In its short existence, the young venture firm has notched two high-profile exits in Oculus VR and RelateIQ and has become a more active investor in 2014.
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.
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.
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:
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.
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.
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.
- 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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