Allied Venture Partners

Hello Partners,

As a current or prospective partner, this newsletter provides exclusive insights into our investment strategy, portfolio companies, and industry trends.

Thank you again for your continued trust and support,

Matt Wilson, MBA

Founder & Managing Director | Allied Venture Partners

Team Updates

• Our core team includes Steve, Melinda, Brendan, and Colton.

• The Allied Scout and Advisory programs continue to expand with several new members each week, providing quality diversified deal flow from across Canada and the United States. Thank you to all those who have joined.

New Deals

• Two investment opportunities are currently available via your investor dashboard: one in API/infrastructure and one in AI/ML/aerospace. Please log in to access the respective deal pages.

• We also have a fintech opportunity in the pipeline that is expected to launch in the coming weeks. Stay tuned for more details.

Portfolio News

• Ediphi closed a seven-figure priced round less than two weeks after we invested, giving Allied LPs an instant markup (our fastest markup in the firm's history). Thanks to all those who joined the deal.

• Rook surpassed 90,000 MAUs in June while growing revenue by 52% month over month. Congratulations to the entire Rook team on your continued growth and success.

• Innerlogic has successfully closed their $1.3M Seed round, offering Allied LPs the chance to participate via our partners at Middle Cove Capital. Thank you to everyone who participated in the deal. You can read the full Betakit press release here.

• Thank you, Plug and Play Canada and the Calgary Petroleum Club, for inviting me to speak at your angel investing workshop. I am excited to participate in more events and help bring angel capital into our growing tech ecosystem.

Industry Insights

As we reach the midpoint of 2024, I wanted to share some insights from our recent investment activities and observations on the current venture capital landscape.

You may have seen my recent LinkedIn post on this topic, but I believe these insights are worth reiterating and expanding upon in our monthly newsletter.

H1 2024 Highlights:
We've had an exceptionally busy start to the year, closing 6 Seed investments. This level of activity underscores our confidence in the current market opportunities despite the unique challenges in the VC landscape.

Key Observations for Founders:

1. Seed Round Dynamics:

   • Longer timelines: 3-6 months or more

   • Smaller sizes: typically sub $2MM

   • Traction requirements: $5k-$10k MRR minimum

2. Funding Strategies:

   • Many founders are bootstrapping to an MVP

   • SAFEs and Convertible Notes remain the most popular, but priced rounds are gaining traction at Seed.

3. Path to Series A:

   • Extended timeline: up to 24 months from Seed to Series A

   • A higher bar to clear market: $2.5MM to $5MM ARR

4. Operational Efficiency:

   • Resourceful founders are achieving a lot more with a lot less.

   • LLMs are significantly improving efficiency and reducing costs across the startup tech stack, especially in sales, marketing, and customer support.

Key Observations for Investors:

1. Valuations:

   • Have remained generally stable, with AI as a notable exception, thus skewing valuation data higher.

2. Market Sentiment:

   • There is widespread agreement that this is one of the most exciting times of the past 15 years to be an early-stage investor.

3. Capital Allocation:

   • Private credit and fixed income have gained considerable attention due to attractive yields. Nevertheless, smart money continues to deploy into VC, emphasizing a long-term perspective.

4. Investment Focus:

   • The bulk of venture dollars are concentrating into AI, leaving some very attractive and overlooked opportunities in other sectors and geographies.

   • Although we are watching the development of AI very closely, investors must remain cautious as we’ve seen this cycle before (learn more from our May LP Update).

5. Deal Flow and Quality:

   • While deal flow volume remains consistent, the quality of deal flow has improved dramatically from 2021/2022.

   • Most Seed-stage founders coming to market have bootstrapped to six-figure revenue and double-digit monthly growth.

6. Exit Landscape:

   • Late-stage liquidity is still a big question mark.

   • The regulatory outlook for M&A remains unclear, and IPO revenue expectations have increased north of $500MM.

   • As a result, we are seeing a growing interest among secondaries, strip sales, and continuation funds.

Key Takeaways:

1. High-growth companies with exceptional teams continue to attract capital.

2. It’s currently one of the most exciting times of the past 15 years to be an early-stage technology investor.

3. While AI remains the hot craze du jour, we've witnessed technology paradigm shifts in the past and maintain a balanced barbell approach to avoid bubble risk as we move from first to second-generation AI.

As always, I remain unwavering in my commitment to identifying and supporting the most promising early-stage technology companies for Allied LPs. Our team consistently evaluates dozens of new opportunities each week, and a healthy dose of paranoia ensures we are continually adapting our investment strategies to evolving market conditions.

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