Investing in People, Not Unicorns - Mark Phillips - 11 Tribes Ventures

Mark King:00:00:15

If he sat down for a drink with Bruce Springsteen, would you rather have him give you a bunch of bullet points about songwriting theory or would you really prefer to hear the story of writing born in the USA? I thought so. That's why here on Impact Investing Roadshow, we believe the best way to understand an investor's craftsmanship. Is to hear them dig deep into the story of a single investment. I'm your host and tour guide Mark King. on this episode, you and I are going to hear from Mark Phillips, the founder of 11 Tribes of Ventures. 11 Tribes is a Chicago based venture capital firm, built on a simple but unique conviction that what happens to the founder of a business is more important than what happens to the business. Mark set out in 2020 on a mission to rethink and reshape the venture capital model He and his team want to back technology companies that are more sustainable, more durable, and ultimately more profitable by keeping the focus squarely on the founder. Mark's path to venture was anything but conventional. He spent the better part of a decade as a strategy consultant first for four years at Accenture, and then three more at point B, where his work centered on strategy and m and a along the way. He went back to school for his MBA at, the University of Chicago's Booth School, and while he was there, he launched his first company. That experience and specifically the not so happy ending became the seed of what would eventually become 11 tribes. In addition to his MBA from booth Mark holds bachelor's in math from Wheaton College, which is a little surprising because as you'll hear, he thinks more like a sociologist. He lives in the western suburbs of Chicago with Emily, his wife, and their three boys. It's a little weird. I feel like I just introduced myself, a guy named Mark from Chicago's western suburbs with three sons, a degree from Wheaton, and that's into tech startups. On top of all that, Mark Phillips is also a podcaster. Hmm. I wonder why we get along so well. I. Joking aside, mark and I had an awesome conversation. We started by talking about the 11 tribes origin story. mark, let's start with some background around 11 tribes. You're into your second fund, and have been at it, I wanna say six years now.

Mark Phillips:00:03:00

Yeah. Yeah. Give, I guess we're in 2026, so that makes it six years. Um, I happy to provide it. Everyone should know that you are, as you know, mark, somewhat responsible for these decisions that I've made. So, uh, you've given the background, but, when I was coming out of school and, and in my. Early days of consulting, I was really intrigued by venture capital and this old podcast called Distilling Venture Capital hosted by none others than Mark King. So listen to that at some point, you referred to your time at Wheaton College and I said there's an alum. Wheaton College who works in venture capital, I have to know more. So you and I, that's where we got connected. Through a, a long and winding journey, I became passionate about this journey of entrepreneurship and what does that mean in terms of yes, the growth of a business. And that's what we're here to talk about today. But so much of the journey mark, as you know, is the growth of the founder. I've experienced that for myself and as a fund. We're genuinely really passionate about what it takes to help leaders grow. 11 tribes came through some of my own entrepreneurial failure. Um, lot of my faith is built into what I do at 11 tribes a lot. Our North Star Mark 8 36, what does it benefit a man if he gains the whole world yet forfeits his soul? And so I quit my day job actually in the midst of COVID, may of 2020. I said goodbye to a consulting firm I'd been with for a couple years. Didn't really know what I was doing, if I'm being completely honest with you, but, uh, found our way into raising a first fund of $11 million, launched on April 5th, 2021. So we've deployed that into 33 portfolio companies. We'll talk a little bit about that, I'm sure. And then in March of 2025, we closed on our second fund, which was a $46 million vehicle, and have now invested into 14 companies. We expect to do probably 10 to 15 more deals over the course of the next 18 months. Yeah, I could go on and on about all that. We've changed our strategy quite a bit. That's a big leap in, in fund size, and so we're now lead investors as opposed to follow on investors, but that's the tactical kind of how old are we as a firm? Where are we today? And, what kind of capital are we deploying as a fund? Yeah.

Mark King:00:05:01

And venture has gotten to be broader and broader in its definition and mandate. So tell us about what are typical deals and what the strategy was and how it's evolved into leading deals.

Mark Phillips:00:05:12

I really came at this more as an operator, as opposed to an investor. I'm not a traditionally trained investment banker. I'm a consultant and entrepreneur is really how I see the world. And so when we launched Fund one, our thesis was always this idea of yes founder outcomes. Are as important as what we call business outcomes, right, mark. And so, right, we all know what a business outcome is. You know how to measure that. IRR, cash on cash, whatever metric you wanna use. But how do you measure a founder outcome? You could talk about the quality of relationships in that person's life. You could talk about their mental health, their physical health, their spiritual health. It's a lot harder to measure if we're being honest, the thesis for us has always been what if we were as committed to the founder outcomes as we were to the business outcomes? And that manifests itself in a few different ways. But what's interesting to your question is when we were deploying out of fund one, while the why was very strong and the unique value prop was very strong, how we invested and in what types of assets we invested was not very strong. We were following on into big funds that had a lot more assets than we do. Had different underwriting methodologies, had different performance metrics. And I think this is what a lot of entrepreneurs don't fully appreciate is like not all VCs are created equal. If you're talking to 11 tribes, we have a very different underwriting methodology and and strategy than Andreessen Horowitz. And the check sizes themselves tell you a lot about what's going on the fund sizes. Right. Andreessen raised $15 billion last year. That's crazy. crazy. And

Mark King:00:06:35

that that's, I saw that number and at some point, probably back when I started, that was the size almost of the industry

Mark Phillips:00:06:42

Whole

Mark King:00:06:43

in, in, a given year. Yeah. It's nuts.

Mark Phillips:00:06:45

as a cottage industry. I

Mark King:00:06:46

Yeah.

Mark Phillips:00:06:47

this, this, I, I think I, I read somewhere that Sequoia, Xcel, you know, KKR and one other were the first four funds and cumulatively they, their, their, the first four funds ever created were a total of $12 million. So we've gone a long way. You're right, mark, where we are today. why hasn't changed. Okay. The, the, we ca we legitimately care about founders. We have what we call our founder all about Mark. we allocate 2% of every dollar. We invest non di exclusively to the founder of each portfolio company for them to pursue their own growth and resilience. So that might be coaching, that might be counseling or leadership development, marriage counseling. We've

Mark King:00:07:25

Okay.

