Navin Chaddha
- Mayfield is nearly doubling its investing pace this year, while other firms are pulling back.
- The longtime VC firm just announced a new $250 million seed fund focused on AI.
- In tough economic times, the firm's leader, Navin Chaddha, believes it's a prime time to invest.
Slow and steady wins the race. That has essentially been Navin Chaddha's mantra since he took over the reins at venture-capital stalwart Mayfield Fund in 2009.
Since then, Mayfield's bar to make a deal with a startup has been incredibly high. On average, of the thousands of companies it meets with annually, Mayfield only makes investments in about 0.4% of them. That's lower than the acceptance rate of startup accelerator Y Combinator, which accepts around 1.5% to 2% of companies that apply for its program.
But it's a strategy that's worked for Mayfield, helping it deliver consistent returns for its LPs, and a big part of the reason why that prudence has made its LPs continue to commit capital for the firm's funds. Earlier this year, the firm announced a total fundraise of $955 million for two new funds — its biggest fundraise thus far — and recently announced a new $250 million AI-focused fund that will draw from the firm's current funds and the new capital raised.
That's in stark contrast to many VCs and their firms like Tiger Global, TCV and Insight Partners, which are tempering their lofty fundraising goals by lowering their targets.
The fresh capital has put Mayfield in a position to lean in and do more investments than it typically does. The firm does about eight investments per year and when markets get too frothy, Mayfield actually pulls back on investing – like it did in 2021 when it only invested in seven new startups, Chaddha said. But now that the market has been on shaky footing the past year with talks of a looming recession, Mayfield's leader, Navin Chaddha, says the firm is probably on pace to do up to 15 new investments this year. Last year, when most of the venture industry pulled back on funding startups, Mayfield made 12 new investments.
"So that's what we do, when things get out of whack, and the whole industry follows this way, we follow that way. We are just contrarian," Chaddha said.
And the timing really couldn't be better for Mayfield, as the hype in AI – particularly generative AI – has hit an apex in the VC industry.
"We think this is the time to lean in," Chaddha said.
The Mayfield leader – who's made successful bets on companies like Hashicorp, Lyft and Poshmark, and has been featured on Forbes' Midas list almost every year he's been at the helm of the firm – firmly believes that the greatest companies are created during tough economic times.
That's what makes the current period such an enticing time to invest in new companies, particularly in AI. These companies could usher in the next wave of tech dominance. Mayfield is actually doubling-down on that assertion with its new AI-focused seed fund, and hiring expert industry investor, Vijay Reddy, to head it up. Reddy focused on AI at Clear Ventures and before that, at Intel Capital, making investments in companies like Sambanova, DataRobot and Joby.
Chaddha told Forbes that he was interested in a wide range of AI companies, from application software to semiconductors, while Reddy said he was excited about co-piloted AI applications, which keep humans as part of the decision making process, and companies building AI trust and safety infrastructure tools.
Mayfield's new AI focus comes amid an inflection point for the venture-capital industry. Many saw this AI wave coming, while others are now trying to catch up. Over the past few months, several firms have announced new AI-focused funds or set aside capital to focus on the sector: Wing Venture Capital just closed a $600 million fund, Bessemer earmarked $1 billion, and Sequoia is now pulling out all the stops to get in on AI startup investments.
For years, Mayfield had kept tabs on AI startups like MindsDB, which was relatively unknown and cast aside by some investors just five to six years ago. But once the startup began to get investor interest, Mayfield was ready to pounce and make an investment. With a dedicated $250 million AI seed war chest, Mayfield is now prepared to lean in even more.
"We believe that AI will emerge as our teammate and that the Gen.AI wave will create many iconic companies," Chaddha said in a press release.