In this interview, Joe Lonsdale explains his natural transition from building companies like Palantir to venture capital, noting that his experience advising and investing in about 15 former colleagues highlighted the need for a centralized effort, leading him to create a fund. He describes raising Formation 8, a $448 million first‑time fund—the largest of its kind since 1999—positioning it as a sizable but still relatively modest vehicle compared to peers. Lonsdale outlines his investment focus: while he values seed‑stage involvement for ecosystem support, the firm concentrates on Series A and Series B rounds, with occasional seed deals. The primary criterion at the seed stage is top engineering talent and strong ownership alignment, with macro‑level sector themes considered later. He emphasizes collaboration with other seed investors and notes the fund’s recent portfolio composition (12 Series A, 4 Series B, 2 Series C).
Why venture capital? What made you switch?
Well, I kind of was already naturally doing it. I think, again, the reason Palantir and Atapar were so successful is we had some of the very, very most talented people working with us, and a lot of people who were working with us, after 4 or 5, 6 years, they go off, they build something. And so I found myself advising about 15 companies of people I'd worked with before in some form, and I'm helping all these companies, I'm investing a little bit in some of them, and I realized to really centralize my efforts and to really be the most help and be able to express my opinions on these things I need to build a team, and the only way to do that and centralize it is really to build a fund. So I kind of fell into that naturally, and I'm on my 4th one now, so I've just been doing it for a while. It seems like the right thing to do.
I read somewhere that— was it the first fund— that it was one of the largest funds raised here in the Valley, or?
It was one of the larger first-time funds. It was small. All my friends had these $500 million and billion-dollar funds. I ended up raising— it's called Formation 8, so we raised $448 million. The target was $400 million, and we went over. And I thought that was a pretty good size, because it was smaller than other funds. And it turns out, I guess, it was the biggest first-time fund since 1999, which was surprising, because I guess people don't usually raise big first-time funds.
Have you always stayed in seed stage, Series A? What's your specialty?
I'd be a little too busy if I was at the seed stage with that much money. But I think seed investing is really important in order to see what's going on, in order to support the ecosystem. So we tend to try to be very collaborative at the seed stage. I have a lot of friends who are seed investors we work with, but we're mostly focused on Series A and Series B. Our favorite thing— I think our last fund I just did was 12 Series As, 4 Bs, and 2 Cs. We do a couple seed investments per month. On the seed side, our number one focus is just top engineering talent. If you've brought together a handful of great engineers, and they all have decent ownership in the company, and they feel like they're part of the company, I'm very interested in that company. Now, that said, we have certain areas, like we talked about in the macro sense, that we think are places to build companies right now. But I think on the very early side, I care most about talent versus anything, because you can always change your focus a little bit.
So would you say that's the main difference? At the seed stage, it's mostly about the team, which is what probably you guys have heard from the past few days. It's all about the team, the team. What happens when you grow a little bit more?
Yeah, so exactly. By the time you're at Series B, it's like the team matters and the company culture matters a lot, but metrics are really important. By the time you're at Series B, it's about the business model. It's about the metrics. It's about the CAC-to-LTV or whatever it is, depending on the space you're in. I think later stage, it has to be about the metrics of a business. That's just how these things work. Series A is a really fun place to invest. People who are not from Silicon Valley or not from this culture, or not from the tech culture, I mean, you don't have to be from here. You can be from any tech culture. But people not with tech cultures have a lot of hard time with Series As, because you end up having to value a lot of things that are just not metrics. You can't value metrics for Series As most of the time. You're valuing the team, you're valuing the team's culture, you're valuing the early feedback from the industry, you're valuing the potential of the idea, and you may be valuing very early signs around metrics and stuff like that. I think Series A investing is the hardest, but also the highest risk-reward if you do it really well. That's kind of the classic area that the top 10 or 15 funds in the Valley really target. I think if you're at a family office, let's say your mom or dad made a ton of money, and you really want to be investing in venture, and you haven't built a company yourself, you should probably do Series B, C, D, because those are things that are a lot easier to learn and measure and understand they're actually working. If you do Series A, you might just have lots of zeros. But if you're in this culture and you really understand it, or at least Let me trick yourself into thinking you understand it. Like, I think Series A is kind of a fun area.
