Former Benchmark investors Victor Lazarte and Chris Frederickson are launching an $800 million AI-focused venture capital fund called Diffusion, aiming to back early- and growth-stage AI startups by leveraging their successful track records. This collaboration marks a significant and unusual partnership in venture capital, positioning Diffusion as a major player amid a competitive market dominated by mega funds.
Former Benchmark investors Victor Lazarte and Chris Frederickson are joining forces to raise an ambitious $800 million AI-focused venture capital fund called Diffusion. This move is notable as it comes less than a year after both had left Benchmark to raise smaller, individual founder-led funds. Lazarte, who exited Benchmark in July 2025 after backing companies like Mercor and Applied Compute, initially raised $200 million for his own fund, VL. Now, he aims to scale up significantly by partnering with Frederickson to target early- and growth-stage AI startups with this much larger fund.
Chris Frederickson began his investing career at Benchmark before moving to hedge fund CO2, where he supported companies such as Instacart, Chime, and Scale AI. Last July, Frederickson raised $175 million for his own fund focused on growth-stage AI startups, backing firms like legal platform Harvey and search engine Perplexity. The collaboration between Lazarte and Frederickson is unusual in venture capital, especially since they did not overlap during their time at Benchmark, making their joint fund a unique proposition for investors.
The $800 million fund would be one of the largest first-time venture capital raises of the year, standing out amid a market dominated by mega funds. Earlier in the year, major firms like Andreessen Horowitz, Thrive Capital, and Sequoia Capital raised multi-billion dollar funds, capturing the majority of the $60 billion raised globally in venture capital during the first quarter. Despite this competitive landscape, Lazarte and Frederickson’s proven track record in identifying promising AI startups is expected to attract significant interest from limited partners.
Lazarte’s background as a Brazilian gaming entrepreneur turned venture capitalist has been marked by successful investments, including leading a $30 million round for AI training company Mercor in 2024, which saw its valuation soar from $250 million to $10 billion within a year. Similarly, Frederickson’s early investment in Harvey in December 2023 has paid off as the company reached an $11 billion valuation by March 2026. These successes underscore their ability to spot and nurture high-growth AI companies.
The partnership between Lazarte and Frederickson, while surprising to some given their separate paths and individual reputations, represents a bold bet on the future of AI startups. Their combined expertise and track record could make Diffusion a major player in the venture capital space, especially as AI continues to attract substantial investment. For more detailed coverage, readers are directed to Ian Martin’s article on Forbes.com.