Mark Phillips:00:07:25

engage in marital counseling. It's ama, which is amazing 'cause if your spouse isn't bought into what you're doing, you're done, man. You're cooked. But what has really evolved is our allocation methodology. And what I mean by that is we're not just looking for a deal that, hey, maybe Andreessen Horowitz or Sequoia comes around and follows on and gives us a big markup and we all win. We're actually asking the very difficult question now of in the age of ai, what does it mean to build a successful, profitable cash flowing business? Sam Altman of of chat. GBT has this great thought, which is, you know, he and his buddies have this, this betting pool going of, when is the first single person billion dollar organization going to be in creation? When is it gonna going to exist? And I have a flip side of that same wager. believe there's going to be a massive proliferation small three to five person teams that can reach to 75, maybe a hundred million dollars of revenue in under five years. Because of the pace at which artificial intelligence allows them to grow. And so that begs a really interesting question of like, has always described itself as a a power law industry where only the biggest outcomes can win. we're asking ourselves and now getting really down to the specifics, what does it look like for us to focus not on unicorn outcomes and home runs, so to speak, but on more singles, doubles, and triples. For those that know the movie Moneyball, we really are starting to feel this is where we're headed as a fund and, and really I believe as an industry where find someone who's worked in the waste management industry, we've done this deal, I'm speaking from a specific example here, understands the space intimately, realizes that artificial intelligence can help them solve a very specific pain point they've experienced for the last decade. enter into that industry, they're solving the pain point in a very specific fashion. They have the right contacts. To grow their revenue and they're able to scale the business at a pace that they otherwise could have never imagined. So what we look for are deals that are generating half a million to $2 million of revenue on something between a 15 and $25 million post money valuation. we underwrite their growth mark to 10 x, meaning we are excited. We expect that they will sell their business for somewhere between to 102 hundred $50 million. 96%. Interesting fact, 96% of all m and a activity in North America over the last decade has occurred a hundred million dollar enterprise value or less. So you've got all these venture funds that are, are squabbling and, and you know, over themselves to get into the next unicorn. While we're asking ourselves what does it look like to build businesses that have sustainable profitability and a huge universe of buyers that are interested in buying the company that they're trying to build.

Mark King:00:10:09

Talk about kind of industries that you focus on and maybe geographies as well, 'cause you're based here in the Chicago area. But talk a little bit about kinda where you're looking for those founders and what industries are you looking for them?

Mark Phillips:00:10:23

Yeah, the geo geographically, you know, it, it's not so much that we have a mandate that we'll never invest in San Francisco, right? But what we are, when you kind of play back that allocation strategy, price Price matters, and Warren Buffett has said this for years. Venture has convinced itself that it's not true. I'm gonna go with the guy who's, you know, got an incredible track record of performance, right? Price has to matter. And so we are geographically constrained by price. And what I mean by that is we observe consistently what we call geographic price arbitrage, when you're doing a deal, could be the exact same deal, mark, same founder, same revenue, same market. But if that deal was raising in Chattanooga, Tennessee as opposed to San Francisco, California. As investors, we're probably getting a three to five x discount on that organization. That's crazy. And so yeah, we are focusing on the Chattanooga's, the Nashvilles, the Chicagos, the Indianapolis is the Austins the Denvers of the world, not playing the coastal VC game because all the things I just said about in doubles, you know, how big is big enough. Frankly, mark, those are not questions that coastal venture firms or coastal entrepreneurs are asking themselves. From an

Mark King:00:11:32

Yeah.

Mark Phillips:00:11:32

you know, I love to say we, we go where great founders want to take us. I, was a failed healthcare founder, right? I tried to build a company in the healthcare space. It didn't work out. Like I, I'm not gonna pretend to know more about the healthcare industry, the gold industry, the, you know, um, the waste management industry than the founders that we work with. So we will go where great founders take us, and we'll get into that as we discuss our deal here and how we think about great founders. What we really are kind of, know, we have to be somewhat specific in what we look at. We talk a lot about vertical AI at this point, as as investors and all the, all the allocation things that I'm talking about really come together nicely when you look at a vertical solution, and what I mean by vertical is, you know, well, it's easier to talk about the antithesis, right? Horizontal or businesses like Salesforce or Microsoft or right? Hey, you know, Workday is a HR solution that can apply to waste management. Healthcare, financial services and banking, right? It goes across every single industry, which is why it's so big. But AI really, um, because we can analyze so much more information, you're gonna start seeing solutions that build vertically. And it's to say, Hey, I'm a solution that is specifically designed for waste management. I'm specifically designed for hospital trauma registry departments. I'm giving specific examples here from our portfolio because now we can collect so much more information and we can build a solution that up until now was not possible. But if I can bring all these component pieces together, I'm gonna delight the customer and I'm gonna grow a really, really exciting So intentionally we, we are, we're generalist funds, mark. Um, but I really anchor back to what I said at the start, which is we love to go into industries where great founders want to take us.

Mark King:00:13:14

Well, speaking of diving in, deep on a vertical, let's dive into, the transaction you wanted to walk us through today. I believe you said it's NQS, national Quality Systems. give us the high level of who they are and what they do, and then we can get into how you got involved.

Mark Phillips:00:13:28

love it. Absolutely. So NQS is part of our, our fund two portfolio, The founder's name is Mark Feinberg Accidental. Now we have three marks on the call, which is on the, on this recording, which is fine. Mark's a wonderful guy he lives in, outside of Jacksonville, Florida, and as a multi-time founder, has built and scaled multiple companies. Most recently was a healthcare consulting organization. We met Mark through a, a co-investor relationship. I wish, to be honest, I wish the story of how we met him was. More glamorous or something, but this is the often, this is the truth of it. The best deals in our industry come through relationships. We had a relationship with a co-investor. The deal was a little bit bigger than he wanted. He passed it along to us and we were delighted, absolutely delighted. Mark is solving this really interesting problem, is how hospitals manage their trauma registries. so what is a trauma register You might be asking? It is the log of all the things that are coming through the emergency room.

