syndicate), for your continued support.

Sincerely,

The Unpopular Ventures Team

1. NEW PARTNER: GIAN SCOZZARO

Welcome to our newest Partner, Gian Scozzaro! You might have already seen this introduction about him in our Boost syndicate memo, but sharing it again here for anyone who missed it:

We are incredibly excited to welcome Gian as a partner at Unpopular Ventures! Gian has already sourced several investments by our rolling fund. Among many other accomplishments, Gian helped launch Lyft in Austin and was responsible for a large part of the 0–1 growth at Bolt (which is now a decacorn). Gian leads a team of superstar advisors which help startups with business development, recruiting, coaching, etc. If you are a founder of a seed-stage startup, you want to have his team on your side. Gian is also one of the most genuine and kindest persons we know. Everybody loves him. No wonder he is a magnet for amazing opportunities to invest in startups.

We are thrilled to have him with us.

2. PORTFOLIO METRICS

The same disclaimers and methodology from our last Annual Report apply here. And as always, you can find the complete source data (de-identified for confidentiality) HERE.

As context, Unpopular Ventures started as a Syndicate in 2019, we launched our Rolling Fund in 2021, and we now invest from both of these entities simultaneously.

First, here are the latest metrics from our Rolling Fund:

And here are our aggregate investing metrics (Rolling Fund + Syndicate), which includes every investment we’ve made across both entities:

If you’d like to see how this performance compares against AngelList’s Access Fund (a reasonable benchmark of “top tier” performance on the platform), you can find their numbers here.

And here’s a new format we are experimenting with, that shows our aggregate portfolio in more detail:

The columns are periods of time, and the time periods compress as our investment pace has quickened (with the expansion of our team). The first column is 2019, the next 2 are halves of 2020, and after that each column is one quarter.

Each cell represents a single investment (including follow-ons), in chronological order as you go down the column. The color coding means:

  • White: no change in the value since our investment
  • Red: investment has shut down and returned <1x
  • Yellow: means one of two things, either 1) there has been a down round at a lower price per share than our investments, or 2) we believe the investment is struggling, and unlikely to return 1x our capital — but still TBD. In the case of (1) we mark to the latest share price, and in the case of (2) we mark these down 50%.
  • Dark green: investment has been marked up >1x but less than 3x.
  • Bright green: marked up 3–10x
  • Dark blue: marked up 10–100x
  • Bright blue: marked up >100x

Note that these multiples are *investment* multiples that include dilution. Some syndicates on AngelList showcase their “valuation multiples” that look bigger because they simply divide the latest valuation by their entry valuation, without considering that most investments see 50–75%+ dilution after multiple follow-on rounds (if not much more). So to be clear, these multiples are inclusive of dilution.

One takeaway when you view the portfolio in this way: we didn’t just get lucky one time. There is a lot of green in there (especially in the older vintages that have had time to mature), and the blues (>10x) are distributed evenly across the board.

3. PORTFOLIO COMPANY SNAPSHOTS

This quarter, we thought we’d each share a snapshot about 2–3 portfolio companies we each felt like writing about. We wish we could write about all of our 230+ portfolio companies in more depth, but it’s just too unwieldy for the purpose of this update. We can’t imagine you all would like to read more than that either.

Gian

Boost is decentralizing commerce with “buy now” coordinates that instantly monetize all on and offline media for brands & creators. They are enabling an instant and distributed point of sale which is friction-free as well as omnichannel, decoupled from a website. Tags are encoded, cart-less purchasing flips conversion on its head (from 30% to 70% conversion) and can be attributed anywhere — social media, live shopping, video, print and packaging, community and events, in the metaverse — without apps or coding required. Due to strong founder relationships, we were fortunate to get in at their pre-Seed valuation alongside XRC, Tiny Capital, Not Boring, Elefund, Antifund/Jake Paul and other household name influencers — months after the round had closed to these other investors.

We are incredibly impressed with the founders (6x entrepreneurs with 2 exits) and their product-obsession. They plan to “hit the gas” over the coming months, having chosen to focus thus far on powering core integrations while stress testing channels and use cases. Boost could become an attractive acquisition target (CashApp, Salesforce, Attentive, Bolt), though their objective will be to IPO if things go according to plan!

