I had an early flight out of Mexico this weekend.

Like many high-strung travelers, I like to get to the airport early, walk to my gate, make sure it exists, and then get a cup of coffee (well, chai latte with oat milk, but you get the idea).

Except... the airport in Léon only had one coffee shop. And it was packed. Every traveler in the airport was at this one coffee shop.

When I finally got to the front of the line, everything went wrong.

The credit card machine was broken, they didn't accept US dollars (the horror), they didn't have oat milk, and the wait to actually get my beverage was 10 minutes.

But if I wanted coffee, this was my only option.

This is a true story.

But it's also a perfect metaphor for today's topic: greenfield.

What is greenfield?

In startup land, greenfield is opportunities in emerging markets that exist because of the lack of competition.

Let's break that down.

In the US and other advanced markets, most industries are crowded.

For example, there are 15,000 SaaS startups alone in the US (source).

But in Indonesia there aren't even 15k total startups (source).

This is what we mean by greenfield – areas where there is very little competition.

The companies that do exist in these markets can capture market share relatively easily... even if their product or service isn't perfect. (ahem like that coffee shop with the long line).

Upsides and downsides

The upsides to investing in greenfield are obvious, but let's list them anyway:

1. Less competition
2. Larger percentage of market share
3. Lower customer acquisition cost
4. Fewer investors in the region means you have a better shot of getting in as an investor
   

Not as obvious are the downsides:

1. Team is less likely to have startup experience
2. Team is less likely to predict obstacles... or know how to overcome them
3. Fewer investors in the region means the companies may have trouble fundraising

Evaluating greenfield companies

When we talk about evaluating early-stage companies, my team always points to two things: the team and the customers.

On the team front, we're looking for a team that has domain expertise and amazing execution.

On the customer front, we're looking for signals that there is a large target audience, and this is a problem they will pay to solve.

In countries with greenfield, the customers aren't as big of a concern.

For example, a founder building a payments platform in the US has to compete with Plaid and Paypal and Venmo and Stripe... and the 11,000 other fintech companies out there.

Most customers already have a solution, and won't want to go through the bother of switching. And the ones that don't are being constantly targeted by existing companies.

But in Indonesia, there aren't that many options. So a founder like Moses Lo from Xendit is able to capture market share simply because Xendit is one of the only options for their target audience.

So we turn our attention to the other variable: the team.

Finding the right team

When you invest in companies based in the US, there's a good chance the founders and operators have worked for startups before.

That experience is a huge asset.

It gives them insights into product development, marketing, hiring, and fundraising.

But if you live in a country where there isn't an established startup ecosystem, you're much less likely to learn those lessons.

Luckily (or unluckily), other founders in that country are likely in that same boat.

So when you're evaluating a company in an emerging market, the question is not, "is this the best team in the world to build this business?". Rather, the question is, "is this the best team in this region to build this business?".

And the best way to answer that question is to get to know the startup scene in that area.

Mentoring founders in a local accelerator is a good way to begin.

And the payoffs could be huge

Warren Buffett once said, "Be fearful when others are greedy, and greedy when others are fearful."

Look – most US-based investors are not investing outside of the country.

But startup ecosystems are popping up all over the world.

And with very little competition for customers, low CAC, and few funders, the opportunity to invest in greenfield companies has never been more exiting.

Just be sure to bring your coffee with you.