Mark King:00:14:26

Hmm.

Mark Phillips:00:14:28

And so there's all these codes, there's all these, these, you know, pieces of information that are required to go along with every single registered event from the trauma department to make sure that reimbursements can happen, to make sure that the, the payers and the payees, all of these things that go along with the insurance that comes into the hospital, everyone can be paid out and reimbursed accordingly. Now, what's interesting about this, this industry, mark, is. It's exceptionally small. Exceptionally small. And this is not company I'm gonna tell you about. NQS is not the sort of organization that traditional venture firms who have this, what I would describe as, um, really, uh, incoherent investment strategy, which is like, I only need billion dollar outcomes or bust. There's so much good money to me, made it. We believe in small markets, especially when we bring artificial intelligence in. The trauma registry departments in the United States total 2,400. It's 2,400 trauma registry departments in the United States. That's the whole domestic market. Now, you can go international and that certainly changes the tone, I mean, you're talking about in total, maybe a one to one and a half billion dollars market. But when we looked at it, and after we started to get to understand Mark and his passion for the space, his expertise for the space, what we found was there was only one meaningful competitor in the industry. And it is a conglomerate software organization that does, software for not just healthcare, not just trauma registry, but dozens of different industries. They make these very cookie cutter software. I mean, we know the type, you know, it's like going to a, a deli or a diner and they're like, yeah, we make pancakes, breakfast burritos, t-bone steaks, and we serve Masa Cho on Saturdays. So like, like you can't do all of those things well, right. Like I, I, I'm not gonna go for the t-bone steak there. I'm gonna go for something very basic. 'cause I, I, I, I don't trust what's happening in the back. It's the same with the trauma registry world. They had one option and that option was trying to keep. Dozens, if not hundreds of different types of customers and industries. Happy. And so Mark Feinberg saw opportunity.

Mark King:00:16:27

When you first, got engaged with him, uh, up and running pre-development. Was it what we used to joke as slideware, was it all just PowerPoint help me understand the kind of stage that he was at and

Mark Phillips:00:16:38

sure.

Mark King:00:16:38

your preference for that

Mark Phillips:00:16:41

We met Mark in, late spring of 2025.

Mark King:00:16:46

go.

Mark Phillips:00:16:46

I, I want, maybe it was February, March. Um, and it was, was pre-product. organization was, they were finalizing the build out. But what was really interesting about it, mark, was that they had, I wanna, I wanna, I'm gonna pull up my numbers here. They had committed revenue 16 different hospitals. That was really interesting to us, and and I share that very intentionally because it was a meaningful part of our decision making process. For those of you that know what the sales cycle of hospitals is like, um, it is, it is not for the faint of heart. We have a, um, we have a model in our, in our fund. We've got a group of operating partners, and these are folks who, myself, have built, scaled, sold companies in the various industries that they are, are passionate about. And one in particular is a woman named Carolyn Wilson. And Carolyn was the COO of the University of Chicago Healthcare System for about a decade. Went up to Michigan and worked at Beaumont Health. Has just done basically everything in the healthcare industry that you could possibly management of healthcare industry that you could possibly do. As we started to understand what Mark was doing, we were genuinely a little uncomfortable with the pre-revenue nature of the business. It's not typically where we invest these days. We wanna see some validation of customer and traction, et cetera. But he kept coming back to this committed revenue. We saw the contracts, we saw the signatures from the hospitals, and we couldn't shake that feeling. And so as we do in our decision making process, we kind of orbit that decision. We bring in other perspectives to try to inform what we're doing. so we called Carolyn and we said, Carolyn, here's the deal. We really like the company. Here's the value prop. But hospitals have already signed contracts with this guy and the product is still six to eight weeks away. her jaw dropped. Mark, her jaw dropped. She's like, hospitals do not do that. So one of two things is true, maybe both. Number one, is otherworldly. And for anyone that's built a software product like that probably isn't true 'cause it's early and it needs time. number two. The pain point is so visceral these people are desperate for a solution,

Mark King:00:18:45

Yeah.

Mark Phillips:00:18:47

and I believe number one will bear itself out. And, and it's been about a year now and it's the product is growing better every day. But number two was the most accurate assumption that we made in our underwriting process.

Mark King:00:19:00

Did you talk to some of the 16?

Mark Phillips:00:19:03

I think we had three customer conversations or signed contract conversations. then Carolyn helped us introduce Mark to two different hospital systems. And that's one of our favorite parts of the diligence process is let's introduce you cold to a customer and let's see how you do. Right. And Mark Feinberg did great, you know, and, and continue to validate this perspective that, yeah. The options in the market today are just atrocious,

Mark King:00:19:28

Yeah.

Mark Phillips:00:19:29

atrocious. And it's a pain point that all of these, these, you know, trauma nurses and doctors and and administration are feeling day in and day

Mark King:00:19:37

You mentioned that you got it from a co-investor. Did you guys lead this one yourselves? Tell me kind of how the structure of the round came together.

Mark Phillips:00:19:44

We did not lead it.

Mark King:00:19:45

I.

Mark Phillips:00:19:45

which is unusual for us. We've done, like I said, 14 deals. I think we've led 12 of them over the course of the last two years in fund two. reason we didn't was because another great investment group, a group called, long run Capital, and uh, the partner there, his name is Wilson Patton Wilson. And, and his team had met Mark, probably three or four months before we did, and they'd been talking for some time. have a ton of respect for how Wilson operates, and that was, that was an important part for us. You know, if we had a diametrically opposed underwriting process and, growth profile from the lead investor, that's probably something we would walk away you know, I think misaligned expectations are one of the great, destroyers of value in this world. but we have a really aligned perspective with Wilson and his team, and so he led the round. Unusual for where they were in the, in their development mark, they actually priced it. And so for those that are new to this world, there's a few different vehicles you can use. The most quick and dirty is what's called a safe, a simple agreement for future equity. I think market standard right now, we see a lot of convertible notes, which is effectively a, a debt vehicle with a, a small dividend of maybe six or 8%. For more mature companies you price it, which means you put structure, you issue shares, you put a price per share on the company, and you don't usually see it. For companies that are pre-revenue, the reason we did that was because we had a lot of confidence in Mark. Mark's, I don't know his exact age, he's probably in his early to mid fifties. Mark has been around the block, right? He knows what it takes to price an, an organization. He knows the governance constraints, right? Protective provisions, negative covenants that come with a priced round. But when you price around, you force an organization to mature, I think, in an even faster clip than it might otherwise. And I think that's really healthy. And for those that are listening, the other component of pricing round is what's called qualified small business stock. For those that don't know, this is a really interesting tax provision and you're

Mark King:00:21:36

Yeah.

