The Unlikely Journey of One Of Silicon Valley’s Fastest-Growing Debut Venture Funds
In the rapidly evolving landscape of venture capital, few stories are as remarkable as that of NFDG—a $1.1 billion fund that achieved a stunning 4x return in just two years (at least on paper) — only to see its founders recruited by Meta in one of the most unusual acqui-hire arrangements in Silicon Valley history.
And it happened so fast. The deal was done in less than a week — and the NFDG website is already down:
- June 29: Gross leaves Safe Superintelligene … which he co-founded and is NFDG’s crown jewel investment
- This week: Zuckerberg announces Friedman joining Meta
- July 4 Friedman confirms on X he’s started at Meta
- July 5: News breaks about the tender offer
- Today: NFDG website is down
The Founding: When GitHub’s CEO and Y Combinator’s Partner Team Up
NFDG was founded by two of Silicon Valley’s most respected figures: Nat Friedman, former CEO of GitHub, and Daniel Gross, formerly a partner at Y Combinator. The duo launched their venture fund in 2023, raising an impressive $1.1 billion in their debut fund—a testament to their combined reputation and track record in the tech industry.
Friedman brought deep experience in developer tools and enterprise software from his time leading GitHub through its acquisition by Microsoft and subsequent growth. Gross contributed his expertise in early-stage investing and startup acceleration from his tenure at Y Combinator, where he helped identify and nurture some of the accelerator’s most successful companies.
The AI Focus: Betting Big on Artificial Intelligence
From the outset, NFDG positioned itself as an AI-focused venture fund, anticipating the massive wave of innovation that would sweep through the artificial intelligence sector. This strategic focus proved prescient as the fund launched just as the generative AI boom was beginning to reshape entire industries.
Portfolio Deep Dive: The Investments That Drove 4x Returns
Safe Superintelligence: The Crown Jewel
The fund’s most spectacular success story is undoubtedly Safe Superintelligence, co-founded by Daniel Gross himself alongside Ilya Sutskever (former OpenAI co-founder and chief scientist). The company’s valuation trajectory tells a remarkable story:
- Previous round: $5 billion valuation
- Current valuation: $30 billion (as of 2024)
- Growth multiple: 6x increase
- NFDG’s role: Early investor through Gross’s direct involvement
Safe Superintelligence represents the intersection of NFDG’s investment thesis and its founders’ direct operational involvement—a unique advantage that few venture funds can claim.
The AI Voice Revolution: ElevenLabs
ElevenLabs represents NFDG’s bet on the future of AI-powered voice technology. As one of the leading platforms for AI voice generation, ElevenLabs has positioned itself at the forefront of the creator economy’s evolution toward AI-enhanced content production.
The company’s technology enables:
- High-quality voice cloning and synthesis
- Multi-language voice generation
- Real-time voice conversion
- Enterprise-grade voice solutions
ElevenLabs has benefited from the broader trend toward AI-generated content and has seen significant adoption among content creators, podcasters, and enterprises looking to scale their audio production capabilities.
Meeting Intelligence: Granola
Granola tackles the massive market opportunity in meeting productivity and transcription. As remote and hybrid work became permanent fixtures of the corporate landscape, tools that can intelligently process and summarize meetings have become increasingly valuable.
The company’s focus on meeting transcription and analysis puts it in direct competition with established players like Otter.ai and Zoom’s native transcription features, but it operates silently at the OS level.
Financial Infrastructure: Basis
Basis represents NFDG’s investment in the accounting and financial software space. As businesses increasingly demand more sophisticated financial tools that can integrate with modern tech stacks, Basis serves the growing market of digitally-native companies that need more than traditional accounting software can provide.
The Advisory Powerhouse
NFDG assembled an impressive advisory board that reflects both the fund’s ambitious scope and its founders’ network:
John Collison – Stripe Co-founder
Collison brings invaluable experience in building and scaling financial infrastructure. As co-founder of Stripe, he understands the challenges of creating technology that can scale to serve millions of businesses worldwide. His involvement suggests NFDG’s portfolio companies benefit from insights into product development, scaling challenges, and navigating complex regulatory environments.
Matt Huang – Paradigm Co-founder and Managing Partner
Huang’s presence on the advisory board brings deep expertise in both traditional venture investing and the emerging crypto/blockchain space. As a co-founder of Paradigm, one of the most successful crypto-focused investment firms, Huang provides NFDG with insights into the intersection of AI and blockchain technologies, as well as experience managing large-scale investment portfolios.
The Meta Acquisition: An Unprecedented Move
In a deal structure rarely if ever seen in Silicon Valley, Meta offered to acquire up to 49% of NFDG’s holdings through a tender offer—effectively allowing limited partners to cash out at current net asset value. This arrangement is particularly unusual because:
Why This Matters for LPs
- Immediate liquidity: LPs can cash out at full NAV, which is rare in today’s market where secondary transactions typically occur at significant discounts
- Flexibility: LPs can choose how much of their stake to sell
- Premium exit: The ability to exit at NAV rather than at a discount represents significant value
The Unique Structure
The deal structure addresses several complex considerations:
- No governance rights: Meta won’t have information rights or board seats in portfolio companies
- No cap table visibility: Meta won’t appear on ownership documents, maintaining portfolio companies’ independence
- Limited partner structure: Meta’s investment comes through LP stakes rather than direct equity holdings
Performance Analysis: How NFDG Achieved 4x Returns
Deployment Strategy
With approximately half of the $1.1 billion fund deployed, NFDG has achieved remarkable capital efficiency. The 4x appreciation on deployed capital suggests:
- Average deployed: ~$550 million
- Current portfolio value: ~$2.2 billion
- Unrealized gains: ~$1.65 billion
Key Success Factors
1. Founder-Market Fit Both Friedman and Gross brought deep domain expertise to their investment decisions. Friedman’s experience with developer tools and enterprise software complemented Gross’s background in early-stage company development.
