New VC Firms Emerge From Ashes of Silicon Valley’s Formation 8

  • Jim Kim is said to seek $200 million for an early-stage fund
  • Two other Formation 8 partners start firm Winter Ventures

Venture capitalists from Formation 8, a much-hyped young firm that broke up unexpectedly last year, are going their separate ways. They’re now preparing to introduce several new VC funds to back technology startups that appeal to their various interests.

Jim Kim, a longtime venture investor who worked at Khosla Ventures and CMEA Capital before Formation 8, is raising about $200 million for a fund that will specialize in early-stage investing, according to two people briefed on the plans.

Meanwhile, Shirish Sathaye and Chris Kelley, two other Formation 8 partners, are teaming up to open a firm called Winter Ventures, said the people, who asked not to be named because the plans are private. T.J. Rylander, who has spent a decade at the Central Intelligence Agency’s venture arm In-Q-Tel, will join Sathaye and Kelley in the venture, the people said. The firm is seeking to raise about $150 million, they said.

Sathaye and a spokeswoman for Kim declined to comment.

The new firms are benefiting from favorable conditions for VCs amid disappointing results in other asset classes, such as bonds. Venture funds raised a total of $22.5 billion in the first half of 2016, the strongest showing in years but far short of the dot-com era of 2000, according to the National Venture Capital Association, a trade group. However, the number of funds from new VC firms fell 35 percent in the first half of this year compared with the same period last year.

Kim started Formation 8 in 2011 with Joe Lonsdale, a founder of data analysis startup Palantir Technologies Inc., and Brian Koo, an investor with expertise in Asia. By 2014, Formation 8 had raised nearly $1 billion. It had some big wins, including virtual reality headset maker Oculus VR, which Facebook Inc. bought for $2 billion, and RelateIQ, which Inc. acquired for $390 million. But the team disbanded last year amid diverging interests among partners.

Lonsdale went off to start Eight Partners. The firm, now known as 8VC, plans to raise $420 million for its first fund, according to regulatory documents filed in February. 8VC is a backer of transportation company Hyperloop One. The startup, which is trying to build a tube-based human transport system, was sued this week by former employees, alleging they were mistreated and that the company has been mismanaged. Lonsdale, who sits on Hyperloop One’s board, was among those named as defendants in the suit.

Koo is working on his own investment vehicle, F8 Asia Growth, to back mature private companies in Asia. He intends to raise $400 million, according to a securities filing last year.

Lior Susan, another Formation 8 partner, is now managing partner at Eclipse Ventures. The firm raised a $125 million fund last year primarily to invest in hardware companies. Pierre Lamond, the onetime Fairchild Semiconductor executive who went on to become a VC at Sequoia Capital and Khosla Ventures before joining Formation 8, is a member of the Eclipse Ventures investment team.

The proliferation of new VC firms started by Formation 8 partners harks back to the activity after EBay Inc. acquired PayPal in 2002. A group of early executives known as the “PayPal mafia” included Lonsdale himself, as well as Facebook backer Peter Thiel and Greylock Partners’ Reid Hoffman. They are among the most powerful VCs in Silicon Valley today.