AAF Management Crosses $100M in AUM in Five Years After Closing Second Early Stage Focused Fund
By: Kyle Hendrick
Tags: Early Stage, Vc Funding, Tiger Global, VC, Andreessen Horowitz

A Sample of AAF Management Ltd. Portfolio Founders

AAF Management Crosses $100M in AUM in Five Years After Closing Second Early Stage Focused Fund Kyle Hendrick Follow Jul 23 · 14 min read

📍 Great Falls, Virginia

We are thrilled to announce the launch of AAF Management’s second early stage focused venture fund. The close of our second fund catapults the firm’s assets under management (AUM) to over $100M following the success of our flagship first fund, AAF I, which closed in 2017.

AAF Management Ltd. was founded in 2016 focused exclusively on venture capital investments. Today we manage capital across a variety of diversified, direct, secondary, and bespoke venture strategies.

We have made over 120+ direct early stage investments as a firm and are exposed to over 550+ venture backed companies throughout the entirety of our extended portfolio. To-date, we have had over 7 public market listings, realized 12 exits, and hold early stage positions in over 15 unicorns. Our first fund has consistently ranked in the top decile, in terms of DPI, and top quartile, in terms of net TVPI, for its vintage benchmarked on Cambridge Associates’ data on over 1500+ US-based venture capital funds.

It is also extremely important to note that over 40% of our firm’s investment selections have been into diverse teams with a minority or women founder-led business. We are proud this is well above industry norms and occurred organically without a pre-set mandate to invest in diverse teams.

Our active fund I portfolio companies have raised over $2.8B in less than 5 years. Notable transactions include the following:

This represents 5 mega rounds ($100M+) in the past four quarters leading up to our Fund II closing.

While we are still in our infancy, reaching the $100M AUM milestone was a time for reflection. We are excited to continue to develop the firm and continue to support founders and emerging managers on their start up journey.

Where We Started

When we look back to 2016 with the launch of our first oversubscribed $25M fund there are a few founding principles and mandates that the partners developed while shaping a new institutional venture capital firm.

Principle #1

The first was that we were exclusively looking for investments that had achieved “venture backing” or had already raised or were currently raising from firms we knew and respected. Today we have over 50+ venture and private equity firms with more than $1B in AUM leading rounds of investments into our portfolio. We’ve invested alongside over 800 prominent VCs, private equity firms, corporate venture arms, strategics, accelerators, angels, and many others in the venture ecosystem.

Principle #2

The second was that the team needed to be uniquely suited to execute on the vision of the business. Today, we could not be prouder of the quality of founding teams we have backed. Talent the firm is backing include former founders or c-suite executives hailing from former companies like Linkedin, Salesforce, Twitch, CA Technologies, Qualcomm, SpaceX, Goldman Sachs, Morgan Stanley, Bell Labs, Uber, PlutoTV, and many other notable brands.

Principle #3

The third was that we needed to be “early stage” investors with our entry investments. Today, 47% of our deals have been entered into the pre-Seed or Seed round and 38.3% into “pre-Series A” totaling over 85% of our deals being entered into prior to their Series A funding.

With these three guiding principles we set out to build a sector agnostic, stage specific “generalist” venture capital firm. The natural evolution of our firm in the first three years produced interest from limited partners to launch our second fund, AAF II — Yasi Ventures, to continue to deploy capital into to our pipeline of venture-backed opportunities.

Before we cover the portfolio construction strategy, it is important to note the diversified investor base our firm has built with over 95 limited partners across all of our investment vehicles and products. These investors have been hand-selected as value providers to the entirety of the portfolio. Our broader investor network is highly differentiated in the VC ecosystem and has been a core driver to winning competitive deals in a crowded venture market.

Our Investors

Today, we have a diverse group of institutions, corporates, family offices, multifamily offices, and high net worth individuals that we manage capital on behalf of. These investors include San Francisco-based venture specific fund of funds, partners from multi-billion dollar Silicon Valley-based venture firms, knighted hedge fund managers in London, former central bank governors from the UAE, multiple successful venture-backed entrepreneurs, publicly traded investment entities, foundations, professional athletes, beauty entrepreneurs, board members of industry conglomerates in financial services, media, healthcare, construction, and a wide range of other strategic limited partner investors to benefit our broad portfolio.

It is also noteworthy that AAF Management Ltd is typically over 10% of the direct capital allocations in our investment vehicles to align our interest with our investors and we are proud to have “skin in the game” well above the norms of 1% typically injected from the managing partners. We are invested in our own growth and this is a testament to the belief of our strategy.

