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

• Thanks to all who took part in our Rook follow-on investment. The round was oversubscribed by $300k, and the company secured multiple high-profile customers over the summer. Final subscription documents will be sent to participating investors next week.

• We have one follow-on and two new opportunities in the pipeline, alongside several prominent VC firms. Active syndicate members will receive an email invite in the coming days.

Portfolio News

• GroWrk had another strong quarter and remains one of our top-performing portfolio companies. A comprehensive investor update was shared with participating investors last week.

• Congratulations to Bavovna for winning 1st place as the 'Best UAV Solution' at the Commercial UAV Expo in Las Vegas. The team has been working tirelessly to support the war effort in Ukraine while also expanding domestically.

• Also, congratulations to Ediphi on their recent oversubscribed $1.5M seed round. Allied is proud to support Cristina and the team on their mission to redefine the $290B global hospitality training industry.

• Ediphi also represents our fastest markup in portfolio history – less than one month since closing our allocation. Thank you to all those who participated in our investment.

• Lastly, I want to express my gratitude to 500 Global for the opportunity to serve as a guest judge for the latest cohort of Alberta Accelerator companies.

Industry Insights

At Allied, we pride ourselves on our data-driven approach to venture capital. We meticulously track and analyze every conceivable metric, from deal flow to exit valuations, to inform our investment strategy and provide a comprehensive outlook on the market.

Since launching in 2020, I’ve worked hard to operate Allied with the diligence and discipline of a top-tier VC firm, yet with the flexibility and democratization of a syndicate. As such, this commitment to data-driven decision-making has been instrumental in our growth and success, helping us build a sophisticated and robust platform of nearly 2,000 limited partners in our syndicate network.

As we navigate the ever-evolving VC landscape, I'd like to share some intriguing observations from our recent LP data analysis. These insights not only reflect the current state of the market but also offer a glimpse into the shifting dynamics of investor behavior.

Shifting LP Behavior and Market Trends

As we all know, over the past 24 months, we've witnessed a significant transformation in the venture ecosystem.

As it relates to Allied, during the bull market of 2021, our LP Participation Rate (i.e., the number of participating investors in any given deal) peaked at an impressive 22%, albeit with a lower average check size of approximately $3,000.

However, as market conditions cooled throughout 2022 and 2023, we observed a notable shift in investor behavior as many LPs left the asset class, making it harder for founders and GPs to fundraise.

When looking at our data, the most striking trend has been the simultaneous decrease in LP Participation Rate and increase in Average Check Size.

For instance, while the overall deal-by-deal participation rate has declined (as expected in a bear market), we've seen our average check size more than double on a trailing twelve-month basis.

As such, this dichotomy tells a compelling story about the quality and commitment of our investor base, and the types of investors who continue to support the VC asset class.

What does this mean for Allied and the broader VC market?

In my view, this data paints a picture of a maturing, more discerning investor landscape.

For instance, the decline in participation rate likely reflects the exodus of "tourist capital" – investors drawn to the asset class during the exuberant times of 2021 but who lacked long-term conviction.

Likewise, the substantial increase in average check size suggests that our core, savvy investors are not merely maintaining their positions but are actively doubling down on VC. This behavior supports my belief that we are in one of the most attractive investment vintages of the past 15 years.

Why is the “Smart Money” doubling down?

In my ongoing conversations with LPs, these sophisticated investors recognize the unique opportunity presented by current market conditions.

With valuations having normalized and AI providing a strong foundation for building and scaling startups more efficiently, the potential for outsized returns is the highest we've seen since the years following the global financial crisis. As a result, LPs are positioning themselves to capitalize on this asymmetric upside opportunity.

Therefore, although we're seeing fewer participating LPs overall, the quality and dedication of our investor base have markedly improved, and we continue welcoming new investors each week.

In other words, the "smart money" – those with a deep understanding of the venture capital cycle and a long-term perspective – is not only sticking around but increasing their exposure to the asset class.

As we move forward, I remain committed to leveraging this unique market opportunity to identify and support the most promising teams and companies. Additionally, the increased commitment from our core LPs not only validates our strategy but also provides us with the resources to capitalize on the opportunities ahead.

While only time will tell how this vintage ultimately performs, the current indicators and behavior of our most thoughtful investors give me confidence in the path ahead.

As always, thank you for your trust and support.

–Matt

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