Formation 8, a San Francisco-based venture-capital firm, has raised $500 million for its second fund to invest in early-growth technology companies.
The firm, started in 2012, has made 28 investments from its first $448 million fund. Those include Oculus VR Inc., the maker of virtual reality goggles, which was bought by Facebook Inc. earlier this year for about $2.3 billion. Formation 8 also invested in big data startup RelateIQ, which Salesforce.com acquired in July for $390 million.
“This fund was oversubscribed three times, but we decided to stick to raising $500 million, because this is the ideal size for a fund investing in early-growth tech companies that have a product at market or ready to market,” said Jim Kim, one of four general partners in the firm he co-founded with Brian Koo, Joe Lonsdale and Gideon Yu.
Formation 8’s competitive advantage is its business development capacity in Asia, where the firm has offices in Seoul, Beijing, Shanghai and Singapore. Koo, who led the firm’s two investments in Oculus, helped the Irvine, California-based company partner with Samsung Electronics Co. The South Korean smartphone maker supplied the screen that eliminated users’ dizziness problems with the original Oculus product.
“We invested in Oculus’s second round because it solved that issue,” said Koo, a member of the founding family of Seoul-based LG Electronics Inc.
Formation 8 recently invested $100 million from its second fund in Korea’s Yello Mobile, a platform for digital businesses, which values the startup at $1 billion.
Investor Shirish Sathaye also joined the firm as a general partner, while semiconductor industry veteran and longtime venture capitalist Pierre Lamond became a special adviser to the team.
The closing of Formation 8’s new fund comes after venture-capital fundraising in the first three quarters of 2014 totaled $23.8 billion, on track to be the most since 2001, according to a report by law firm Fenwick & West LLP. Venture-capital investments in the same period totaled $37 billion, the highest since the late 1990s dot-com bubble.
“There’s certain sectors of tech that are in a bubble,” Kim said. “As a fund, we tell investors we are not going to bid up but we will help them grow their business by bridging it with global market opportunities.”