How We Got Here

While Fund I is not even half way through its 10-year term, we can now reflect on what nearly five years of developments have produced from this core strategy and how the partners have used their extensive network to divide the venture asset class into sub-categories (health, fintech, enterprise software, deep tech, proptech, ecommerce & retail, consumer tech, gaming, augmented reality, blockchain and more) and systematically raised capital from strategic partners in each of these sectors to compliment as value add prospects.

Portfolio Construction: Deep Dive

Financial technology or “FinTech” has been a standout sector for the firm with the recent influx of capital into some of our earliest deals from 2016–2017 resulting in outsized venture returns for our investors. Current’s $220M Series D from Andreessen Horowitz marks our entry position up 33x. We initially invested in Current’s Series A round with a pre-money valuation of $15M in a round led by QED Investors in 2017.

Flutterwave’s recent $170M Series C led by Tiger global marks our entry position up over 28x on the back of them also receiving a prestigious ranking in Time’s 2021 100 Most Influential Companies. We invested in Flutterwave at a $10M valuation upon their graduation from Y Combinator in 2016.

These two companies alone represent over 160M transactions worth over $10B annually and growing.

The subcategories of the sector we are invested in include but are not limited to embedded finance, banking as a service, digital brokerages, neobanks, robo advisors, savings AI, financial planning & accounting software, blockchain as a service, blockchain remittance, lending, credit, mortgage servicing, auto finance, construction finance, and real estate finance tools with certain aspects of financial services baked into their extensive platforms.

Our Fintech value proposition for winning these “off market” early stage investment opportunities is due to our deep ties to large customer cohorts via our limited partnership base. Our investors include Board of Director representation on over 10 regional banks in the GCC which is highly differentiated and typically hard to access as U.S.-based entrepreneurs. In addition, we have deep access to sovereign wealth funds, central banks, institutional investors, retail banks, venture capital firms, insurers, and other strategic partners.

Our portfolio companies went on to raise proceeding rounds of financing by world class venture capital firms and financial institutions investing after us in later rounds including Citi Ventures, American Express Ventures, Wellington Management, Tiger Global, Visa, Mastercard, DST, FIS, Lending Club, MassMutual, Harvard Management, QED Investors, Avenir Growth Capital, Sapphire Ventures, and Andreessen Horowitz to name a few.

We are also fortunate to have exposure to some of the most exciting private market (for now) fintech companies in the world including Robinhood, M1 Finance, Figure, Ramp, Blend, eBroker (Hong Kong), BharatPE (India), and others. We are proud to have portfolio exposure through Clocktower Technology Ventures, Social Leverage, Conversion Capital, March Capital, and Amplo VC which all have fintech specific mandates for either the entirety of the fund or for a significant portion of their strategy.

Healthcare investments make up roughly another 22% of our firm’s direct investments. Our founding partners stem from long standing successful healthcare related businesses and families generating natural strategic value propositions from the origination of our firm. Furthermore, we have brought on limited partner strategic capital from groups and families related to pharmaceutical manufacturers, leading MENA pharmaceutical distributors, hospital management companies, vaccine manufacturers, retail pharmacy owners, and other strategies in the broader healthcare space.

Some of our early exits and fastest growing companies have been in the broader healthcare space with Hello Doctor.’s exit to GoodRx (NASDAQ:GDRX), Medumo’s exit to Philips Healthcare (NYSE:PHG), and HelloHeart’s Series C financing from IVP on the back of massive growth and adoption with major customers including pharmacy giant CVS. Kleiner Perkins backed Kinsa and their smart thermometers have been the feature startup story of 2020–2021 with their insights and monitoring data with partnerships like the NBA, Fidelity, and many others. Their YoY growth is staggering given their readiness in response to COVID-19.

The subcategories our investments cover remote patient monitoring, smart devices, cognitive behavioral therapy software solutions, at home testing kits, addiction cessation therapy, medical assistant AI, liquid biopsy diagnostics, computational biology, wellness supplementation, telemedicine, pregnancy monitoring, and others.

Our portfolio companies are backed by world class venture capital firms and healthcare entities including Pfizer, Amgen, Thermo Fisher, GE Capital, Philips, Founders Fund, Andreessen Horowitz, DCVC, IVP, Khosla Ventures, Kleiner Perkins, FirstMark Capital, Presight Capital, Resolute Ventures, BlueRun Ventures, StartUp Health, Wonder Ventures, Box Group, to name a few.

Our firm is also exposed to a number of later stage growth deals including K Health, Cue, Insitro, Parsley Health, xBiome (China), and others at the Series B and Series C stages. We have portfolio exposure through Sky9 Capital, Marcy Venture Partners, HOF Capital, and Amplo each covering healthcare in their respective fund strategies.