Mark Phillips:00:21:36

ear over there, mark. 'cause it's, it's so attractive. But the, the IRS is a little ambiguous about whether safes and convertible notes apply as qualified small business stock. But if you issue a stock to a small business that has less than $50 million of assets and you hold that stock for five years and then you sell it. You get zero federal income tax. There's no income tax from the federal level

Mark King:00:21:57

how do you go about having the alignment and values conversation with co-investors and how do you have a conversation with the founder about the co-investors?

Mark Phillips:00:22:09

maybe I'm, I'm, naive in this, but I'm just extremely direct. Uh, I, it, it's actually more nuanced than that. One of the things we've really developed. And intentionally put a lot of effort behind over the last year is what we call our handshake agreement, it's our, it's our philosophy of partnership and I'm really proud of it. Like it's one of my favorite things we've ever created. And it says things like, as the founder of this organization, I acknowledge that my mental, emotional, physical, and spiritual health have a direct impact. On the performance of my company and the stewardship of the funds that investors are investing into my business. so as a founder of 11 Tribes portfolio, like I'm gonna ask myself how big is big enough? I'm gonna ask for, you know, I'm not gonna hide when I need help. I'm going to fully pursue my founder resilience commitment and continue to grow. That is an amazingly clarifying document in our investment process. And we sent that, you know, it, it goes to the founder probably at the 75%. Mark, in terms of our diligence process. So we're not all the way there. It's not the, it's not the one yard line, but we're in the red zone, so to speak.

Mark King:00:23:18

Mm-hmm.

Mark Phillips:00:23:19

And, a handful of times, mark, it's killed the deal. A founder has read it and he's, he said, you know, this is not something I'm, this is not how he or she says, I'm not, I'm not interested in building with this methodology. And so we wish them best of luck. It's no hard feelings like it it that's, there's no one way to build a business. I just think a lot of people have led themselves to believe that the only right way is that unicorn outcome, and we're simply trying to help people understand that there's more than one way to go about it. So when I shared that with Mark Feinberg at NQS, you know, when you share it with someone that resonates what you are offering, it's an incredibly trust building exercise. In that moment, mark Feinberg really felt like, wow, this is an organization, 11 tribes. This is an investment firm that really understands how I wanna build a business. that was really, really special. So that's how we do it with the founder. And then as I talked with Mark and I got to know, Wilson at, long jump, it just became clear and clearer. One of the things we did along a lot with, uh, with Long Temp was we asked them about their existing portfolio companies. Tell us about who you're on the board with. Tell us about some of the exits you've experienced. What's got you excited, what doesn't? And, and when you just sit back and listen to an investor talk, you know what really enthus them is gonna come to the surface very quickly. Is it vanity metrics quick markups and, but a lot of. Value, destruction and burning of cash? Or is it profitable businesses that are growing with sustainability and durability that are focusing on the fundamentals and really targeting a reasonable outcome for their know, if it's the latter, that's the kind of organization and investor that we

Mark King:00:24:54

Yeah.

Mark Phillips:00:24:54

with.

Mark King:00:24:55

Yeah. You mentioned also that you had given Mark Feinberg some homework in terms of, calling a cold prospect or doing a sales call with you. What other sorts homework did you give him, if that's the right word?

Mark Phillips:00:25:09

Yeah. The two biggest things I'll give you are financial model whatever stage is really important to us. And I think I, I've met enough founders that feel, you know, they can kind of put their finger to the air and, you know, get a directional. Model going, and that'll be enough. But you know, I think what you can't measure, you can't improve, right? So if, if you're not tracking information and assumptions about how you're building this business and what financial metrics need to be controlled for, that doesn't make me feel good about, you know, where that company's going to go.

Mark King:00:25:45

Right.

Mark Phillips:00:25:45

So Mark, mark had a really good model in place. We pressure test those models quite a bit and push back on him in a number of different ways to. Make sure that we felt comfortable with the assumptions that he was working with. But the second piece that we ask each founder to do is, really a psychometric profile.

Mark King:00:26:03

Hmm.

Mark Phillips:00:26:04

What I said a few minutes ago is, right, we want great leaders to take us where they want to go. Well, how do you know what a great leader is? We have wrestled with that question for years, and I don't have the answer, so sorry to disappoint, but I have a couple ideas. Uh, we use something called the culture index. I've, listen, I've, I'm a bit of a nerd on this stuff, like I've Enneagrams Strengths Finders, disc, you know, the list goes on and on. Uh, team Alytics, Kolby Index, like, there's all these different profiles that you can use. I've never seen anything quite like Culture Index, so it's a, it is a profiling software platform that's been around for about 40 years, it doesn't give us whether you're a good founder or a bad founder. What it does is it gives us a profile. there's four different categories, whether it's visionary, coordination, or social. And what we've really, really come to realize, mark, is again, there's no one right answer for a founder, but there is a right answer for how you compose a team. And so if you have a team that is full of simply visionary, right, these, I'm in that category, like I like to move fast, not really worried about the details, let's make sure we get the job done and we accomplish all of our goals. That's gonna make my day. If you build a team of entirely early visionaries, like you are gonna, I love this saying more companies have died of indigestion than starvation, You're gonna consume a lot of stuff, but do you have the ability to process and metabolize each of those different component pieces that you're taking in? that what we asked Mark to do was to use the culture index, take it for himself. We had a big, long conversation. He's in the visionary category. He's this profile called the philosopher, which has a lot of gas pedal. Also has a lot of focus. So he moves very fast, but on one thing at a time. And I think that's really cool. I move really fast, but I like to work on like six things at once, which my wife tells me doesn't work, which she's probably right. So that was really fun. And we also asked the rest of his management team to take it. And then we were able to have a conversation with the management team about here's what we see, here's the, here's the good we see, and also here's the things that might turn into issues. Those conversations do a couple things, right? I mean, it's, I think it's really healthy to have that conversation. It informs them about maybe things they didn't realize before. But it's also so interesting Mark, right? Because when you tell someone there's something wrong with them, you know, the, the colloquial, your baby is ugly. You learn something about 'em, right? You, you learn are are they able to take feedback? Can we have healthy conflict? And what I was so impressed with Mark's team was not only was there healthy conflict, they welcomed it. They asked for more. And it's not me suggesting that I've got all the answers, but it is a disposition that I think a leader can create within the context of their team of do we think we have all the answers or are we humble enough to admit that we need help? Pat lencioni's, ideal team player. He talks about three attributes, right? Humble, hungry, smart. And Mark checked all three of those boxes with flying colors during our diligence

