Today is not only Tuesday, but also the last Tuesday of the year. So I decided to do something a bit special.
Inspired by Turner Novak, who did this back in 2018, I decided to build my own fake venture portfolio.
The goal of this exercise is to figure out two things:
How much about a company’s future you can actually predict if you study it for 10 hours without having any inside knowledge.
Whether the fact that a company is solving a very specific local problem says anything meaningful about its future success.
Without further ado, let’s get into it. And I never thought I’d say this, but this is not investment advice.
How I Picked Companies
Before I go over the companies I’ve chosen, I want to explain how I chose them in the first place. At the very start, I had three basic rules.
1. A $1 million fund. My fake LPs provided me with $1 million in fake money, which I now allocate. I don’t limit myself by the number of companies I invest in. The amount invested differs depending on how much the company raised in its last round and how strongly I believe in it.
2. I’ve written a full article about them. In the first iterations of this newsletter, I was writing shorter notes on several companies every week. For this exercise, I’m only including companies I later covered in a full standalone article.
3. They haven’t raised a round since. I’m choosing only companies that haven’t had a funding round since I published an article about them. Snabbit is a good example here. When my article came out, they had just raised a Series A. In May they raised a Series B, and in October a Series C. I would love to say that my fake fund invested in the A round and at least 5x’ed the money in under a year, but that feels like cheating, even if it’s fake money.
With that in mind, my picking process included two stages.
First, I just went through my whole archive and picked the companies that I would have at least some interest in owning. There were 19 of them.
Those that didn’t make the cut were:
From a “too hard” pile, where I understand the technology well enough to write an article about it, but barely more than that.
From developed countries, which I’ve written about before, but no longer cover as I now focus exclusively on emerging markets.
Attacking a very small market, where even I, someone who doesn’t think market size is the be-all and end-all, don’t see how it could realistically scale into something meaningful.
Didn’t have a founder I would want to back, or more precisely, someone I don’t think I’d work well with.
Just not that interesting to me as a business. I did have some articles that I wasn’t excited to write, but I had to in order to keep the weekly schedule.
Second, I had to pick actual investments from the 19 that made the first cut, and this was much harder. I’ll be honest: about half of those 19 were in agritech. I find the space both fascinating and important, which is why I write about it so much. But having agritech make up half of my portfolio would be a bad idea, given the risks those companies tend to carry. And also not that fun of an exercise.
So the rules I came up with were:
No industry should be represented by more than two companies.
No country should be represented by more than two companies.
I can’t look at the founder too much. This is somewhat counterintuitive in early-stage investing, but I’ve spoken with some founders I’ve written about, and with others I haven’t. To make it fair, had to limit how much this influenced my decisions.
I’m risk-averse, which again is counterintuitive. In practice, this means I care more about how predictable the business model is and/or how large the gross margin could be.
I scored the 19 companies from 1 (bad) to 5 (good) across the following dimensions:
TAM: self-explanatory.
Usefulness: this is my whole shtick. If you’re an AI sales automation tool, you score a 1. If you’re literally saving lives, you get a 5.
Distribution: how easy it is to distribute the product, for example a simple sales cycle or strong network effects, versus having to convince highly dispersed customers one by one.
Gross margin: the most controversial one, since I don’t know the actual economics of any of these businesses. Still, I can infer a lot based on the business model and target customer.
Moat potential: whether the business can build a compounding advantage through switching costs, network effects, economies of scale, etc.
Predictability: once the business is scaled, how predictable revenue and margins are likely to be.
Simplicity: how easy the business is to break and how many dependencies it has.
Potential: how big the upside could realistically be.
After scoring, I selected seven companies. Six ranked at the top, and I added one more simply because I like this type of business.
So here’s who I picked and how much I would invest in each of them.
Leta
Industry: Logistics SaaS
Country: Kenya
Year founded: 2021
Portfolio share: 23%
Leta makes delivery businesses run more efficiently. Through its software, it helps clients identify more efficient routes, discover new demand areas, manage assortment across locations more effectively, and determine optimal loading order. If a business doesn’t have its own fleet, Leta also matches businesses with riders.
Why I fake invested: I built my thesis around three key points. First, I know of successes in this space that went from launch to acquisition within just a few years. Second, it’s genuinely useful software. Like most software, it should have strong gross margins, but unlike a lot of useless software, you can clearly see its direct impact on the underlying business. Third, there are both switching costs and data-driven network effects. The more companies join, the more data the system collects, and the better the routing engine becomes.
What might go wrong: There’s a real question around how quickly the company can scale, given both the limited size of the ecommerce market and Kenya’s infrastructure quality. The company has started expanding into other markets, but success in one market doesn’t automatically translate into success elsewhere. There’s also the question of whether this expansion is at least partially forced, meaning whether they’ve already exhausted much of the opportunity in Kenya.
Full article: Leta
Higala
Industry: Fintech
Country: Philippines
Year founded: 2023
Portfolio share: 20%
Higala is a fintech infrastructure provider. The company has two core products:
An instant payment network that handles payments
An open payments platform that helps digitize small financial institutions
The company is trying to do two things at the same time: build an alternative to existing digital payment rails, and onboard businesses onto those rails in order to grow the overall digital payments pie.
Why I fake invested: This is the most ambitious fake investment in my portfolio. I think it has more upside than any other company here because it addresses the biggest market there is, payments, and does so with an unusually ambitious approach. While it’s not a Visa- or Mastercard-type business today, payment rails businesses can have enormous gross margins and very strong moats.