Our software as a service or “SaaS’ businesses makes up roughly 32% of the direct portfolio. A number of our earliest investments have seen recent momentum swings in terms of next stage financing from the early stage in light of the massive digital adoption taking place globally. Marc Andreessen famously stated “software is eating up the world” in 2011 and this has remained true almost 10 years later.

A few exciting highlights from our SaaS portfolio include both Kite and Agolo’s Series A financings from Microsoft’s Venture arm, M12 - Microsoft’s Venture Fund and Tara.ai’s Series A financing from Aspect Ventures and Slack Fund, the venture arm of Slack.

More recently, we were also proud to join from our Fund 2 former cofounder and CTO of LinkedIn, Eric Ly’s new company, KarmaCheck, in their seed round led by Accel Partners and Index Ventures.

The subcategories we cover in the enterprise software market include team productivity and management tools, AI assisted code automation, extract transform & load platforms, no-code/low-code analytics and dev tools, SOC 2 compliance automation, background checks as a service, blockchain as a service, and more.

Our software companies are also backed by some of the leading venture capital firms and experts in the domain including Microsoft, Slack, Google Ventures, Salesforce Ventures, Trinity Ventures, Shasta Ventures, Accel Partners, Index Ventures, Aspect Ventures, SV Angel, 8VC, Cowboy Ventures, Bullpen Capital, and many others.

We are exposed to more great businesses via our secondary and fund strategies which include companies like Spark Cognition, Forter, Postscripts, Rescale, and others via 1984 VC, March Capital Partners, Quiet Capital, and others with enterprise software mandates.

Deep Tech we define as requiring PhD level expertise to execute on the vision of the particular company. In many instances this covers artificial intelligence, robotics, bioscience, genetics, and other “edge” technologies. Deep Tech makes up roughly 12% of the direct portfolio.

We have made some notable investments in the space including Synthego which received over $100M in Series D funding from Founders Fund, Osaro AI which received $30 Series C funding from Nomura Capital, and Peptilogics which recently raised a $30M Series B led by Presight Capital and Thiel Capital.

The subcategories we cover in Deep Tech include but are not limited to robotics, deep learning, artificial intelligence, computational biology, live attenuated vaccines, CRISPR automation applications, RNA uses (mRNA, sRNA, cfRNA), diagnostics, therapeutics, advanced manufacturing, photonics, LIDAR, 4D sensing, micro transfer processing, nanotechnology, 3D printing & manufacturing, electric engine aviation and more.

Our companies are backed by leading Deep Tech investors including DCVC, 8VC, Lux Capital, Founders Fund, Thiel Capital, Presight Capital, Future Shape, Intel Capital, Prelude Ventures, iRobot Ventures, BMW i Ventures, AME Cloud Ventures, and many others.

Property technology and real estate related technology we broadly define as “PropTech”. Our firm has a truly diversified network of foreign direct investors focused on US commercial and residential real estate ranging from sovereign wealth funds to publicly traded investment entities in the GCC to family office allocators. We also have many investors who are infrastructure partners either involved in the construction, materials, and/or the development side of the sector. We also have top ranked global property managers and developers from hotel management companies to mall developers and more. This unique and strategic base of investment dollars from strategics is systematically designed to be a full scale value provider and connector across the sub-sectors of broader PropTech.

AAF Management partners recently consulted with one of the largest sovereign wealth funds in the world on their proptech fund of funds strategy for identifying new managers and has built an impressive network of the best-in-class real estate investing venture capital firms in the process.

Some of our highlighted direct investments including DealPath which recently raised their Series B funding from Blackstone, one of the largest real estate asset managers in the world. Brace.ai raised their Series B from Canvas Ventures, Landed closed a Series A investment from Initialized Capital, Betterview raised their Series A from Nationwide Insurance, and Hearth Closed their Series B led by 8VC and Human Capital.

The subcategories we have active positions covering but not limited to mortgage servicing, home equity lending, construction lending, property management software, commercial real estate investment platforms, IoT sensing & building analytics, indoor air quality sensing & reporting, satellite imagery property data, home improvement financing, and more.

Our companies are backed by leading strategics, real estate asset managers, and venture capital firms including Fifth Wall Ventures, Brick + Mortar Ventures, JLL Spark, Metaprop, Blackstone, 8VC, Starwood Capital, LeFrak, Millstein & Co, Gaw Capital, and others.

Our ecommerce & retail portfolio has won our firm deep respect in the sector as we have developed the portfolio since 2016 that have grown into standout companies regularly featured in top publications honing in on the top direct-to-consumer (DTC) businesses and retail growth companies.

