It’s been almost a decade Omar Darwaza And kyle hendrick launched aaf management And its first funding in 2017 was $25 million.
Rather than rushing to dramatically increase their assets under management like many funds have done in recent years, the partners have deliberately kept the size of their funds small, even as their reputation and returns have grown.
Their latest vehicle — a $55 million early-stage hybrid fund called the Axis Fund, which recently closed — brings the Washington-based venture firm’s total assets across four funds to about $250 million. The firm raised a $39 million Fund II in 2021 and a $32 million fund-of-funds investment vehicle in 2017 for a select group of its limited partners.
“Running a $50 million fund is very different from running a $500 million fund,” general partner Darwaza said in an interview with TechCrunch. “We have seen that inherently larger fund sizes can disrupt GP-LP alignment because it becomes a function of management-fee generation versus carry-interest creation, and that’s not the game we want to play.”
Unlike typical VC firms that invest directly in startups, AAF is adopting elements of the fund-of-funds model, where it invests a portion of its capital in a portfolio of emerging funds in addition to backing the startups.
With this fourth fund, AAF plans to invest in emerging managers’ first or second funds (typically less than $50 million) and their most promising portfolio companies from pre-seed to pre-IPO, the partners said.
The company is allocating about 80% of its capital to startups and 20% to emerging funds, combining the two into what it calls a “one-stop capital-formation partner” for founders and fund managers.
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To date, Axis Fund has backed 25 pre-seed and seed-stage venture funds, as well as made five direct stakes in early-stage and growth startups.
“We have found that the richest datasets of private-market companies in the early stages of their formation over the past decade have been accessed only through LP screening in emerging managers,” said Hendricks, the firm’s other general partner.
This dual fund-type strategy has given AAF access to many promising startups. The company is an early investor in Current, Drata, Flutterwave, Jasper, and Hello Heart.
Similarly, through funds where it is an LP, AAF holds indirect investments in other unicorns, including Mercury, Deal, Retool and, more recently, AI firms such as Motion, Decagon and ElevenLabs, which are led by Lyonnais Capital, Wayfinder Ventures and Quiet Capital (a firm founded by Lee Linden, who has a similar two-way deal with former founding fund GP Is exploring the strategy) through its network of seed-fund LP positions in companies like. Brian Singerman for a new fund).
The eight-year-old venture firm claims to have investments in around 800 venture-backed companies launched between 2021 and 2025 through these underlying managers.
With this approach, AAF focuses less on hiring for portfolio companies or practical help with product and more on connecting founders from its network of limited partners to later-stage capital. This is a service that becomes especially helpful when a startup starts scaling up its growth phase.
“I would say where we typically add the most value to the founder’s journey, especially early stage, is through our venture network,” Hendricks said. “This means we can get you directly into 45 active venture funds where we are LPs. It’s instant delivery into their ecosystem.”
At the same time, AAF acts as a conduit between institutional investors – particularly in the Gulf – who often prefer diversified enterprise exposure without having to manage dozens of direct relationships.
Mubadala of Abu Dhabi; several US, European and MENA family offices; GPs from leading US asset managers; a billion-dollar American venture firm; And a publicly traded company is backing this fourth fund, the firm said.
Darwaza and Hendricks came to the venture from different backgrounds. Darwaza, who previously worked in corporate finance and private equity in the Middle East, has spent years connecting Gulf capital with US startups. Hendricks, a former entrepreneur who has also worked at the UAE Embassy in the US and a family office in Abu Dhabi, brings an operator’s perspective to AAF’s early deals.
Across its four funds, AAF has made 138 direct investments and supported 39 unique emerging managers, with 20 portfolio exits totaling approximately $2 billion.
Those exits include True Optic, MoneyLion, Even Financial, Portfolio, Prodigy, Betterview, Lightyear, Trim, HeDoctor and Medumo. At least six publicly traded companies have acquired its portfolio companies, including TransUnion, Giant Digital, GoodRx, and Affirm.
The company says this all adds up to some of its past fund vintages ranking in the top decile in terms of net TVPI for their respective vintages, according to Cambridge Associates and Carta data.
“Our strategy allows us to identify the signal from the noise and increase our likelihood of spotting outliers – fund returners, 10x cash-on-cash companies and seed-to-unicorn investments,” Darwaza said.