Mark King:00:29:01

Really appreciate you diving into that data gathering diligence stuff. I assume, the throwaway comment is, and I assume you researched the market and I assume you talked to some customers, blah, blah, blah. But clearly those are the things that kind of differentiate your approach. So I appreciate you diving deeper on those.

Mark Phillips:00:29:16

well said. Mm-hmm.

Mark King:00:29:18

But you've got all this stuff. You mentioned this concept of circling around a decision talk to me about how you guys actually make decisions.

Mark Phillips:00:29:26

Mm. The, the things you said that didn't need to be said are absolutely true and are a lot of homework for us. Isaac on my team is our Vice President of investments and diligence, and he's just a really thoughtful individual. I would say, you know, on average between the time we meet a company and the time we choose to invest, we're probably spending 40 to 50 hours of time researching these companies. I mean, you're talking, you're talking full weeks of work, uh, a across the board, and that's. That's really encouraging to me and gets me really excited about the quality of decision making that we're bringing to the table. Isaac has built a really fantastic diligence process within the context of our organization. We have what we call, level one and level two memos. Level one memos are the exhaustive, on average, they're probably 20 to 30 pages, and they go into every single detail about the business, every single detail. The good, the bad, the ugly. I mean, what people have to appreciate is we're talking about the venture asset class here. None of these businesses are perfect. What we're doing is making a decision as to whether or not we are comfortable underwriting the risks that are present in the company. That's an important methodology and, and kind of mindset to bring to the table. So what Isaac does, I so glad you asked this question. 'cause I think a lot of firms have pretty subpar investment decision making processes, because a memo will be distributed and then everybody will come together. But what happens, mark, is the loudest voice in the room, which I'm as a founder of 11 tribes, is typically my own. And also I just have a loud voice, make a comment and then everybody will kind of like fall in line, right. Okay. Mark said that like, let's, okay, that's probably right. Like I'll, I'll poke here or there, but I'm not gonna have a totally different perspective or opinion. That's the opposite of healthy conflict. the opposite of making great decisions. So here's what Isaac did. Really simple. builds out the memo called 30 page memo. We all get it 48 hours in advance of what our investment committee meetings, which are on Tuesdays and Thursdays. And then he gives us a Google form. And the Google form is four different pages it goes across probably 25 different questions, right? on a scale of one to five, what is this? Founder's,

Mark King:00:31:31

Hmm.

Mark Phillips:00:31:31

humility. is this? Founder's smarts. What is their hungriness? Right? Are they the ideal team player? Okay, cool. Next page, what's the quality of the market? What's the recession nature of this industry, right? Is this, is this very cyclical or is it not cyclical? Right? Market style questions. And then the third page is the business itself. What do we think about the business model? One to five? Is it good? What do we think about the valuation and the price? What do we think about the deal terms? And then the last page is, open text. Right? What are the biggest strengths, weaknesses, and concerns that you have about this business? have created incredible, like, what's the word, organizational commitment across all. We have three partners on the investment committee that each time we have a deal that's ready to be reviewed, you are going to come to that meeting, having completed that form. are going to be willing to adamantly defend your opinion because we have it here in front of us. And so you can't tell us that you thought something different. it is it is so fun. Mark. It is so fun. 'cause we get into that meeting and I'm telling you, man, like the gloves come off, 'cause I've already made, I've staked out my, my position. I'm not gonna change it now. You know, and I, we've got really opinionated people on the team and I love it. It's one of my favorite calls of the week because. It's a debate of ideas in ways that very rarely I think people get to engage in. And so the run of show on that call, as Isaac gets on the form is intentionally anonymous to start, right? Okay. Two people picked four, but one per person picked a two. Who's the two? Do you wanna talk about it or No? And people can choose whether they wanna engage, but by the end, I mean we're, it's a rip ruckus, man. We're digging in and we're fighting. And really proud of that decision making process because I think it creates. intellectual honesty, and I think it lets us really wrestle with the ideas and the risks that we have to take

Mark King:00:33:19

Well, and the flip side is it surfaces consensus. So you can be a lot more efficient I won't name names, but I've sat through an awful lot of investment committees where people were just trying to show how smart they were, and it's a massive waste of time and we all agree with them and can we please move on? And you guys, it's like, okay, we all rate the guy a 10 for this, or she's a a zero on this. And we all agree we don't. Need to debate it, but what are the things that, need to be debated?