From our first fund, Tamara Mellon Brand raised a $65M Series C round led by Centricus, AuRate raised a Series A from Bluecrest Management’s Family Office, and BulkMRO closed their Series A from Ace & Co. to highlight a few.

We’ve witnessed Tamara Mellon and AuRate grow from less than $1M in sales to over $50M collectively. BulkMRO’s numbers have skyrocketed in 2020–2021 on being a trusted layer in the personal protective equipment (PPE) space and we expect it to be one of the fastest growing companies in our portfolio for 2021 with large long term contracts coming to light.

The subcategories we cover in our funds encompasses ecommerce, SKU level tracking and logistics, IoT sensors for retail, pick & pack automation and fulfillment, conversational AI, curbside pick up enabling platforms, consumer insights and engagement tools, augmented reality-based store navigation and checkout, and much more.

Our companies are backed by leading venture groups focused on ecommerce & retail including NEA, M13 Company, Khosla Ventures, Core Capital Partners, Ace & Co., Y Combinator, IKEA, and others.

Our firm has won oversubscribed deals in the sector given our extensive retail background and network of investors also in the overall ecommerce and retail sectors. Partners at AAF Management have worked with previous retail successes such as Wolfgang Puck, Five Guys, Lululemon, Under Armour, and many others.

Members of our investor base sit on the board of brands like Kate Spade, Huda Beauty, Revlon, Jimmy Choo and other notable retail oriented brands. The unique geographical alignment of our investors and consumer purchasing power from the GCC has compelled a number of retail startups to not only seek out VCs, like ourselves, with ties to the region but also partner on the business with franchisee and licensee models.

The Limited Partnership Agreement (LPA) for our first fund did not have specific language regarding tokenized investments, alt coins, and blockchain related securities which prohibited us from holding alternatives in the broader blockchain space. We have since updated our Fund 2 LPA to allow for these types of new investment vehicles. However, it is important to note we did not miss opportunities for our investor base as we were venture investors in our first fund in two leading blockchain companies, Lightyear.io and BlockApps.

Lightyear.io is the for profit arm of Stellar.org and was acquired by Insteller Inc. generating a 4x return on investment in less than 18 months. BlockApps recently raised their Series A financing with leading blockchain investors on the cap table including Consensys, Galaxy Digital, and Fenbushi Capital, among others.

We are also proud to be early investors in Genies which recently entered the Non-Fungible Token (NFT) sector to serve as an identification layer via their software development kit (SDK) for easily creating and minting NFTs. They recently raised $65M Series B from Marry Meeker’s Bond Capital valuing the company over $400M. Existing investors include NEA, Breyer Capital, CAA Ventures, Warner Music, UMG, and others. AAF Management partners were invested in the seed round at a $14M pre-money valuation.

Lastly, AAF Management recently incubated and became a co-founding investor in Mint Songs, a new music-specific NFT marketplace platform founded by our former investment associate Dwight Torculas. Dwight worked with AAF Management for nearly 4 years focused on our blockchain and fintech strategy before raising a $1.25M pre-seed round led by Freestyle VC. Other venture investors in Mint Songs include Goodwater Capital, East West Ventures, and Michael Lazerow (Founder of Buddy Media & Velvet Sea Ventures) who recently led SuperRare’s Series A round.

We are very proud to have one of our own personnel transition to becoming a venture backed founder. Freestyle VC and Goodwater Capital are both over $1B in AUM and have previous investments that include Spotify, Facebook, Airtable, Patreon, Wag, and many others.

Broadly across the blockchain space, we’ve been able to leverage unique elements of our firm’s network such as helping Stellar Lumens (XLM) receive Sharia Compliance and onboard to the largest crypto exchange in the Middle East, BitOasis, which is also a partner level angel investment from an AAF Management partner. We’ve also introduced leading remittance players, crypto specific funds & investors, banks and integration partners across the spectrum.

Investors in our portfolio companies include Galaxy Digital, Consensys, Blockchain Capital, Coinbase Ventures, NEA, Box Group, Trinity Ventures, Foundation Capital, and others.

Going Forward

With the closing of our second fund and a massive start to 2021 with over $850M already being invested into the direct portfolio in the first 6 months alone we are ecstatic to continue to build out the portfolio with new investments and following on into our best performers. For a comprehensive look at our portfolio please visit www.aaf.vc/investments

If you are a venture fund with deal flow or a start up with a pitch please feel free to reach out to the partners directly.

We Are Hiring

Lastly, we are hiring for a few positions. If you know any talented young curious minds who you think would be a fit with our firm, please send them our way. You can reach us at admin@aaf.vc

All the best and big thanks to anyone who read this far!

-AAF Management Ltd Partners