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, including Steve, Melinda, Brendan, and Colton, is finalized.

• The 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.

New Deals

• We are in the process of closing into a very exciting AR software company that recently launched alongside the Apple Vision Pro. Stay tuned for an announcement in the coming weeks.

• Last week, we shared our latest opportunity, an exclusive pre-demo-day allocation into a high-profile Canadian company set to join Boston Techstars. Please check your LP dashboard for the deal invite.

• We have another exciting follow-on opportunity at a significant markup to share with syndicate members in the coming days. Keep an eye on your LP dashboard.

Portfolio News

• The team at Share continues to execute exceptionally well, inundated with inbound leads and aggressively moving users through their funnel.

• Fonbnk had an outstanding 2023 with remarkable progress. The company is reaching an inflection point with all metrics starting to hockey stick – a testament to their on-the-ground efforts across Sub-Saharan Africa.

• Vint also had an outstanding 2023 with all metrics starting to hockey stick. Keep an eye on your LP dashboard for the latest news & updates. It’s looking like a very promising year ahead.

• I am excited to once again collaborate on a high-profile Canadian investment opportunity with Middle Cove Capital in Toronto. Stay tuned for more details.

Industry Insights

I recently revisited one of my favorite investing books, Poor Charlies Almanack, and highlighted some observations in a LinkedIn post. It’s fascinating to see how history rhymes, particularly concerning the current AI cycle.

Every day, we see a continued consolidation of power among a few major players in the AI industry, specifically Microsoft/OpenAI, Google, Meta, Anthropic, and Nvidia.

Not only have these companies been investing in (and developing) underlying LLMs for many years, but they possess the financial resources and infrastructure to develop and deploy them at scale, giving them a significant competitive advantage.

Concurrently, as AI technology becomes more prevalent and accessible, this widespread adoption leads to commoditization (as history shows), whereby the end consumer captures the bulk of the value created.

As a result, only the large aforementioned players can afford to participate in a race to the bottom, primarily as a loss leader for their other products & services.

So, where does this leave startups attempting to innovate and build AI products?

Candidly, it’s still very uncertain and too early to tell.

With history as my guide, I believe the AI market will evolve in the form of a barbell, whereby large infrastructure providers collect the vast majority of profits, and customers collect the vast majority of benefits.

For any startup trying to operate in the middle, it won't be easy to differentiate itself and sustain a competitive advantage when the underlying technology is continuously evolving (nor proprietary to the startup).

For example, I’ve seen startups building AI for lawyers every week for the past five months. It’s undoubtedly a large and lucrative market, but without any meaningful or sustainable advantage, it’s quickly becoming a red ocean flush with platform risk, built using a handful of LLM providers.

So, where do we invest our capital for maximum return?

In the context of venture capital and AI, understanding historical market patterns and trends provides valuable guidance when assessing the cycles and dynamics of emerging technology.

In my view, the ship has long sailed on foundational opportunities such as OpenAI and Anthropic. In fact, we’re now seeing a flood of secondaries hit the market at astronomical valuations as early investors look to cash-in on the current hype cycle.

Therefore, in my opinion, the real and blue ocean opportunity in AI currently lies at the other end of the spectrum, on the consumer side of the barbell. For instance, companies focused on creating unique value propositions while differentiating beyond simply adopting AI for the sake of it.

In other words, since we already know that the majority of value will accrue to either end of the barbell, I’m interested in companies that can benefit as the end consumer by leveraging AI as a tool to enhance their existing core competencies and deliver exceptional customer experiences.

In doing so, I believe these startups will avoid getting caught in the messy middle and, ultimately, capture a larger share of the overall value generated by AI.

In practice, I believe this looks like companies that have already identified (and are solving a problem for) a lucrative target market. Now, as the end consumer of AI, the company can leverage these newfound AI tools to dramatically improve its underlying economics and accelerate growth.

It’s currently one of the most exciting times in history to be an early-stage investor. Every day, I wake up looking forward to my job of finding and identifying these opportunities.

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