1Mby1M AI Investor Forum: Mark Phillips, Founder and Managing Partner at 11 Tribes Ventures (Part 4)

Sramana Mitra: What size checks do you write?

Mark Phillips: Out of fund two, we’re writing a $1-$1.5 million check into  to portfolio companies over the course of the next two to three years.

Generally, the rounds we’re participating in are priced somewhere between probably $10-$15 million pre-money. These are post revenue companies by and large. We’re not doing a ton of pre-revenue investing at this juncture. They’re raising anywhere from $2-$3 million of capital in that round.

Sramana Mitra: Okay. So, when you say post revenue, what kind of revenue level are you looking to investing?

Mark Phillips: Well, the strike zone for us is $0.5-$2 million of revenue. We’re happy for that to be annualized. We’d prefer it to be realized, but I realize now that ARR has really become a MRR times 12 as opposed to, “Hey, this is actually recurring revenue”. That’s an annualized number of $0.5-$2million of revenue over the course of the last 4 months.

Sramana Mitra: You said you’re sector agnostic, so this is not focusing on anything you’re willing to invest in anything you want.

Mark Phillips: The best performing company in fund one was an $11 million vehicle. The best performing company was a direct to consumer functional mushroom coffee called RYZE. They’ve become a very dominant player in the mushroom category. It’s not a space that we had a ton of conviction in, but we met the founders – Andrée Werner and Rashad Hossain. They are classmates from Harvard.

Rashad worked at Kraft Foods, felt like they needed a mushroom category when they said that they didn’t think that was the right strategic initiative. He moved home. He bootstrapped the business, he got it to a million dollars in revenue very, very quickly.

When we looked at that opportunity, we saw someone who had incredible leadership potential. The business has gone on to perform exceptionally well. But I use that as an example of like, we’re not just enterprise SaaS investors. We don’t need everything to kind of fit into a square peg, round hole situation.

If you’ve got a great CPG [consumer packaged goods] product, if you’ve got a great piece of hardware that we think you have a unique right to win within that space, it’s absolutely an opportunity that we will consider.

Sramana Mitra: Have you done a hardware investment?

Mark Phillips: We have one in fund one. It’s a medical hardware device called Brain Space, and it’s helping solve a very real problem of relieving cranial pressure in hospitalized trauma patients.

Sramana Mitra: What is the go-to-market strategy? Through hospitals?

Mark Phillips: Yes, directly through hospitals. They’re months away from FDA approval. It does require FDA approval, but they’ve got a backlog of numerous hospital administrators and executives that want to use the product. 

Sramana Mitra: If it’s pending FDA approval, how can it be post revenue?

Mark Phillips: This was a fund one investment. As I talk about us investing in post revenue, that is a fund two strategy for us.

Sramana Mitra: I see.

Mark Phillips: Fund one was a 2021 vintage. I kind of started at the top. Price has always been very important to us as we allocated out of fund one, we didn’t budge on price. What we moved on was the traction of the business itself. So, fund one has a few more pre-seed investments, but fund two, given where the market is today, will be an exclusively post revenue investment strategy.

Sramana Mitra: We are a tech and tech enabled services accelerator. We don’t do CPG, we don’t do medical devices. We only do software. We would do hybrid hardware software, but within the information technology domain. We would do e-commerce within CPG. If you have a CPG product that is a primarily e-commerce product or hybrid, that we would do.

This segment is part 4 in the series : 1Mby1M AI Investor Forum: Mark Phillips, Founder and Managing Partner at 11 Tribes Ventures
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