2. AI Timing The fund’s launch in 2023 coincided perfectly with the generative AI boom, allowing NFDG to ride the wave of increased valuations and investor interest in AI companies.
3. Operational Involvement Unlike traditional VCs, NFDG’s founders remained operationally involved with their investments, with Gross co-founding Safe Superintelligence and both founders actively advising portfolio companies.
4. Quality Over Quantity Rather than making numerous small bets, NFDG appears to have focused on a concentrated portfolio of high-conviction investments, allowing for better support and higher potential returns per investment.
The Transition: What Happens Next?
NFDG’s Future
The fund has announced it will not make new investments, focusing instead on managing its existing portfolio through its remaining team. Its website as of this writing is … down. Offline.
Portfolio Company Management
The existing portfolio will be managed by NFDG’s remaining team, with guidance from the newly formed management company advisory group including Collison and Huang. This structure aims to maintain continuity for portfolio companies during the transition.
LP Considerations
Limited partners face an interesting decision: cash out at current NAV through Meta’s tender offer, or remain invested in a portfolio that has demonstrated exceptional performance but will no longer have active management from its star founders.
Industry Implications
The New Model of Venture Capital
NFDG’s story represents several evolving trends in venture capital:
1. Operator-Investors: The success of founder-VCs like Friedman and Gross reinforces the value of operational experience in venture investing.
2. Corporate VC Integration: Meta’s acquisition approach suggests new models for how large corporations can access venture capital insights and talent.
3. LP Liquidity Options: The tender offer structure could become a template for providing LP liquidity in high-performing funds.
Lessons for Emerging Managers
NFDG’s rapid success offers several lessons for emerging fund managers:
- Domain expertise matters: Deep knowledge in specific sectors can drive outsized returns
- Network effects: Strong industry relationships can accelerate deal flow and portfolio support
- Timing: Understanding and anticipating market cycles can significantly impact returns
- Concentration: Focused portfolios can outperform diversified approaches when conviction is high
A Venture Capital Success Story for the AI Age
NFDG’s journey from launch to 4x returns to acquisition by Meta represents one of the most remarkable venture capital stories of the AI era. The fund’s success validates the importance of domain expertise, operational involvement, and strategic timing in venture investing.
For the broader venture capital industry, NFDG’s story raises important questions about the future of fund management, LP liquidity, and the relationship between corporate venture capital and traditional VC funds. As AI continues to reshape industries, the NFDG model—combining deep technical expertise with operational involvement—may become increasingly valuable for investors seeking exposure to cutting-edge technology companies.
The fund’s transition to Meta marks the end of one chapter but potentially the beginning of another, as Friedman and Gross bring their investment insights and portfolio relationships to one of the world’s largest technology companies. For the portfolio companies they leave behind, the challenge will be maintaining the momentum achieved under their guidance while benefiting from the continued support of world-class advisors and the remaining NFDG team.
In an industry where success is often measured in decades, NFDG achieved remarkable returns in just two years—a testament to the power of expertise, timing, and the transformative potential of artificial intelligence.
The New Calculus: When Even Billions Aren’t Enough
NFDG’s story bears striking parallels to another recent Silicon Valley transition: Garry Tan’s departure from Initialized Capital to become CEO of Y Combinator. Both cases represent successful fund managers leaving behind proven investment vehicles to take on operational roles at the heart of the innovation ecosystem.
Tan’s move from running a successful early-stage fund managing well over a billlion dollars with top-tier returns to leading the world’s most influential startup accelerator signaled a shift in how top-tier investors view the risk-reward equation. Similarly, Friedman and Gross’s transition from managing a fund that quadrupled $1 billion in value to joining Meta’s AI initiatives suggests something profound about the current moment in technology.
In the Age of AI, even quadrupling a $1 billion fund in two years may be less lucrative and compelling than being in the game itself.
This phenomenon reflects several key dynamics:
The Scale of AI Opportunity
The potential rewards from being directly involved in building transformative AI systems may dwarf even exceptional venture capital returns. When companies like OpenAI, Anthropic, and others are potentially worth hundreds of billions of dollars or even $1 trillion or more, the upside of being an operator rather than just an investor becomes mathematically compelling.
Access vs. Returns
Traditional venture capital success is measured in multiples and IRR, but the AI revolution offers something potentially more valuable: direct access to and influence over the technologies that will reshape civilization. For investors who have already proven they can generate returns, the opportunity to shape the future may be more attractive than optimizing for the next fund’s performance.
The Acceleration Imperative
The pace of AI development has created a unique moment where being on the sidelines—even as a successful investor—may feel like missing the most important technological transition of our lifetimes. The window for influencing the direction of AI development is narrow, and the stakes are existential.
Network Effects in the AI Ecosystem
Both Y Combinator and Meta represent nexus points in the AI ecosystem. Y Combinator touches hundreds of AI startups in their earliest stages, while Meta has the resources and user base to deploy AI innovations at unprecedented scale. For investors like Tan, Friedman, and Gross, these platforms offer leverage that individual fund management cannot match.
The NFDG story thus becomes more than just a venture capital success story—it’s a signal about where the smartest money and talent believe the real action will be in the coming decade. When the potential for direct impact in AI development outweighs even extraordinary financial returns, we may be witnessing a fundamental shift in how Silicon Valley’s top performers allocate their careers.
The venture capital landscape continues to evolve rapidly, and NFDG’s story represents just one example of how traditional fund structures and investment approaches are adapting to the realities of the AI age. As the most significant technological transition since the internet unfolds, we can expect to see more top-tier investors trading exceptional returns for the opportunity to be operators in the AI revolution itself.