Faliam is rebuilding the healthcare supply chain with tech-enabled infrastructure. Their first product is a procurement platform and marketplace that digitizes and centralizes purchases for healthcare practices; managing orders, offering financing terms and generating analytics into the business. They are also building the stack to bring suppliers online; order mgt, logistic enablement, payment processing, lending analytics, etc..

They have been building in stealth and recently launched their marketplace (first focus, dental) already surpassing $500k GMV, with a 5–10% take rate and 90% reorder. We were the last check in at their $35m Seed alongside Contrary, founders/execs from Uber, Bolt, Flexport, Faire, and Eventbrite. Their team is stacked, and we anticipate a significantly larger allocation in their A round later in the year.

Nowadays is a plant-based meat company based in SF, focused on low-cost manufacturing of healthier alternative meats with minimal ingredients, without sacrificing indulgent, nostalgic taste and texture. Nowadays had some big wins this quarter (securing Whole Foods Market as first retailer into 68 stores; increasing distribution via UNFI and Sysco; Non-GMO Project verification; closing an oversubscribed Seed round; and hiring some impressive new team members) despite a major challenge with supply (inconsistent protein from their ingredient supplier led to inventory shortages and slower R&D for new products). After overcoming the supply challenge, we believe they can turn a much deeper moat around their technology; while animal-based industry headwinds (bird flu and meat prices shifting upward) are also considerable positives as Nowadays scales up / brings price drastically down.

We invested from our Rolling Fund only based on timing and limited allocation. If you are interested in tasting their 7-ingredient plant-based nuggets, they are not only nutritionally levels above 1.0 plant-based meat products on the market today, but are also simply delicious! The founders have offered UV LP’s a chance to find out — enter promo code UNPOPULAR (case sensitive) for 30% off, or click here.

Sergii

Dash is a unified payments app serving multiple countries in Africa. Dash App simplifies the money movement and allows you to send, receive, spend and save, all in a single app, with full transparency and security. I originally met the company in spring 2021, and got particularly excited about the founder’s experience and the well-staffed engineering team from the company’s early days. We did several syndicates at $10M pre and $15M post valuations back in Q2 and Q3 2021.

In March 2022, Dash raised a $32.8 M “seed” round led by tier 1 VC Insight Partners at a *dramatically* higher valuation. We can’t share the number publicly, but we can say it’s big. We have been continuously impressed by their growth in Revenue, Total Payment Volume, and Registered Users metrics, but can only share specific numbers with the LPs of these investments. Dash is currently operating in Ghana, Kenya, and Nigeria, and will be launching in South Africa, and Tanzania soon.

Fitnescity caught my attention in June 2021, and we promptly invested in August 2021. Their team has grown the business steadily since then, adding 20–30 test locations every month and generating 120K+ web page views per month with $0 CAC. On average, customers took 1.65 tests this April, compared to 1.15 tests one year ago.

Fitnescity is the “Airbnb for health checkups.” It gives consumers easy access to in-person health and wellness tests — along with personal analytics — while allowing local clinics and labs to reach more consumers. Currently, the company offers body composition (DEXA, BOD POD, SECA), metabolism (RMR), aerobic capacity (VO2 max), and Blood Panel (Diet, Fitness, Supplement, Stress) tests across the US. The founder’s vision is to build the largest platform of local clinics. 20,000+ test locations and $100k+/location/yr = $2B+ (U.S. only).

We have been impressed with the consistent growth of test locations, the methodical execution of the team, and are excited about the new telehealth features being rolled out this quarter.

Thibault

I always advise angel investors to pace themselves and to build a diversified portfolio. To illustrate the point:

