While the venture capital ecosystem has been flooded with a glut of new micro venture capital firms, it hasn’t seen many new funds the size of Formation 8. Founded by a team including Palantir co-founder Joe Lonsdale with a focus on connecting entrepreneurs with its network in Asia, Formation 8 was founded in 2011 and announced its first fund of $448M in April 2013.
And in its short existence, not only has the young venture firm participated in over 30 deals but it’s also notched two very high-profile exits including unicorn acquisition Oculus VR for $2B by Facebook and RelateIQ‘s acquisition by Salesforce.com for as much as $390M. The firm has also garnered quite a bit of buzz with Fortune Magazine calling Formation 8 “the hottest VC since Andreessen.”
So using CB Insights data and visualizations, we wanted to take a look at Formation 8’s financing strategy, stage strategy, investment syndicates and more.
Note: 100% of the visualizations and data you see in this analysis are directly from the CB Insights platform’s Investor Analytics tool. No Excel was used or harmed.
Formation 8 Gets Busy in 2014
In 2014 year-to-date, Formation 8 has participated in 12 deals totaling over $328M, just several deals away from the total number of investments it made in all of last year. Ranging from shopping apps to ed tech software to artificial intelligence, Formation 8 has placed bets on a diverse set of companies. The jump in funding in May was due to Formation 8’s participation in an $80M Series A to Oscar Health Insurance, which has quickly emerged as one of the most well-funded companies in New York and part of NY’s digital health boom.
A few of Formation 8’s other recent notable deals include:
- Wish‘s $50M Series B which valued the firm at $400M. Formation 8 also co-led Wish’s $19M Series A round announced in April 2014. Wish connects with Chinese and other non-Western sellers so makes sense given Formation 8’s cross-border focus.
- Vicarious Systems‘ $40M Series B round. Vicarious is among the companies in the growing artificial intelligence ecosystem.
- Addepar‘s $50M Series B led by David Sacks and Valor Equity Partners. Addepar is the wealth management tech firm co-founded by none other than Formation 8 investor Joe Lonsdale so perhaps not surprising to see the firm’s participation here.
Below is a graph of Formation 8’ monthly investment participation (deals & funding) over time from their profile on CB Insights.
Exits
As previously mentioned, Formation 8 has notched two exits, RelateIQ and Oculus VR in its very early existence. The firm first invested in Oculus at the Series A stage when the firm was valued at just $30M pre-money and first invested in RelateIQ at the Series B stage when the firm was valued at $100M and so both look to be early wins for the young venture firm.
Geographic Strategy – California dominates
While Formation 8 launched with an aim of linking startups with Asian conglomerates, the majority of those startups it hopes to connect with the east are based in California. In fact, over 3/4ths of Formation 8’s deals have gone to California-based companies and mostly to those in the Valley including RelateIQ, OpenGov, and Mode Analytics to name a few. Outside of California, Formation 8 has invested in firms including Rhode Island-based voltage optimization firm Utilidata and New York-based Oscar and real estate tech startup Hightower.
The chart below highlights Formation 8’s U.S. activity and financings within California since the start of 2012.
Stage Strategy
Since its inception, Formation 8 has gotten busy at the seed-stage, which have taken nearly a third of its deal activity. Another third of Formation 8’s deals have gone to the Series B stage including Context Relevant, Kidaptive and Illumio. The firm has largely shied away from the late-stage thus far.
The table below gives details on the firm’s deals in each stage:
New vs. Follow-On Investments
Given its youth, most of the firm’s investments are new. Among the investments Formation 8 has followed-on include its winners Oculus VR and RelateIQ as well as Wish and OpenGov.
The chart below from CBI’s Investor Analytics shows the proportion of Formation 8’ new investments vs. follow-on investments in each quarter for the past two years.
Deal Size
While Formation 8 has largely kept its investing focus to the Series B stage and earlier, it has not been afraid to participate in rounds deploying significant amounts of funding. Among those large deals are Oculus VR ($75M), Oscar ($80M), RelateIQ ($40M) and Vicarious ($40M), the latter two of which bumped up average deal sizes in Q1 2014. Below is a graph from the Investor Analytics tab on CB Insights that shows Formation 8’s average deal size and median deal size by quarter.
Syndicates
Formation 8 has done seven different deals together with Andreessen Horowitz including Illumio, Simpler, LearnSprout and OpenGov. Two other firms have been prominent syndicate partners of Formation 8 including Thrive Capital (Formation 8 is an investor in Joshua Kushner’s Oscar) and Founders Fund, which may stem from Lonsdale’s connection with Peter Thiel, whom he worked with previously.
Among the firms that Formation 8 seems to look to for dealflow are SV Angel, Felicis Ventures and Founders Fund’ seed firm FF Angel.
Notes:
- 100% of the visualizations in this Teardown are from Investor Analytics. No MS Excel necessary.
- Visualizations on CB Insights are all interactive so you can click and see underlying transaction details.
- Visit Formation 8‘s to check out these visualizations on your own.
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