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

• Thanks to everyone who participated in our follow-on financing of Bavovna AI. We were once again oversubscribed into one of our fastest-growing portfolio companies.

• We currently have an API infrastructure opportunity that will soon close. You can access the deal page via your investor dashboard.

• We also have two fintech opportunities in the pipeline. Stay tuned for more details in the coming weeks.

Portfolio News

• Tiliter posted another excellent quarter, achieving full deployment across Woolworth’s Australia and expanding throughout the EU, including stores in Poland and Germany.

• Trace is off to the races after closing an oversubscribed $2M pre-seed in Q2. Following our investment, scout funds from Sequoia, a16z, and Index Ventures joined the round, underscoring our core thesis of identifying and investing before tier-1 firms take notice.

• Roq.ad signed multiple new enterprise clients in Q2 and closed a fresh seven-figure round from new outside investors. Our current gross markup for LPs is 9x.

• Fonbnk had its best quarter in company history, growing 159% QoQ. This is a testament to their hard work and on-the-ground efforts in building deep local networks across key markets over the past several years. Stay tuned for updates on their upcoming Series A.

• Thank you to all the founders, funders, and ecosystem partners who came out for Stampede.

Industry Insights

I've had some interesting discussions with VC fund managers over the past few weeks and noticed a (concerning?) shift among managers attempting to satisfy LP mandates. Let me explain...

We all know the fundraising market remains challenging for founders, but it's also difficult for fund managers.

In particular, among managers raising Fund II or III, I've noticed a trend whereby the manager alters (or restricts) their investment mandate to satisfy institutional LP requirements.

For example: an overly narrow geographic focus to satisfy the investment mandates of local institutional LPs.

Although a narrow geo focus is appealing to local LPs (who are mandated to invest locally), from a performance perspective, I think the VC’s aperture must remain wide(r) to have a chance at generating top-quartile returns.

For instance, in a smaller ecosystem outside of the major startup hubs, if only one (maybe two) companies are started each year that eventually become unicorns, the VC absolutely cannot afford to miss that deal over their 3-year deployment period since a single investment can make or break the success of the fund and firm.

Additionally, even if the VC sees every possible deal in the ecosystem, there’s no guarantee they will correctly predict & pick the winner at such an early stage (or get an allocation).

A healthy and self-sustaining startup ecosystem requires the distribution (and subsequent reinvestment) of profits. Moreover, for VCs (and LPs) to be successful, the smaller the ecosystem, the broader their geo focus must be.

From the VCs' perspective, I think it's critical to consider institutional capital from a more holistic portfolio approach. For instance, we must ask what percentage of the LP’s overall portfolio is allocated to venture capital.

In most instances, it's only a few percentage points, thus begging the question: based on what I know about the LP, are they investing primarily to drive returns or to satisfy some other mandate (social or economic)? If the latter, I would caution against skewing my investment thesis to qualify for an LP cheque that might limit my investment edge & subsequent returns.

Ultimately, returns are the flywheel that powers the startup ecosystem. To generate maximum ROI, managers must invest where they have an edge—and just like founders, VCs need investors who align with that edge. Otherwise, if we handcuff the VC, ROI suffers, and the ecosystem stalls.

Therefore, while big LP cheques are tempting, it’s essential for VCs to define an investment thesis that plays to their unique strengths rather than conforming to LP requirements at the expense of returns.

The tail shouldn’t wag the dog.

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