Mark Phillips:00:33:46

I think it's an incredible process. And what's unique about our organization that allows that, mark, and I didn't, honestly, I didn't know this as I've been building this firm, but, I think a lot of venture firms, any investment firm. or presidents or whatever, vice presidents, they're expected to kind of run the gambit of activities in the context of a firm. Meaning you source due diligence you bring to investment committee, and then if we do the deal, you get to be the person that is on that deal, right? That's a tough thing to ask everybody to do because sourcing is a lot different skillset and activity than diligence. And so what we've created is actually a really, we've come to use this word, interdependent organization. Isaac doesn't source. Isaac is diligence. He's focused on that and that alone. And then I've got Keegan on my team. And Keegan has a totally different skillset by the way we use Culture Index. The culture index for what makes someone great at sourcing is way different than the culture index that makes someone great at diligence. And so we looked for that different profile. And then Keegan doesn't diligence. He meets new founders. He gives them an initial pass based on whether they fit our strike zone. And then if they do, he introduces them to Isaac and to the partners to help evaluate whether we make an investment. So it's a really fun structure we have here. It requires, zero ego. If it's about you and your ability to get deals through, like you're gonna become a bottleneck really quickly. so we talk a lot about the culture at 11 Tribes and that's created, I think, a really efficient and, and dynamic process

Mark King:00:35:10

so on NQS, what were some of the big issues? You mentioned, it's pre-revenue, which is a, a basket of issues, but what,

Mark Phillips:00:35:19

that's a,

Mark King:00:35:19

But, uh,

Mark Phillips:00:35:20

the room.

Mark King:00:35:21

given that you got, what were the other issues and what were the things you debated?

Mark Phillips:00:35:26

Yeah, I'd say there were three. I mean, the pre-revenue is, is top of the list, right? And we just had to decide whether we were comfortable with that risk. Um, the second was small market. It's really easy and, and I'm happy to talk about, you know, we'll get to performance and things like that, but, it's really easy 'cause the company's doing well. To talk about it now and be like, well, it makes so much sense. You know? But when you map out that market and you understand the market share that they need to have in order to return the kinds of capital that we are looking for, it's a big number. It's a big percentage. And so, yeah, hindsight's always 2020, but we really wrestled with are we comfortable going into markets of this size and of this scope? And, I think the quality of how they have performed has really helped us get more comfortable with, as long as there aren't incumbents that are actually doing well. There's, there's a lot of opportunity in this emerging AI market for very underserved, sectors to have game changing solutions. So that's really the second one. And then the third was, and this has borne itself out. Um, it was a team debate and there was some questions around whether the CTO, who was on the team at that time was the right person to continue moving forward. had been some delays in product development, which is why they were still pre-revenue. Um, and you know, we had some honest conversations with Mark about, do we need to make an adjustment at team? Are you willing to remove this person if so needed? And a lot of those things that we suspected might have to happen, mark have borne themselves out. There continued to be a few more delays and, you just, you can't have that at this stage of a company. Um, and it, it reflected, I think, on the kind of leader that was in that position. So

Mark King:00:37:02

Yeah.

Mark Phillips:00:37:03

really ran the gambit. Uh, you know, I, I, there was a lot of risk to this and, but yet three things kind of mitigated all of that. Mark Feinberg is an incredible leader. a man of, remarkable integrity, and he's humble, hungry and smart. That gets us so excited. The second was. The customer contracts, the hospital contracts. Never heard that before. Literally never heard, a company that's pre-product, pre-revenue, having customer contracts. And then the third was our operating partner, Carolyn Wilson. Carolyn sits on an advisory board with them now and is doing a great job and. She just had a ton of conviction for it, and we listened to the people around us that orbit the decisions with us that have deep and abiding subject matter expertise, and Carolyn is, among them. So it was a, a great process. We felt really good about the outcome and, the assumptions that we felt would bear themselves out have proven to be true.

Mark King:00:37:54

You had mentioned that it was a priced round. How did negotiations go how heavy was the lift? Kind of get the deal, actually documented and closed?

Mark Phillips:00:38:03

Well, anytime you price it, the lift is, is bigger than a safe, of course. Right? There's a lot. There's hundreds of pages, right? You're putting in governance and charters and all these things. Mark Feinberg had always been someone that prioritized the right partner over the right price. We invested in the first round at a post money valuation of $8 million. That's, I, I think the pre was six and I think he ended up raising $2 million. And that was between us and, long run Capital, Wilson and his team. I think folks that aren't comfortable with venture. Maybe struggle to understand those numbers at times. I've met a lot of LPs limited partners in our fund who just like, they're like, how can you value that at 8 million? Well, in venture, we're not just underwriting to what you have done, which of course was nothing we're underwriting to what is the overall potential success and scale of this organization. is, it's very unusual to find a multi-time founder like Mark, that has a clear market opportunity that has, existing revenue or, you know. Let me, how should I put it? Um, predictable revenue opportunities in the pipeline to find something like that's raising on anything less than a $10 million valuation is very unusual. Very, very unusual. It's easy for a founder to be like, I've got a great business. What's a nice round number I can raise at, let's call it a 10. Mark always prioritized partners over price, and I appreciated that about him. So the negotiation was not, intense. It was, we always felt that number was very fair. are excited to participate in that and ultimately, we wrote a check for $750,000 into that round. we took a seat on the, the governance board. I am the board member on that company now, and as we talk about our methodology, that's really important to have that board seat so we can continue to help influence the trajectory and the growth potential of these businesses and really help them understand like, again, there's, there's more than one way to build a successful business. You don't have to get on that growth at all costs. wheel, you can think about sustainable, profitable, durable growth and ask yourself like, what if I don't have to raise the alphabet soup of of financings, right? If I raise a seed in a Series A, but then I don't raise any more capital, is that okay? Yes, it is. So long as you can continue to build the business and scale the business at the pace at which you desire.

Mark King:00:40:07

When exactly did it close, and how are things going from a both product and sales and marketing standpoint?

Mark Phillips:00:40:14

Yeah, so the round itself closed, March of 2025. Within four to six weeks, the product was live, so it got into market. And so this was last year. And, the receptivity has been incredible. It's been absolutely incredible. I just outta confidence of the organization. I don't wanna share live revenue numbers, but, I can confidently say this is, I. mean, it's

Mark King:00:40:36

I.

