Venture firm Neo disclosed that its 2021 fund has achieved a 6.5x net multiple on invested capital, a rare outperformance for its vintage that highlights a widening gap between top-tier and median venture returns.
"The top 5% is racing away from the middle. That’s happening in startups and it’s happening in funds,” said Peter Walker, who runs the insights team at Carta. “The really fast acceleration of company growth is limited to a very narrow slice, a more narrow slice than it was in 2021.”
The San Francisco-based firm’s 2021 fund, Neo 2.0, raised $150 million and saw its gross value grow to approximately $1.18 billion by the end of December, according to audited financials. This performance starkly contrasts with the median multiple of 1.04 times for the 2021 vintage, as tracked by Carta. The firm's initial combined investment of $4 million in portfolio companies Cursor and Kalshi is now valued at about $1.4 billion, per Neo's estimates.
The results underscore the power of early-stage access to outlier companies, a strategy that could fuel broader investment interest in AI and deep-tech. This performance is likely to increase investor demand for Neo's future funds and may influence capital allocation across the private markets as limited partners chase top-quartile returns.
Founded in 2017 by Ali Partovi, Neo operates a hybrid model that integrates an early-stage venture fund, a startup accelerator, and entrepreneurship programs for college students. The firm emphasizes technical proficiency, using coding tests to evaluate founders and students. This merit-based approach has led to a diverse portfolio, with over half of Neo's capital backing companies with a female or underrepresented minority co-founder, according to the firm.
A prime example is Kalshi, a prediction-markets operator whose co-founder Luana Lopes Lara was named the youngest female self-made billionaire by Forbes. Neo led Kalshi's seed round in 2020. Similarly, Neo backed coding tools company Cursor, whose co-founders participated in Neo's college program before launching their startup.
The firm's ecosystem extends beyond capital. Students from the "Neo Scholars" program often join portfolio companies, creating a valuable talent pipeline. Kalshi, for instance, sourced its chief technology officer and several engineers from the program. This network effect has allowed Neo to pull ahead of other venture firms, said Michael Kim, founder at Cendana Capital, an investor in Neo.
Neo’s portfolio of approximately 160 startups includes other high-growth companies such as coding company Cognition, fintech Ramp, drug discovery AI firm Chai Discovery, and HR software business Deel. "Community is becoming more important than capital," Partovi said, highlighting the firm's competitive moat.
This article is for informational purposes only and does not constitute investment advice.