  • I led our investments in Zepto and Huvi at about the same time. Same business model (rapid grocery delivery), different geographies (India, Southern Europe). Zepto went from seed ($13 M valuation) to Series D ($900 M valuation) within a year. Huvi was acquired in a not so great outcome for us. It would have been impossible at that early stage to predict which one of the two would succeed, but by taking a risk on both — we ended up with extraordinary returns from the combined portfolio. Zepto is the highest-valued investment in our Q1 ’21 Rolling Fund, already worth >1x all the money we invested in that quarter.
  • I led our investment in Vaultree at a €5M valuation, where we were actually the lead investor for their overall pre-seed round. Vaultree is developing real-time searchable and fully homomorphic encryption technology. I pointed out at the time that this was the riskiest investment I have ever made. 6 months later, several of the most famous VC firms in the world have started chasing Vaultree, and they appear likely to get their next round at a dramatically higher valuation soon. Again — by taking this early risk in an unknown but promising company, we were able to get real ownership in a potential outlier.
  • We were one of the first investors in Pallet at a $5M valuation. The team did a slight pivot and raised at a $110M valuation 8 months later. We bet in large part on the team, and they found traction with another business plan than they had presented to us. Pallet makes infrastructure for community-driven hiring markets.

This is not to say that we are “spraying and praying” or just getting lucky without having a strong filter to review the opportunities we come across. Startups are messy. The wisest, and intellectually most honest, angels have realized that the best way to deal with all the uncertainty of early-stage businesses is to back many founders. That is work intensive. But it is also the safest road to capturing the outliers that really move the needle in terms of portfolio performance.

Keep in mind too: quick markups are not necessarily the right measure of success. We have many other extremely promising portfolio companies, such as Startchy (coatings for fresh produce that increases their shelf life), that are making great progress without having to raise further rounds. VC is an asset class for patient capital. Startchy, in this case, has already coated >10 million apples and has signed partnerships with some of the biggest grocery chains — and they’ve done all this on very minimal capital.

There are many founders who are happy to take our RF check but who do not want us to share their information with the syndicate. It is unfortunate but it means that we have many exciting portfolio companies which you have not heard about yet.

Peter

(One thing to keep in mind is that Peter has been with UV the longest of all of us — so his investments are naturally a bit further along).

Jeeves has been a big one for us. This is the only bright blue box (>100x) we have in the portfolio image we shared above. We originally invested in 2020 on $10 M and $13 M post money caps while they were still in YC, and we were actually their biggest investor in those first two rounds. They’ve since raised a Series A from A16Z, a Series B from CRV, a Series C led by Tencent, and were last valued at $2.1 Billion. The multiple from our first investment on $10 M post is now 112x, net of dilution.

Jeeves started as a corporate credit card for international companies — kind of a “global Brex,” and has since expanded their vision. They now offer numerous financial services for companies that operate across borders, and have a vision of one day becoming “the global business bank.” I think this is a really interesting evolution because they’ve gone from being something of a copycat, to actually solving a very big and unique problem: how multinational companies manage expenses across their operations in multiple countries. That’s a hard problem (navigating multiple currencies and financial regulations), it is distinct from mere expense management and credit cards, and it’s becoming increasingly important as the world becomes ever more global.

Because of that expanded vision: of perhaps one day becoming *the* global business bank — I’m as bullish on Jeeves as I’ve ever been. I really think it could become a multi-hundred billion dollar company.

Kyte is another that I’ve been consistently impressed with. I also feel particularly grateful to the company for letting us invest in every one of their rounds to date: on $8 M, $15.6 M, $25 M, $45 M, $150 M, and $225 M post money. Based on their growth, I think they are very likely to snag their Series B soon, at an even higher valuation.

Kyte is a rental car delivery company that is re-inventing the car rental experience to be as easy as ordering an Uber. I think the solution is disruptive, and has the potential to not merely be a delivery company — but to replace the incumbent system of car rentals altogether. Renting a car is just so painful: waiting in line, dealing with the person at the counter who tries to upsell you on gas, insurance, tolls, etc. To be able to replace that counter experience with an app, and the car keys handed to you, with your car waiting at the curb — has the potential to transform a frustrating experience that we all encounter.

And their execution has been phenomenal. They’ve gone from ~$100k of revenue when we invested in 2019, to now well into a mid-multi-tens of $millions revenue run rate, growing 7x over the last year, with very strong positive unit economics.

The valuation here isn’t yet as high as in some of our other portfolio companies, but I think they will get there soon. I’ve just been so impressed by their team, and their relentless execution in cracking a very challenging operational/logistics problem.

Outer is the last one that I’ll write about in this update. We joined this company on the later side for us, in the Series A on $55 M post money. We then followed on via an uncapped SAFE to ensure we could participate in their Series B — which ended up happening a few weeks later: $50 M at a mid-multi-hundred million dollar valuation, led by Kathy Xu at Capital Today (Forbes Midas List).

