When Roda moved into our first real office this year I realized that it was the tenth space we’d run some type of operations from in three short years. When Roda was no more than a pilot we met our clients where they were – on the street corners where bike mechanics hung out across Bogotá and in the informal Rappi-hubs across the city. As we grew in 2021 we evolved into cramped, grease stained garages and 2022 brought the relative peace and quiet of coworking spaces. As I write from the reception area of our own office I’m reminded how tremendously improbable it is that we’ve made it this far. Roda is built on two audacious premises. First, that people excluded from formal financial institutions are far more creditworthy than banks believe and second, that gig-work electric mobility is a viable pathway to prosperity both for the company and the client. Today we've issued over $1mm in loans to Venezuelan migrants, 80% of which has been paid back – a sector virtually untouched by any formal financial institution in Colombia. We focus on our clients growing with us -- the average client doubles their earnings within 6 months of taking their first loan out with Roda, while exceptional clients can increase their earnings by over five times. The electric bikes which we design, manufacture and maintain have replaced over a million miles of combustion transit, making a measurable impact in the quality of life of drivers and inhabitants of Bogota alike. This Year In Review is a letter of thanks to Roda’s team for believing in an audacious vision and to our clients for proving that vision right.
Background and Philosophy
From 2018 through 2020 I interviewed hundreds of Venezuelans in Venezuela and Colombia. The level of talent in menial jobs shocked me again and again. A couple who had dropped out of law school to sell pottery door to door in the border city of Cúcuta. A mechanical engineer who was working as a delivery driver in Bogotá. A dentist in her 60s with a beautiful singing voice who had suffered a fall and the failure of a corner fruit stand in Cartagena. A hustler with a grade school education and a higher aptitude for numbers than most college graduates. The unifying thread across all of these stories is that they were rejected out of hand for any credit product from any Colombian institution; no financing for a motorcycle to work, no formal rent contracts due to the way rental insurance works in Colombia, no internet in the house without a Colombian as the primary contact on the contract. Infinite resourcefulness didn’t change the equation; without bootstraps, there’s very little chance you can pull yourself up.
The residency card issued to them (PEP or PPT) does not grant many rights and the pathway to getting a full visa is often not possible or the right decision. Of the 7 million Venezuelans who left their home country in the past decade, as many as 50% of them re-settled in Colombia. Some of them have Colombian citizenship thanks to family, but the majority are still fighting for a foothold in society. Despite the conditions of Venezuela today, it was a solid middle income country until approximately 2013. With this came high literacy rates and a relatively solid public education system. While the vast majority of Venezuelans have bank accounts at home their migration abroad leaves them “using wooden boxes under their bed” and “relying on friends and family for loans.” Roda was born to meet the demand with a conviction that the formal sector was ignoring migrants without reason.
Laura, head of risk management, thrilled to be in our newly remodeled reception area of the office.
The way we went about this is simple: issue loans with a high probability of increasing incomes. Standardizing loan types is the simplest way to do so. The literature on traditional microfinance shows mixed outcomes and Roda strives to do better. On the net, most studies show no average increase in earnings by traditional microfinance clients. Consider a microfinance bank which specializes in the much-romanticized micro-entrepreneur. Evaluating a hot dog stand in one corner of a city, a clothing import/export hustle in another corner and a fruit seller are entirely different processes and much of the data provided by those entrepreneurs is nonexistent or illegible. Informal entrepreneurs tend to have mixed business and personal finances, further complicating things. Often, loans end up used for living expenses and consumption rather than for investment. Roda’s client path is simple. Analyze the earnings of gig workers, provide them a loan to make them more effective in those jobs and only then evaluate other credit products.
A good COO fixes problems. A great one anticipates and avoids them before they happen. Carlos (COO) and Santiago (data science) on the first week in the new office.
Clean Databases have always been the Hottest Thing
On paper, migrants represent an unthinkable credit risk for most formal financial institutions. Credit is fundamentally a relationship between debtor and creditor. Risk analysis is a measure of a debtor’s ability to keep a promise while collections is a measure of the communication required to bring the promise to fruition. Roda’s risk analysis is a ML algorithm that measures the diligence and social graph of a client. In 2023 Roda hired key people to improve this algorithm. Credit analysis gets all the attention but money issued without money collected is the most popular and least successful business model in history. Backend engineers should get their time of glory for effective database management. The combined impact of improvements in credit modeling and database management for communications and collections means that across more than 10,000 loans and a million dollars of issued credits (>80% of which has been repaid) Roda has maintained default rates at 50% or below the national average, despite lending to a population which is supposedly too risky to serve.
Roda's team nearly doubled in 2023.
