How rising Mubadala-backed AAF is successful VC offers in a few of the hottest startups | TechCrunch

It’s been virtually a decade since Omar Darwazah and Kyle Hendrick launched AAF Administration and its first fund of $25 million in 2017. 

Reasonably than racing to dramatically improve their belongings underneath administration like many funds have lately, the companions have deliberately stored their fund sizes small, at the same time as their repute and returns have grown. 

Their newest car — a $55 million early-stage hybrid fund, dubbed the Axis Fund, that lately closed — brings the Washington-based enterprise agency’s whole belongings to roughly $250 million throughout 4 funds. The agency raised a $39 million Fund II in 2021 and a $32 million fund-of-funds funding car in 2017 for a choose group of its restricted companions.

“Running a $50 million fund is very different from running a $500 million fund,” basic companion Darwazah stated in an interview with TechCrunch. “We’ve seen that naturally large fund sizes can disrupt GP-LP alignment as it becomes a function of management-fee generation versus carried-interest generation, and that’s not a game we want to play.”

In contrast to typical VC corporations that make investments immediately into startups, AAF is adopting parts of a fund-of-funds mannequin the place it invests a part of its capital right into a portfolio of rising funds along with backing startups.

With this fourth fund, AAF plans to put money into rising managers’ first or second funds (usually underneath $50 million) and their most promising portfolio firms from pre-seed to pre-IPO, the companions stated.

The agency is allocating about 80% of its capital to startups and 20% to rising funds, mixing the 2 into what it calls a “one-stop capital-formation partner” for founders and fund managers alike.

To this point, the Axis Fund has backed 25 pre-seed and seed-stage enterprise funds, together with 5 direct bets on early-stage and development startups.

“We’ve found that the richest dataset of private-market companies at the earliest stages of their formation over the past decade is accessed only through LP checks in emerging managers,” stated Hendrick, the agency’s different basic companion.

This twin fund sort technique has granted AAF entry to many promising startups. The agency is an early investor in Present, Drata, Flutterwave, Jasper, and Good day Coronary heart.

Equally, via the funds the place it’s an LP, AAF holds oblique publicity to different unicorns, together with Mercury, Deel, Retool, and extra lately AI corporations comparable to Movement, Decagon and Eleven Labs via its community of seed-fund LP positions in corporations like Leonis Capital, Wayfinder Ventures, and Quiet Capital (the agency based by Lee Linden, who’s exploring an identical two-pronged technique with former Founders Fund GP Brian Singerman for a brand new fund).

The eight-year-old enterprise agency claims to have publicity to roughly 800 venture-backed firms launched between 2021 and 2025 via these underlying managers.

With this method, AAF additionally focuses much less on hands-on assist with hiring or product for portfolio firms and extra on connecting founders with later-stage capital from its community of restricted companions. That’s a service that turns into particularly useful as soon as a startup begins elevating development rounds.

“I’d say where we typically add the most value to a founder’s journey, especially in the early phase, is through our venture network,” stated Hendrick. “That means we can inject you directly into 45 active venture funds where we’re LPs. It’s instant distribution into their ecosystems.”

On the similar time, AAF serves as a conduit between institutional traders — particularly within the Gulf — who usually want diversified enterprise publicity with out managing dozens of direct relationships.

Abu Dhabi’s Mubadala, a number of U.S., European, and MENA household workplaces, GPs from main U.S. asset managers, a multi-billion-dollar U.S. enterprise agency, and a publicly traded firm are backing this fourth fund, the agency stated.

Darwazah and Hendrick got here to enterprise from totally different backgrounds. Darwazah, who beforehand labored in company finance and personal fairness within the Center East, has spent years bridging Gulf capital with U.S. startups. Hendrick, a former entrepreneur who additionally labored on the UAE Embassy within the U.S. and at a household workplace in Abu Dhabi, brings an operator’s lens to AAF’s earliest offers.

Throughout its 4 funds, AAF has made 138 direct investments and backed 39 distinctive rising managers, with 20 portfolio exits totaling practically $2 billion in combination worth.

These exits embody TruOptik, MoneyLion, Even Monetary, Portfolium, Prodigy, BetterView, Lightyear, Trim, HeyDoctor, and Medumo. At the least six publicly traded firms have acquired its portfolio firms together with TransUnion, Large Digital, GoodRx, and Affirm.

The agency says this all provides as much as a few of its earlier fund vintages rating within the high decile by way of internet TVPI for his or her respective vintages, in response to Cambridge Associates and Carta knowledge.

“Our strategy allows us to identify signal from noise and increase our probability of backing outliers — fund returners, 10x cash-on-cash companies, and seed-to-unicorn investments,” stated Darwazah.