Outer makes outdoor furniture, sold DTC, and has innovated across every element of the business: product, marketing, manufacturing, and supply chain. They started with just a sofa, and have started adding additional products like tables. In the last year, they’ve encountered challenges on multiple fronts — including supply chain disruptions (they manufacture in China and ship to the US), and demand volatility (during the pandemic people bought more outdoor furniture to enjoy their homes while locked down, and then bought less when everything started to open back up). They have weathered these challenges masterfully, and are now on track to have their best year yet — by far.

4. MARKET CHECK

Unfortunately, our January forecast about a looming startup winter does appear to be playing out. It’s getting harder for startups to raise money, valuations are coming down, and we’re increasingly hearing about shutdowns and down rounds.

Here’s some of what we are seeing now:

Link, Thread

Thread

Article

And we are already starting to see some high profile flame outs, like Fast:

I’m sure it won’t be the last of this cycle.

Bear markets suck. Just about everyone gets hurt in a bear market, one way or another — us included.

But we stand by everything we said in our January post. Bear markets are a natural part of startup cycles (or really, all market cycles for that matter). When we invest in startups, we expect to hold for at least 10 years — and over that time horizon, it’s almost guaranteed they will go through at least one down cycle. The very best companies (the ones that will carry our portfolio) can raise in any market, and I also feel fortunate that *a lot* of our strongest companies loaded up on cash in the last year. If they use that cash wisely, they will sail through this bear market and come out the other side in great shape.

In terms of what we can do as investors: bear markets are a time of opportunity. Valuations are coming down, and more importantly: we are going to actually get the opportunity to invest in more of the very best startups.

So we are continuing to actively invest, and we think we will look back on 2022 as a prime vintage. Airbnb, Uber, and Whatsapp were all started in the depths of the last recession in 2009/2010. We invested in Jeeves just a few months into the COVID pandemic, when most VCs pulled back. We think that played a big role in enabling us to invest so much and at such an attractive valuation — and that has since delivered a >100x markup in <2 years.

We have no doubt that similarly important companies are being started now.

5. ROLLING FUND

Our Rolling Fund has continued to grow — now past $1.5 M/quarter in commitments. As it grows, we are increasingly investing from it as our primary investing vehicle. In fact, out of 75 investments so far in 2022, 42 (>half) were made from our fund only, and/or we only shared the syndicate with our fund LPs due to limited allocation and high demand.

Some of our biggest markups from 2021 were exclusive to our fund, such as Zepto ($13 M -> $900 M valuation in a little over a year), where we were only able to get enough allocation to make an investment from our fund. And we offered our best follow-on opportunities to our fund LPs only, such as the Jeeves Series A and the 99 Minutos Series B.

As our name implies, we believe the best time to find (and earn allocation in) outlier investments is before they get popular — using our own judgment, rather than the judgment of others. Many of our best investments had no brand name VCs when we first invested (including Jeeves, Zepto, Kyte, and many others).

But this is a challenging position to take on AngelList, where the platform tends to reward deals that have “top tier” co-investors already. AngelList’s Access Fund and PCN select deals almost purely based on co-investors, and most of the LPs on AngelList do too — which makes it especially hard to raise capital for the initially “unpopular” ones.

Because of this, we are exceptionally grateful to the LPs who back our Rolling Fund. These LPs are enabling us to make these earlier and often non-consensus investments, which helps us to deliver superior investment returns. Indeed: we are currently beating the AngelList Access Fund on mark-to-market returns across every vintage of UV’s existence so far. Our approach is riskier than theirs — but it is this higher beta approach, backing strong companies before they get popular — that we believe produces higher aggregate returns across a portfolio.

So: thank you again to our Rolling Fund LPs. We are eternally grateful for your support, and we intend to reward you with both 1) continued outsized investment returns, and 2) our best breakout follow-on opportunities.

If you are not yet part of our Rolling Fund and would like to be, you can find it HERE.

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We partner with outstanding teams who create new markets, pursue ideas which others initially dismiss, conquer overlooked geographies, operate in underestimated verticals and/or take on challenges with daunting odds.

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Looking for the best companies, off the beaten path.

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