How tiny Mubadala-backed AAF is winning VC deals in some of the hottest startups

It’s been astir a decennary since Omar Darwazah and Kyle Hendrick launched AAF Management and its archetypal money of $25 cardinal successful 2017. 

Rather than racing to dramatically summation their assets nether absorption similar galore funds person successful caller years, the partners person intentionally kept their money sizes small, adjacent arsenic their estimation and returns person grown. 

Their latest conveyance — a $55 cardinal early-stage hybrid fund, dubbed the Axis Fund, that precocious closed — brings the Washington-based task firm’s full assets to astir $250 cardinal crossed 4 funds. The steadfast raised a $39 cardinal Fund II successful 2021 and a $32 cardinal fund-of-funds concern conveyance successful 2017 for a prime radical of its constricted partners.

“Running a $50 cardinal money is precise antithetic from moving a $500 cardinal fund,” wide spouse Darwazah said successful an interrogation with TechCrunch. “We’ve seen that people ample money sizes tin disrupt GP-LP alignment arsenic it becomes a relation of management-fee procreation versus carried-interest generation, and that’s not a crippled we privation to play.”

Unlike emblematic VC firms that put straight into startups, AAF is adopting elements of a fund-of-funds exemplary wherever it invests portion of its superior into a portfolio of emerging funds successful summation to backing startups.

With this 4th fund, AAF plans to put successful emerging managers’ archetypal oregon 2nd funds (typically nether $50 million) and their astir promising portfolio companies from pre-seed to pre-IPO, the partners said.

The steadfast is allocating astir 80% of its superior to startups and 20% to emerging funds, blending the 2 into what it calls a “one-stop capital-formation partner” for founders and money managers alike.

So far, the Axis Fund has backed 25 pre-seed and seed-stage task funds, on with 5 nonstop bets connected early-stage and maturation startups.

“We’ve recovered that the richest dataset of private-market companies astatine the earliest stages of their enactment implicit the past decennary is accessed lone done LP checks successful emerging managers,” said Hendrick, the firm’s different wide partner.

This dual money benignant strategy has granted AAF entree to galore promising startups. The steadfast is an aboriginal capitalist successful Current, Drata, Flutterwave, Jasper, and Hello Heart.

Similarly, done the funds wherever it’s an LP, AAF holds indirect vulnerability to different unicorns, including Mercury, Deel, Retool, and much precocious AI firms specified arsenic Motion, Decagon and Eleven Labs done its web of seed-fund LP positions successful firms similar Leonis Capital, Wayfinder Ventures, and Quiet Capital (the steadfast founded by Lee Linden, who is exploring a akin two-pronged strategy with erstwhile Founders Fund GP Brian Singerman for a caller fund).

The eight-year-old task steadfast claims to person vulnerability to astir 800 venture-backed companies launched betwixt 2021 and 2025 done these underlying managers.

L-R: Kyle Hendrick and Omar Darwazah [general partners and managing directors]Image Credits:AAF Management

With this approach, AAF besides focuses little connected hands-on assistance with hiring oregon merchandise for portfolio companies and much connected connecting founders with later-stage superior from its web of constricted partners. That’s a work that becomes particularly adjuvant erstwhile a startup begins raising maturation rounds.

“I’d accidental wherever we typically adhd the astir worth to a founder’s journey, particularly successful the aboriginal phase, is done our task network,” said Hendrick. “That means we tin inject you straight into 45 progressive task funds wherever we’re LPs. It’s instant organisation into their ecosystems.”

At the aforesaid time, AAF serves arsenic a conduit betwixt organization investors — particularly successful the Gulf — who often similar diversified task vulnerability without managing dozens of nonstop relationships.

Abu Dhabi’s Mubadala, respective U.S., European, and MENA household offices, GPs from starring U.S. plus managers, a multi-billion-dollar U.S. task firm, and a publically traded institution are backing this 4th fund, the steadfast said.

Darwazah and Hendrick came to task from antithetic backgrounds. Darwazah, who antecedently worked successful firm concern and backstage equity successful the Middle East, has spent years bridging Gulf superior with U.S. startups. Hendrick, a erstwhile entrepreneur who besides worked astatine the UAE Embassy successful the U.S. and astatine a household bureau successful Abu Dhabi, brings an operator’s lens to AAF’s earliest deals.

Across its 4 funds, AAF has made 138 nonstop investments and backed 39 unsocial emerging managers, with 20 portfolio exits totaling astir $2 cardinal successful aggregate value.

Those exits see TruOptik, MoneyLion, Even Financial, Portfolium, Prodigy, BetterView, Lightyear, Trim, HeyDoctor, and Medumo. At slightest six publically traded companies person acquired its portfolio companies including TransUnion, Giant Digital, GoodRx, and Affirm.

The steadfast says this each adds up to immoderate of its erstwhile money vintages ranking successful the apical decile successful presumption of nett TVPI for their respective vintages, according to Cambridge Associates and Carta data.

“Our strategy allows america to place awesome from sound and summation our probability of backing outliers — money returners, 10x cash-on-cash companies, and seed-to-unicorn investments,” said Darwazah.