1Mby1M AI Investor Forum: Mark Phillips, Founder and Managing Partner at 11 Tribes Ventures (Part 5)

Sramana Mitra: So, tell me a little bit about fund two. What are you expecting to see? I’m sure you have some sort of a pipeline and deal flow that’s already built up as you are starting to divest your second fund. What is happening in the geographies you are interested in? Tell us more about what’s happening in the tech enabled services work.

Mark Phillips: To be clear, the opportunistic things are probably 20% of the portfolio. There’s still a huge 70-80% of what we’re doing that are absolutely tech and SaaS enabled. So, that’s an area we spend a lot of time discussing.

At the top of the call, we were discussing the role of artificial intelligence. We will not invest in what I would describe as sort of the AI wrappers or even any of the underlying large language models, right? I think all of that fundamentally in our estimations from is a race to the bottom.

When Deepseek came out from China and we looked at its performance, it became very clear that the moat of these larger language models was not terribly significant.

The other challenge from an investor point of view is we just have no idea what the pace of change is going to look like.

Sramana Mitra: Not really. That kind of business is not a small fund gain.

Mark Phillips: Indeed.

Sramana Mitra: That is Andreessen Horowitz’s gain.

Mark Phillips: You’re spot on. The mistake I made building my first company was, I was trying to build it for somebody else. Who we’re trying to be as 11 Tribes is the investors that is true to who we are. That’s a really important thing that anyone building a company needs to understand for themselves.

Back to your question directly, I think one of the biggest things that we’re really appreciating is that as we’re investing out of this 2024 vintage software or CEOs are really becoming AI natives, right? It’s not a question of how you’re using AI and what in what ways it’s being integrated into your business.

It’s a question of how are you using that AI enablement to create some prior or previously unattainable aspect of your company that is going to either create a better go-to market strategy, a better customer experience, or a better retention strategy for the customers that you have already retained.

It’s no longer a question of like, how are you using AI? Are you using ai? Really the generation of entrepreneurs that we are starting to see have been building for the last two years since the advent of ChatGPT, and they have become very proficient at integrating AI directly into the processes of what they’re doing.

So, that’s the first kind of component piece. I imagine you might have a comment there, so let me pause before I kind of talk about some of the other trends. Are you seeing something similar?

Sramana Mitra: Well, the way we look at AI is different. Where you would find venture fundable AI companies is something I look at differently and many of my colleagues here look at differently.

Most of them are bypassing the infrastructure layer where there’s these large language models or very large datacenters and so on and so forth, which is ma basically a money game, right? It’s a multi scale game that’s happening in the hands of big tech mostly and companies like Open AI and Anthropic. Most small fund investors are looking at the application layer where you can make use of all these different layers that are already in place. The differentiating factor in that application layer is domain knowledge.

You’re doing something in manufacturing then you need deep manufacturing domain knowledge to build something interesting. If you are doing something in pharmaceutical, you need deep domain knowledge there.

This segment is part 5 in the series : 1Mby1M AI Investor Forum: Mark Phillips, Founder and Managing Partner at 11 Tribes Ventures
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