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

Not an LP? Click here to join the Allied Venture Partners syndicate.

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 participated.

New Deals

• Thank you to all those who participated in our recent Share follow-on investment. The round was heavily oversubscribed, and we participated alongside several notable VCs, including Panache Ventures, Garage Capital, and others. I had lunch last week with Andrew Kim, Co-Founder & CEO, and I am very excited about the company's future!

• We have a new opportunity coming out shortly. Keep an eye on your inbox for the deal invite.

Portfolio News

• Vint's new QSBS Rollover product officially entered the market, and the team is working towards their first $5M in QSBS Rollovers. The core business, including Vint Marketplace, had its best month ever in September.

• Rook continues to acquire new enterprise customers each month. Strategic partnerships with Klarity and Alula are helping the team provide a more comprehensive product for insurance industry customers. Additionally, the team has launched Rook Score 2.0, their most advanced algorithm to date.

• Ediphi announced the launch of its new VR training facility in partnership with Philippines University.

• Tiliter is experiencing rapid growth in the EU, with over 100 stores onboarding in Germany and Poland. As a result, Marcel Herz, Co-Founder & CEO, is relocating to Germany to be closer to customers and assist in driving regional growth.

• I met with fellow GPs, LPs, and Founders in Toronto last week. Thanks to everyone who joined me for a coffee, lunch, or dinner. I look forward to many more investments in Toronto!

• We also celebrated our 4th Birthday earlier this month. Thank you for your continued trust and support.

Industry Insights

As we navigate the rapidly evolving venture capital landscape, particularly with the surge of AI (and subsequent valuations), we're witnessing a notable resurgence in nine-figure seed funds.

Most recently, Harry Stebbings announced the close of a new $400 million fund, of which $125 million will be dedicated to seed investments.

What does this mean for investors like us?

As an LP in six VC funds, I aim to add a new fund to my personal portfolio each year. However, I firmly believe that fund size is intrinsically linked to strategy. In today’s market, only a handful of geographies, primarily the Valley and New York, can sustain nine-figure seed funds while maintaining the prospect of generating top-quartile returns.

Nine-Figure Seed Funds: A Challenge for Average LPs

Taking Canada as a case study, the dynamics of venture capital reveal that nine-figure seed funds may not be viable for the average LP of high net-worth individuals and family offices.

For example, we know from many decades of data that small funds of less than $100 million have consistently matched or outperformed all other fund sizes on a net return basis. Put simply, bigger funds require bigger outcomes to generate outsized returns, and bigger outcomes are far less frequent.

Additionally, for most large VC funds, it’s a game of access, with eight-figure investment minimums that the average LP cannot afford.

When we examine the Canadian venture capital landscape more broadly, there are one (maybe two) companies started each year that will grow into multi-billion dollar global enterprises.

Furthermore, there are five essential components to every successful venture investment—seeing, picking, winning, supporting, and exiting.

For a nine-figure seed fund to achieve top-quartile status of 3-5x net, it must not only see every opportunity across the country but must also correctly pick the winner and then win an allocation from the founder by beating other VCs.

1. Seeing: The fund must have visibility over every relevant opportunity across the country, an impossible task for any single firm.

2. Picking: Identifying the winning startup is inherently uncertain; no investor has a crystal ball.

3. Winning: Competing for an allocation from founders requires not just skill but also luck, as many funds vie for limited opportunities.

Excelling in all of these areas is no small feat!

Additionally, given the Power Law—where a small percentage of successful investments drive the majority of returns—fund managers face the daunting challenge of repeating this process each year throughout an average deployment cycle of 3 to 4 years—a tall order, particularly in smaller markets.

Lastly, from an LP’s perspective, the ecosystem remains relatively small. Only a few institutional LPs have the financial capacity to anchor a nine-figure VC fund, leading to a concentration of capital. This creates a cycle where the same institutional investors back a limited number of VC firms, which in turn invest in a narrow pool of startups.

The result?

Inflated startup valuations since big funds are beholden to fund math that requires larger seed checks than local startups can effectively ingest and deploy.

No matter how I analyze the numbers, it seems highly improbable that a nine-figure seed fund (outside of major hubs like the Valley or New York) will consistently deliver a 3-5x net return for LPs. Instead, the most suitable LPs for such funds are often large, government-backed institutions whose investment mandates extend beyond financial performance to include social and economic development goals.

What This Means for Individual LPs

So, where does this leave individual LPs like myself?

It’s essential to remember that fund size is strategy—it always has been and always will be.

Especially in smaller markets like Canada, the math behind nine-figure seed funds simply doesn’t add up for consistent 3-5x net returns. The reality is that only GPs benefit from management fees while government institutions tick the box on fulfilling broader societal mandates.

As an individual LP focused on maximizing returns, I actively seek out managers with unique access to high-potential networks and markets where I have no competitive edge.

In practice, this means engaging with emerging fund managers in their early fund cycles (Funds I through IV), typically with fund sizes under $50 million, and a proven track record of disciplined decision-making. These managers are on the ground (or have unique ties) in the market in which they are investing and are writing appropriately sized checks in line with fund size and the local ecosystem.

In some cases, I’ve followed a manager for years, getting to know their thought processes. Other times, I’ve supported managers who have spun out from established firms with which I was already familiar. As an LP, this approach requires continuous networking, discovery, and ongoing monitoring to build a foundation of trust and familiarity.

Venture capital is inherently a long-term game. Both LPs and GPs must adopt a long-term mindset, supporting managers who demonstrate consistency and discipline in their execution, paired with unique access.

As we look ahead, I encourage my fellow LPs to explore the potential of smaller funds that align with these principles. By doing so, I believe we can better position ourselves to navigate the complexities of today’s VC landscape and achieve the top-quartile returns we all strive for.

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