Mark Phillips:00:40:37

it's grown hand over fist. And I think the progress of. The contracts and the, the customer relationships that Mark has been able to make is just, it's exceptional. It's one of the fastest growing portfolio companies that we have. And again, it comes back to the assumptions we made, mark, which were small market, yes, but incumbent is terrible and the pain point is ridiculous. Are there other startups in this space? One or two. But they're not focused on specifically this trauma registry space. So to answer your question very directly, it has exceeded our expectations from a revenue perspective, from a customer perspective, from a execution perspective. Mark has done better than we could have expected, and that's always creates interesting questions, right? Because you, you always have one set of expectations, but when you have outperformance, it's easy to allow those expectations to drift and ask questions like, is there more that we can do? So as a board member now, that's where the conversation I'm having with Mark is. How big is big enough? What are you excited about? What outcome is enough for the blood, sweat and tears that you've

Mark King:00:41:40

Yeah. Yeah.

Mark Phillips:00:41:41

organization? And those are really, those are privileged conversations to have, right? A lot of founders don't get to that point, but it gets us really excited and it's worth noting, Mark King, that we've now put, two additional tranches of capital into this organization. So. Fairly quickly Yes. One was a little bit smaller. And then, just, just three weeks ago, we put in additional $750,000,

Mark King:00:42:05

usually people will tell a story about, going to the first board meeting and they'll flip to the third page of some memo,

Mark Phillips:00:42:11

Mm-hmm.

Mark King:00:42:12

and there's the big aha moment. Have there been any big, negative surprises that, once the deal closed.

Mark Phillips:00:42:20

Uh. Yeah. That is such a visceral comment you just made. Gosh. Um, what is it about that first born meeting mark? It is, it is a doozy, isn't it? Oh boy. Um, the biggest, you know, the biggest aha, the biggest frustrations have been in product development with this company. Um. It comes back to team, you know, I, the the right team, both internal and there were some external resources that were supporting. It just was not the right team. And so that has required some hard decisions on the leadership team's part. Um, you know, getting the right people on the bus and the right people in the right seats. But I feel really encouraged by the willingness that Mark Feinberg has shown make difficult decisions. That is, that sounds so easy in practice, but when you're in the middle of it and people have shown you loyalty and they've been there since the start, or whatever story that you've got in your own mind and whatever narrative you've told yourself, making the right decision that might hurt at the time, but is right for the overall stewardship of that organization is really tough to do. But Mark has shown a, a willingness, a propensity, and a courage those decisions. So yeah, that was. I remember that first board meeting. Yeah. The, the product development was slower than we wanted. It had already created delays in, in getting the product to mar to market, but then as it was in market, we weren't able to make updates there. Just all these delays. Right. And what was interesting is that's kind of the inverse. I think a lot of times what we see is product development's going great. We're shipping all these new features and yet we can't find new customers. That's really like, I would much rather have, Hey, the product isn't working, but the customers are like. Scrambling for this thing. Right. They're desperate to have it in their hands. I'd much rather have that version of the story than is great, but we can't seem to find any revenue. It's, goes back to the old saying, you could have the greatest idea in the world, but if you don't have a distribution mechanism, if you don't know how to sell it, like you're dead in the water.

Mark King:00:44:14

So as you're sitting here today, thinking about kind of the over performance, what is next on the horizon? Are you guys thinking quick exit, thinking another round. Where's everybody's heads at at this point?

Mark Phillips:00:44:28

Yeah. I mean, the are high. You know, those are fun board meetings. We like those board meetings. I mentioned, we've made a few more investments. The one we just had is effectively a series A. He's achieved certain, performance metrics that have warranted a Series A. It was really internal mark, which is cool. One of the things I love about our methodology as investors, where we talk about that founder outcome is we build relationships where these founders get to a point where they're like, you are the firm and team I want to continue doing business with, and that's happened time and time again where companies in our portfolio. Jump outta the gate real fast, and then they need more capital to meet customer demand and instead of going back out to the market, they come to us. That's incredible. That's in, those are incredible opportunities to, to take an additional stake in these organizations. I think where we are right now is let's have a great 2026. continue seeing that growth. I think it's too early for acquisition conversations. Inevitably, those are gonna come. I've gotten probably half a dozen private equity firms reaching out to me directly saying, Hey, congrats on NQS, would love to talk about it. And I politely decline, because ultimately, and I say this and all sincerity, it's not my decision, I'm a steward. I'm a supporter of what Mark is doing. I will tell him exactly what I think, exactly what I think, and then I will honor him and allow him to make the right decision because this is the thing that he took on a lot of risk to build this thing. And it's ultimately his decision to make. So I say that in, in a way that like, yeah, I am a board member and I have a vote in what we'll do. And I'll exercise that vote to my full extent. But I think that's such a different aspect of who we are at 11 tribes of like, I don't know more about NQS than Mark Feinberg. He breathes, eats, sleeps, this thing, right? And I get to think about it a couple hours a week and support him, and then I'm onto the next portfolio company. So that's an important disposition for us. I'll tell Mark Feinberg precisely what I think and I do think this has a ton of potential and is gonna create a lot of value for a lot of people.

Mark King:00:46:17

One other thing I'm curious about, you've mentioned the incumbent several times. Any competitive reaction from the incumbent?

Mark Phillips:00:46:28

So, I don't mind sharing their name. They're a big public company. You know, this is like a, a Reddit review. You know, I'll tell everybody how we feel about 'em. It's a company called E sso. I don't even know what that stands for. Uh, it might not stand for anything, but the website, isso.com. And if you go, you can see, I'm looking at it right now, mark. They have a column for EMS, fire Hospital Government Research. Those are all the different categories they're a part of. And if you scroll on each of those, you'll see they've got another 10, 15 different category categories below. So they do a little bit of everything, right? there hasn't been a response yet, and I think we're. is actually something we've talked about at the board level, right? Like we don't wanna poke the bear, so to speak. But I will tell you that mark Feinberg has brought over some technical resources from ESO. So people are starting to realize that maybe they're not on the right ship, and they're looking for an organization that's going to build with care in a way that builds a product that is really gonna delight the customer. So, no, no, uh, no noise quite yet, but I certainly suspect that, um. At some point, maybe this year, a conversation between us and their leadership is gonna come to fruition.

Mark King:00:47:37

Raises another strategic question, because that is one route. I mean, do you guys think strategically about. Broadening the offering within the hospital or taking that kind of core technology and finding maybe other places where it would be a similar, I mean, I'm trying to think of places that are similar to ERs and I can't think of one off the top of my head.