What might go wrong: There is already an existing rail called Instapay, and while it’s expensive today, that could change over time. The second risk relates to the market targeted by the company’s second product, SynerFi, which focuses on small financial institutions. There’s a reason many of these institutions are small, and that segment may simply not generate enough digital payments volume to matter at scale.
Full article: Higala
Eratani
Industry: Agritech
Country: Indonesia
Year founded: 2021
Portfolio share: 18%
Eratani is a vertically integrated platform that helps rice farmers get the most out of their land. It does this through three solutions:
EraFarm, which helps farmers manage their land.
EraKios, which provides farmers with quality inputs.
EraMarket, which distributes farmers’ harvest.
The company supports and guides farmers throughout their entire farming journey, providing practically any help they might need.
Why I fake invested: No other theme has been covered in this publication as much as integrated agritech solution providers, so I had to pick at least one. While these businesses are risky and don’t have enormous margins, Eratani has consistently been profitable and is growing rapidly. Switching costs are high, the business is theoretically infinitely scalable given the number of farmers in the country, and there are plenty of opportunities to introduce new products to the existing customer base.
What might go wrong: While the potential scale is massive, achieving it is hard. There are many individual buyers, each of whom needs to be convinced to onboard. There are also weather events that can devastate farmers and, in turn, meaningfully harm Eratani’s business. Finally, thin margins don’t leave much room for real disruption or large long-term investments without raising additional capital.
Full article: Eratani
Crabi
Industry: Insurtech
Country: Mexico
Year founded: 2019
Portfolio share: 13%
Crabi is a digital car insurer. Everything is done through the app, from buying a policy to filing a claim. Unlike traditional insurers, Crabi offers flexible policies, both in terms of coverage options and payment structure. As an ancillary business line, the company has launched CrabiPass, a maintenance and support service.
Why I fake invested: The investment thesis here is basic. It’s a giant market with plenty of unsatisfied customers, and a startup that is clearly counter-positioned against incumbents, solving problems they’ve largely ignored. That’s it.
What might go wrong: This is a capital-intensive business, and the larger Crabi gets, the more attention incumbents will pay. If they adjust their positioning and meaningfully improve product quality, it could become very difficult for Crabi to compete.
Full article: Crabi
Rhino
Industry: Mobility
Country: Brazil
Year founded: 2022
Portfolio share: 13%
Rhino is a Brazilian premium ride-hailing service where all cars are armored and all drivers are trained. It works like a typical ride-hailing app, but differs from the Ubers of the world both in smaller product details, such as bilingual drivers, and in the business model itself, including owning a fleet or hiring drivers instead of acting purely as a connector between riders and drivers.
Why I fake invested: The market for this business is limited, but the idea of targeting a very basic need, safety, in such an original way is compelling to me. Brazil is the largest market for armored vehicles globally, so demand for this type of product clearly exists. Positioned as a safety-first brand, the company, through its pricing and product features, also encroaches on the premium mobility market more broadly, as well as the vanity-driven segment of that market.
What might go wrong: This is a capital-intensive business with limited expansion opportunities, since density is even more of a prerequisite for it to work. A lot is riding on the company’s ability to retain customers, especially in the B2B segment. LTV is critical to recoup investments not only in customer acquisition, but more importantly in the fleet itself.
Full article: Rhino
BuuPass
Industry: Mobility
Country: Kenya
Year founded: 2016
Portfolio share: 10%
BuuPass formalizes intercity bus travel in Kenya and neighboring countries. To address challenges faced by both travelers and operators, such as queues and fraud, BuuPass built a marketplace where travelers can book and ticket trips, as well as a bus management system that helps operators manage schedules, bookings, and payments.
Why I fake invested: BuuPass combines a marketplace with a software component. The former enables scale, while the latter creates lock-in. These two flywheels reinforce one another, improving the business’s long-term sustainability. The company has also been around for a while and has successfully pivoted from a previous business model, which to me signals resilience and staying power.
What might go wrong: There’s potential for disruption, including from AI-driven products that could abstract away the layer between the customer and the underlying service. Bus operators could also choose to participate in multiple networks at the same time, so it’s on BuuPass to aggregate enough demand to control supply and apply pressure when needed.
Full article: BuuPass
Living Roots
Industry: Agritech
Country: Thailand
Year founded: 2021
Portfolio share: 5%
Living Roots develops bio-fertilizers using an AI system called Hypha to design highly localized, crop-specific biological inputs. Its offerings include seed coatings, bio-nutrient fertilizers, and residue management solutions, all generated and iterated using data on soils, crops, climate, and on-farm trials.
Why I fake invested: Both farmers and the planet need better fertilizers, ones that are more efficient and don’t degrade the soil. There’s also a clear need to reduce field burning. Living Roots addresses all of this at roughly the same price point as existing (and worse) products. The company has also taken a very different approach to product development by relying on AI and targeting specific local environments, rather than pursuing a one-size-fits-all solution.
What might go wrong: This is the company in the portfolio that has raised the least capital, and scaling manufacturing capacity can be a real challenge. Even if the product works well in specific environments, the company still needs to manufacture, distribute, and sell it at scale. That takes time, repetition, and execution, and it’s a difficult road ahead.
Full article: Living Roots
What Does Success Look Like
I’ll track these seven companies more closely going forward and report back in six or twelve months. Since I don’t know the real cap tables, valuations, revenues, and the rest, I’ll look for a few simple signals, ordered from weakest to strongest:
The company is still in business.
It has raised a round.
It has been acquired or gone public.
Maybe in the future I’ll come up with better ways to evaluate this fake portfolio.
In the meantime, happy New Year, and I’ll see you next year.
P.S. I won’t be publishing next week because I’ll be working on something else, but I’ll be back in two weeks with the regular programming.
