Longtime venture capitalist Shirish Sathaye has quietly joined early-stage investor Cervin Ventures as a general partner. This move marks a significant shift in his career, after previously serving as a general partner at the embattled venture firm Formation 8.
Formation 8’s Demise and Sathaye’s Departure
Sathaye was a key member of Formation 8, which was co-founded by Palantir’s Joe Lonsdale, Brian Koo (a scion of the Koo family, owners of the electronics giant LG), and former Khosla GP Jim Kim. However, in 2015, the firm announced that it would not raise a third fund and would begin winding down operations.
Despite only being at Formation 8 for one year, Sathaye had already made significant investments through the firm’s sophomore fund. His previous portfolio includes notable companies such as Nutanix, Samsung-acquired Grandis, McAfee-acquired Solidcore Systems, cybersecurity startup Vectra Networks, and data storage provider Panzura.
Conflict Among Founding Partners Leads to Demise
The downfall of Formation 8 was largely attributed to conflict among its founding partners. Lonsdale quickly raised $425 million for a spin-off fund called 8VC; Koo brought in $357 million for Formation Group, while Kim followed up with a $200 million fund called Builders.
Sathaye, on the other hand, had grown tired of the "bigger is better" mentality and opted to leave the business of big VC. He began making angel investments and advising startups at Cervin Ventures, a pre-Series A VC fund focused on the enterprise sector.
Cervin Ventures: Focused on Early-Stage Startups
Cervin Ventures, led by GPs Preetish Nijhawan and Neeraj Gupta, has been actively investing in early-stage startups. Sathaye’s new role will focus specifically on the security, mobile, cloud, and data verticals.
With a fund size of $1 million to $2 million, Cervin Ventures is committed to making more informed investment decisions through its smaller fund structure. This approach aligns with Sathaye’s long-held belief that "smaller funds make better decisions" due to fewer people being involved in the decision-making process.
Smaller Funds: A Better Approach to Venture Capital
Sathaye attributes his departure from Formation 8 to the firm’s increasingly large fund size and the deployment of a "spray and pray" strategy. He believes that startups have more access to capital than ever before, thanks in part to recent innovations like Google Cloud and Amazon Web Services.
According to Sathaye, companies can now bring products to market quickly and reach their customers with much less money. This has led him to conclude that smaller funds will get better cash-on-cash returns due to the reduced funding requirements of startups.
A Shift in Venture Capital Strategies
Sathaye’s move to Cervin Ventures marks a significant shift in venture capital strategies. By focusing on early-stage startups and adopting a more targeted approach, Sathaye aims to make more informed investment decisions and drive better returns for his investors.
In an interview with TechCrunch, Sathaye stated: "With AWS, companies can bring products to market quickly and they can reach their customers with much less money. If you look at it just from a returns profile, the smaller funds will get better cash-on-cash returns simply because companies don’t need that much money to be successful."
Conclusion
Shirish Sathaye’s move to Cervin Ventures as a general partner marks a significant change in his career trajectory. His departure from Formation 8 and subsequent shift towards smaller VC funds reflects his growing dissatisfaction with the "bigger is better" approach.
By joining Cervin Ventures, Sathaye aims to leverage his expertise and experience to drive better returns for his investors while making a more meaningful impact on the startup ecosystem.