Seguimos Matando Tigritos
Some of our clients have so dramatically exceeded expectations that we launched a new category of product this year, the “tigrito.” We learned that a loan for an electric bike or motorcycle will at least double a client’s income when compared to a bicycle. In the most exceptional cases we’ve seen earnings increase by over five times. This increase is so dramatic that it opens the door to other products. A tigrito is a Venezuelan term which roughly translates to a hustle. We’ve found that tigritos and loans to microentrepreneurs differ in a few specific ways. Microentrepreneurs frequently come to us as their last bet. They need to provide for their family and a micro-business is the only option they have. If they’re starting out, their projections are almost always too rosy and their margin of error (overestimate margins, underestimate how long it takes to develop clientele) is very low. By contrast, we use the term tigrito to imply excitement about a growth opportunity. Importantly, a client should be able to pay off the loan regardless of whether or not the plan works out. If a microentrepreneur wants to bet everything on a new hot-dog stand a loan can actually be counterproductive to their upward mobility. Tigritos should be seen as a “pilot” with growth potential. A new hot-dog cart would not be approved while exporting pants from a Bogota based factory to your cousin in Caracas who has a clothing store would be approved. The former has many unknown variables. The latter is well defined, clearly collateralized, and could be done in addition to a full time job.
With Tatiana and Paula, celebrating one of Roda’s clients who was ranked 3rd in all of Bogotá.
I mention tigritos because they’re genuinely groundbreaking for upward mobility in this demographic. Large Aid programs funded by governments and private donors have done a tremendous amount of good in the past decade, but they’ve struggled with sustainable models. Roda’s model of doubling incomes through a loan for mobility and following that loan with a product that lets clients dream about life after being a delivery driver is a sustainable foundation for the >130,000 delivery drivers in Colombia.
Jeysson, our lead designer, passed away unexpectedly this year. His passion for product lives on in each curve and cut of our hardware.
Financial products in addition to motorcycles and electric bikes breaks the “siloing” of credit which traditionally limits clients outside of the traditional banking sector. Roda plans to continue to break these barriers in 2024. In 2023, Roda launched an on-chain credit scoring system for our clients. We measure factors of our clients' work which are associated with the probability of them repaying loans and publish them to the Celo blockchain. This serves three purposes; improves our internal credit scoring system, records offsets of EVs versus 2-stroke motors, and provides a public credit score which can be analyzed and used by future creditors. This lets migrants develop a credit score while the Colombian government continues to improve visa application pathways.
Tuk-Tuk Mobility: On indestructibility, affordability and productivity
One of my favorite pieces of writing, Why Rebel Groups Love the Toyota Hilux (or “Trucks of the Taliban") is a good blueprint for how electric vehicles will evolve in emerging markets over the next decades. While the focus of the pieces are rebel groups, they tap into a realism about values in emerging markets so frequently absent. The Hilux is popular because it is indestructible and reparable. Electric vehicles today have a reputation for the opposite.
Testing a new model on a 120 mile trip over the eastern Andean range and into the lowland plains near Villavicencio.
The trick to being able to offer quality early is to focus on users who need the vehicle for work. If using an electric vehicle increases earnings, users are more able to pay for quality and more likely to buy into electric vehicles for the long term. Through the Guajira brand, Roda launched an ebike this year which is designed for heavy use and increases incomes. Traditional ebikes are advertised with battery ranges of 20-30 miles and in most cases are designed for light daily commutes or weekend outings. Guajira’s bike has an easily swappable battery more than 2x that capacity.
In 2023 marked the year of constant run-ins with clients in the streets. Seeing products in the wild will never cease to excite. Sora, the woman was our very first client.
In 2023 we launched more than 80 bikes – a pilot launch to evaluate the viability of the product. To date, our vehicles have covered over a million miles which would have been done on a polluting garage-punk two-stroke moped. For every dollar we invested in building these vehicles, our users made more than $5. As we look towards the future, we’re more convinced than ever about the potential of electric vehicles. Between 2022 and 2025 battery prices will fall another 40%. Designing for quality today means delivering it at scale tomorrow. We’re focusing on gig-workers today and as we look towards tomorrow we’re looking at other sectors where indestructible, repairable vehicles which increase incomes will come into demand.
A client talking about his experience with the ebike.
Bright Horizons of 2024
Roda began in the first days of the pandemic. To get our first clients I recruited through bike mechanics who carried their tools to popular street corners in a bundle of canvas. On more than one occasion I biked to the extremes of Bogota to conduct credit interviews in the homes of potential clients. The team which helped build Roda in 2021 and 2022 brought a similar passion for a richness of life. Many left behind the comfort of their banking and technology jobs in favor of a garage in a questionable part of town. While we didn’t have a snack bar in those days, working from a garage with the sound of mechanics banging on motors offered something which couldn’t be found in Zoom calls: a genuine understanding of the complex lives of our clients.
If we had started by launching an app instead of working from a garage, we would have never gotten to know Juan, a man who made his earnings collecting recyclables around the city. Nor would we have met Liliana, a woman working as a webcammer in the border city of Cúcuta. Both developed credit relationships with Roda. Juan ended up buying a financed motorcycle from us while Liliana started a family business with her parents in Venezuela.
These stories are at the core of Roda's value of calle y corbata and the foundation upon which we're scaling to reach the tens of millions of people in Colombia and beyond. Over the more than ten thousand loans which we've issued a foundation in things which don't scale is the foundation which will let us scale. It has tuned our ability to select loans which reliably double the incomes of our clients. Reliably driving upward mobility is not simply an endeavor of impact, but the potential to create impact which scales.
For 2024 we’re looking forward to applying that hard earned wisdom to even greater heights.
If you’d like to join the journey, please reach out to James Downer at