December 3, 2014 / 7:16 PM / 5 years ago

Formation 8 raises $500 million for second venture fund

SAN FRANCISCO, Dec 3 (Reuters) - Formation 8, the U.S. venture capital firm known for backing virtual-reality company Oculus VR, said on Wednesday it has raised $500 million for its second fund, less than two years after raising $448 million for its first one.

The fund, created by startup whiz kid Joe Lonsdale and colleagues Brian Koo and Jim Kim, specializes in technology companies with aspirations of doing business in Asia.

“We like to place contrarian bets,” Koo said in an interview on Tuesday, citing hardware, agriculture technology, and energy as areas from which many other venture firms shy away. In recent year, software companies have attracted the most dollars, according to the National Venture Capital Association, as well as the most buzz in venture capital.

Oculus, which relies on hardware in the form of a 3D headset for video games, is a case in point. Facebook Inc bought the company earlier this year for $2 billion.

Formation 8 uses connections in Asia to help companies in their portfolio, as it did with Oculus. Koo, whose cousin is chairman of Korean conglomerate LG Electronics Inc helped connect Oculus with another Korean company, electronics giant Samsung Co Ltd. Samsung now helps Oculus develop its video screens.

Working with Formation 8 can help their U.S. portfolio companies gain the same entree to Asia they might gain with a strategic investment by a large Asian business, without the drawback of putting off other potential Asian partners, Koo and Kim argued.

They plan to invest about 15 percent of the new fund into Asian-based startups.

“That’s our competitive advantage, and we want to build on that,” said Kim, about Formation 8’s Asia know-how. The firm has business-development offices in Beijing, Shanghai, and Singapore.

One of the new fund’s first investments is in YelloMobile, the Korean mobile phone-based shopping and media company.

About 20 percent of the fund’s investors are Asia-based, with the rest largely U.S.-based institutions and individuals, Kim and Koo said.

The firm has attracted several alumni of Menlo-Park based investment firm Khosla Ventures, including Kim, new partner Shirish Sathaye, and special adviser Pierre Lamond, known for his pioneering work in semiconductors. (Editing by Jeffrey Benkoe)

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