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Allied Venture Partners
LP Newsletter: 21 May 2025
Matt Wilson
May 21, 2025 • Estimated Reading Time: 5 minutes
Hello Partners,
As a current or prospective partner, this newsletter provides exclusive insights into our investment strategy, portfolio companies, and industry trends.
Thank you for your continued trust and support,
Matt Wilson
Founder & Managing Director | Allied Venture Partners
Not an LP? Click here to join the Allied Venture Partners syndicate.
Team Updates
New Deals
Our next investment opportunity will launch later this week. Keep an eye on your inbox for the invite.
We currently have five more offers out, each pending a lead VC and final terms.
Portfolio News
Ediphi has signed its first healthcare host and nursing university, successfully expanding the business beyond the hospitality sector.
Trace had a highly successful Q1’25, expanding collaborations with various partners, including ESPN, PGA, EON, and Dell.
April was a busy travel month, starting in the Valley, followed by a visit to the Middle East, where we have over a dozen LPs, and concluding in Saskatoon, where I was invited to attend their premier tech and investor conference.
A big thank you to all the founders, investors, and conference organizers for your warm hospitality.
Industry Insights
The AI Investment Paradox
There's a fascinating dichotomy underway in today's fundraising environment that I think deserves careful attention. The market is effectively functioning as two separate ecosystems with dramatically different dynamics and outcomes.
On one side, we're seeing AI-first startups with minimal product development and negligible revenue securing heavily oversubscribed funding rounds at premium valuations. These companies often present little more than conceptual frameworks or thin wrappers promising agentic capabilities built on existing foundational models.
Investors are predominantly betting on the concept and market momentum rather than on demonstrated traction or unique technical differentiation.
The Overlooked Growth Stories
In stark contrast, we're seeing many companies with proven business models that, while not necessarily AI-first in their positioning, boast impressive metrics: dozens of customers, six to seven-figure revenues, high margin, and 2x-3x year-over-year growth.
Paradoxically, these rounds are taking much longer (3-6 months), primarily consisting of angels and smaller VC funds, and struggling to secure lead investors willing to price the round or set terms.
Differentiation Challenges in Crowded Verticals
I've spoken about this trend for the past year, and I’ll reiterate my challenge of meaningful differentiation in overcrowded AI verticals. For example, when I meet my sixth AI voice agent startup targeting customer service and call centers within a month, the differentiation becomes remarkably thin.
This market will inevitably consolidate toward one or two leaders, but until then, it’s a fierce land-grab for marketshare that often boils down to who can raise the most capital to fund recruitment and customer acquisition.
History Lessons & Our Investment Approach
The historical parallel of Uber's $22+ billion raise to dominate ride-sharing illustrates both the capital intensity required to win paradigm shifts and the difficulty in predicting ultimate winners.
For this reason—call me old-fashioned—I find the most compelling opportunities among companies solving validated problems with proven customers and revenue. By strategically incorporating AI, these businesses are dramatically enhancing their growth trajectories and economic fundamentals.
We're seeing this approach succeed across our portfolio, including companies like GroWrk, Tiliter, RetinaLogik, Rook, Share, and others.
To the founders building AI-first companies: keep innovating and pushing boundaries.
To the investors backing AI-first companies: may fortune favor your bold bets.
As a reminder, our Core Investment Values since Day 1:
Read our investment thesis one-pager, available here.