Emerging AAF Backed by Mubadala Navigates VC Landscape

It has been nearly ten years since Omar Darwazah and Kyle Hendrick founded AAF Management, launching their first fund of $25 million in 2017. Unlike many funds that aggressively expand their assets, AAF has opted for a more measured approach, maintaining smaller fund sizes while enhancing their reputation and returns. Their latest initiative, the $55 million Axis Fund, recently closed, bringing the firm’s total assets to approximately $250 million across four funds.

Strategic Fund Management

AAF Management has taken a unique path in the venture capital landscape by intentionally keeping its fund sizes small. General Partner Omar Darwazah emphasized the differences between managing a $50 million fund versus a $500 million fund. He noted that larger fund sizes can disrupt the alignment between general partners and limited partners, shifting the focus from generating carried interest to management fees. This strategic choice allows AAF to maintain a more hands-on approach with its investments, ensuring that they remain aligned with the interests of their investors.

The firm’s latest fund, the Axis Fund, is designed to invest in emerging managers’ first or second funds, typically under $50 million, as well as promising startups from pre-seed to pre-IPO stages. AAF plans to allocate around 80% of its capital to startups and 20% to emerging funds, positioning itself as a comprehensive capital-formation partner for both founders and fund managers.

Diverse Investment Strategy

The Axis Fund has already made significant strides, backing 25 pre-seed and seed-stage venture funds and five direct investments in early-stage and growth startups. This dual strategy allows AAF to tap into a rich dataset of private-market companies at their earliest stages, which General Partner Kyle Hendrick believes is only accessible through investments in emerging managers.

Through this approach, AAF has gained early access to several successful startups, including Current, Drata, Flutterwave, Jasper, and Hello Heart. Additionally, the firm holds indirect stakes in unicorns like Mercury, Deel, and Retool through its limited partner positions in various seed funds. AAF claims to have exposure to approximately 800 venture-backed companies launched between 2021 and 2025, showcasing the breadth of its investment reach.

Connecting Founders with Capital

AAF Management focuses less on hands-on operational support for its portfolio companies and more on facilitating connections between founders and later-stage capital. This strategy becomes particularly valuable as startups begin to raise growth rounds. Hendrick highlighted that AAF adds significant value to founders by leveraging its extensive venture network, which includes 45 active venture funds where they are limited partners.

The firm also serves as a bridge for institutional investors, particularly in the Gulf region, who prefer diversified venture exposure without the complexities of managing numerous direct relationships. Notable backers of the Axis Fund include Abu Dhabi’s Mubadala, various family offices from the U.S., Europe, and MENA, as well as a multi-billion-dollar U.S. venture firm.

Proven Track Record and Future Outlook

Since its inception, AAF Management has made 138 direct investments and supported 39 unique emerging managers, achieving 20 portfolio exits with a combined value nearing $2 billion. These exits include companies like TruOptik, MoneyLion, and GoodRx, with at least six of its portfolio companies being acquired by publicly traded firms.

The firm asserts that its investment strategy has led to some of its previous fund vintages ranking in the top decile for net total value to paid-in capital, according to data from Cambridge Associates and Carta. Darwazah believes that their approach enhances the likelihood of identifying high-potential investments, including those that could yield significant returns, such as seed-to-unicorn opportunities.

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