Mark Phillips:00:47:58

It's a good question. And the answer is more the former, the platform itself is pretty unique and bespoke to trauma. Um. But what's interesting is as you start to land and expand, there's more opportunities even within trauma. So it comes back to this vertical idea here, right? Like there's a verticalization that can occur where it's like, we're not just the platform that allows you to log and, and make sure all the codes are in place, but we are also the platform that is helping with transactions. also the platform that is helping you, process insurance claims. So you can start to think about what are all the transactions that are happening through this registry, trauma registry, software platform, and then how can we continue to make ourselves a more meaningful part of each of those transactions? without getting into much more detail than that, that is certainly where Mark is, his mind is going, that gets really attractive as well, right? I mean, the business is gonna do great just on a software subscription model, but if he can move it into a place where. We're now actually on a transaction by transaction basis, benefiting from each of those. That takes this business to a whole nother category in terms of its potential.

Mark King:00:49:06

Mark, I appreciate you taking this deeper on NQS. Let's zoom back a little bit. What's next for 11 tribes? You have closed fund two, which in the venture world is a huge milestone. So congratulations on that. But what's, the agenda for 2026?

Mark Phillips:00:49:21

Yeah, well, uh, you're right. This fund two is a big deal and, we're grateful and humbled and honored to be stewarding that capital. The end of last year and early this year, we're in a almost like a team scaling mode, mark. We just, we hired someone to help on the sourcing side. I mentioned him a little while ago. Keegan, probably right when this podcast goes live, we're hiring an analyst to join Isaac, a gentleman named Jonathan who's gonna help on the diligence side. 'cause we're seeing a lot of deals and it's quite a burden, in a good way, but. The, Rally cry for this year is to, find and fund the companies that we wanna make a part of, fund Two's portfolio. got, like I said, 14, the goal is 25, give or take in total. So we'd like to be pretty fully deployed out of Fund two over the course of the next, probably 12 to. 14, 16 months. So that's a deal ish a month. And given how much we underwrite, I talked about that process, that's requires intentionality and pace. So that's always really exciting. I'm just about culture and building all of these component culture pieces into our firm as much as we encourage the founders we work with to build it into theirs. I love that stuff. So if anyone wants to talk about it, gimme a shout. And then, the big bogey, and this is kind of the world you submit yourself to when you're a fund manager, is the next fund. You know, i've never been more convicted about the quality of our thesis than I am today. I've always appreciated the why, but to have this what, and to to have a really defined strike zone in terms of the kinds of deals that get us excited, those deals are only increasing in frequency as founders, entrepreneurs, people who have been in industry and now are realizing AI can solve a really meaningful problem for them. They're gonna be building more and more companies over the course of the next decade. and and I wanna be a part of those. I really, really, do. So, fund threes, uh, you know, 12 to 18 months

Mark King:00:51:11

Yeah,

Mark Phillips:00:51:12

But you know what it takes to get a fund off the ground mark that requires a lot of foundational work that probably begins, uh, you know, sometime later this year you know, I'll say I, I, and maybe it's good or bad, I'm not sure, but I love, I. actually love fundraising and you know me well enough to know that's not surprising. But, the 11 tribe story is not, it's not a normal venture story. It's very personal to who I am and it's very integrated with my faith. And so I feel like when I pitch, it's actually an opportunity for me. To share how my faith has impacted the journey that I've had as an entrepreneur, and what's, more would I wanna do with my time? How, what else would I wanna be doing with my time? That gets me so excited. I feel so blessed to be able to do the work. And so the idea of another fundraise is something that actually deeply energizes me

Mark King:00:51:57

you mentioned getting in touch. What is the best way to learn more about 11 tribes?

Mark Phillips:00:52:01

Our website talks about all our deals. We've got every single founder on there. We put pictures of the founders, not just logos of their companies. 'cause that's who we are. We care about them as people. So check that out and, and take a look at NQS and, you know, dig into Mark Feinberg's company. And then if you wanna reach out to me, LinkedIn's a great place to find me. And Mark, I love your, your audience. So they can just have my email and reach out to me directly. It's just mark, MARK at. 11 tribes one. One tribes vc. So we'd love to hear from any entrepreneurs, anyone else that you know. wanna see the handshake, shoot me a note, I'll, I'll pass it to you. We're very open-handed with that thing. Everyone should have their own philosophy of partnership. Everyone should. And so if you wanna use mine as a template, if you wanna use that as a foundation to build your own, great do it.

Mark King:00:52:41

Mark, I really appreciate your open handedness and open sourcing The culture building stuff that you guys do. 'cause I think you guys are on the leading edge of that, and it's great to be able to talk about it. So I appreciate you taking the time.

Mark Phillips:00:52:52

Great to be here, mark. Thanks so much.

undefined:00:52:55

I hope you've enjoyed my conversation with Mark Phillips of 11 tribes. Mark is, as you can tell, if you've made it this far, a venture capitalist that thinks a little bit differently than most of the industry. As I mentioned, mark does have a podcast. If you made it all the way to the end, you must be a lover of podcasts. His, podcast is called Masters of Resilience. He co-hosts that with Ryan Seger and they talk to all kinds of folks who have been through the highs and lows of. The business, life investing, life entrepreneurship, and really dig into this question of what makes a resilient founder and a resilient business person so strongly encourage you to check out Masters of Resilience with Mark and his co-host, Ryan Seger. He is also super active on LinkedIn. Again, it's just Mark Phillips, on LinkedIn and if you wanna reach out to him via email, that's mark at 11 Tribes vc. Again, it's Mark with a k and 11 not spelled out. So it's one one tribes.vc. You can get all these links, and additional information in the show notes, and you can find those@impactinvestingroadshow.com slash 11 tribes. If you've enjoyed this conversation and maybe learned a little something, could you do me a personal favor and think of a friend that you know would really enjoy this or learn a lot from this episode and forward it to them? Would really appreciate that. They will appreciate it and I certainly appreciate it as well. So, until next time, I am your host, Mark King, reminding you that if you wanna move the impact to needle. You gotta step on the gas.