Business and Legal Developments | May 2024
Friends,
In last month’s newsletter, we reflected on the venture capital debt market. Following the bank crisis spurred by the Silicon Valley Bank, Signature Bank, and First Republic Bank failures, spring has ushered in a season of renewed growth across the venture capital debt market. We reviewed PitchBook’s notes on the current market’s gradual recovery and provided a statistical summary of the recovery.
With the first quarter of 2024 behind us, analysts are now taking a look at the dealmaking landscape so far this year. CB Insights has released their State of Venture Q1’24 report, showing a “mixed bag” for VC dealmaking to start the year.
Their data shows dealmaking dropping to a seven-year low in Q1. It was also the eighth straight quarter we saw a drop in equity deal volume. However, they note that several blockbuster deals contributed to a modest rebound in funding (11% QoQ), driven by generative AI and the creator economy.
Also, Pitchbook has released its Q1 Venture Monitor Report, and below are some highlights from the report.
- The first quarter of 2024 did not start on a high note for the US venture capital community. There is usually a bit of seasonality life that accompanies Q1, but with $36.6 billion invested across 3,925 deals, Q1 deal activity remained relatively on pace with the past year.
- The VC market slowdown has not shifted significantly over the past few quarters. The beginning of 2024 was met with some residual optimism, but that did not translate into meaningful growth in activity. Market headwinds continue to enforce their will on financial markets.
- In Q1, the pace of dealmaking continued to slow. Deal value dipped QoQ but was roughly the same as Q3 2023.
- At the late and venture-growth stages, where a significant portion of large deals historically take place, there has been an uptick in capital supply shortage.
- In Q1, there has been a significant drop in deal count and value at the pre-seed and seed stages. The sharp decline contrasts with trends from recent quarters, wherein pre-seed and seed activity held up relatively robustly.
- Earlier-stage companies that have been stuck at a standstill between pre-seed and seed, or between seed and Series A, may not be able to achieve the next milestone.
- On a positive note, the median pre-money valuation for venture-backed startups surfaced an upward trajectory from the 2023 annual level across the venture lifecycle, despite the overarching slowdown in deal momentum.
- Dry powder remains at an all-time high, totaling $311.6 billion, and capital continues to be deployed at a slower pace.
As always, do not hesitate to reach out if we can help you brainstorm a legal or business challenge you are facing, or if we can connect you to a potential investor, professional, or entrepreneur.
Welcome Joe Bernardi
Last month, we announced that M&A partner Joe Bernardi has joined our Boston Office in our Innovative Technology and Health Care and Life Sciences sectors. Joe joined us from Goodwin Procter in Boston.
With over two decades of experience, Joe focuses on advising private equity sponsors, as well as public and private companies, on strategic business transactions across diverse industries. He is highly regarded for his adept business acumen and ability to maintain a clear, level-headed perspective even in the most demanding situations.
Spotlight on Hellenic Innovation Network
Hellenic Innovation Network (HIN): The Future of Life Science and Chicago Debut: Greek Startups and the Greek Entrepreneurial Ecosystem | April 18, 2024 and April 23, 2024
David Kantaros (Partner & Co-Chair, Venture Capital Practice), Chris McKenna (Office Managing Partner, Boston), and Foley were honored to host “The Future of Life Science” event at our Boston office on April 18 and the Greek Startups and the Greek Entrepreneurial Ecosystem event in our Chicago office. Sponsored by the Hellenic Innovation Network, these events convened prominent Greek investors and innovators for evenings dedicated to networking and gaining insights from industry experts. Discussions focused on the current state of the cleantech industry and presented opportunities for entrepreneurs in the life sciences.
Events
Upcoming:
ABA SciTech’s Information Security Committee Pre-RSAC Meeting | May 4, 2024 — May 5, 2024
The ABA Science & Technology Law Section’s Information Security Committee will hold its annual pre-RSAC meeting the weekend before the RSA Conference in San Francisco at Foley & Lardner’s offices. Join us for the 17th year of this meeting, where we will discuss the changes happening in the information security industry and how we can stay ahead of it all. We hope to spark ideas and insights to help make decisions that will transform how we protect ourselves, our clients, the industry, and the world.
American Telemedicine Association ATA Nexus 2024 | May 5, 2024 — May 7, 2024
Join Foley in San Francisco for an informative and engaging afternoon exploring the latest trends and strategies in financing within the Life Sciences Industry. Capital Connect will feature a distinguished panel of industry experts who will share their insights and experiences on navigating the complex landscape of finance and funding in the life sciences space. Whether you are an investor, entrepreneur, or industry professional, this event will provide valuable perspectives and networking opportunities to help you stay ahead in this rapidly evolving sector.
Capital Connect: Finance & Funding in Life Sciences | May 15, 2024
Join Foley and Slone Partners in San Francisco for an informative and engaging afternoon exploring the latest trends and strategies in financing within the Life Sciences Industry. Capital Connect will feature a distinguished panel of industry experts who will share their insights and experiences on navigating the complex landscape of finance and funding in the life sciences space. Whether you are an investor, entrepreneur, or industry professional, this event will provide valuable perspectives and networking opportunities to help you stay ahead in this rapidly evolving sector.
Lunch & Learn — An AI Conversation | May 20, 2024
Join the Utah Tech Community for a lunch & learn exploring the evolution of artificial intelligence (AI) and its implications for founders and finance teams. Our expert panel promises an engaging and informative discussion on this always top-of-mind topic. Artificial intelligence has rapidly evolved in recent years, revolutionizing various industries and transforming the way businesses operate. As technology continues to advance, it’s crucial for founders and finance professionals to stay informed about the latest developments and understand how AI can present challenges, drive efficiency, accelerate innovation, and shape the future of their organizations. Natasha Allen (Venture Capital Co-Chair, Silicon Valley) will join a panel of experts for an informative and inspiring discussion.
May 2024 Midwest Cyber Security Alliance Meeting — Integrating Trending AI and CMMC Compliance Into Vendor Management | May 22, 2024
In today’s rapidly evolving digital landscape, effective vendor management is paramount for ensuring the security and integrity of organizational operations. By harnessing AI-driven tools for continuous monitoring and anomaly detection, organizations can bolster their compliance efforts, identify deviations from established security protocols, and mitigate potential risks in real time. Join us on Wednesday, May 22, at the next Midwest Cyber Security Alliance meeting, where Chanley Howell (Partner, Jacksonville) and Leighton Allen (Associate, Chicago), will delve into the integration of two critical components — AI due diligence and Cybersecurity Maturity Model Certification (CMMC) compliance — to fortify vendor management practices. Attendees will learn about strategic methodologies to assess and mitigate AI-related risk while ensuring that third-party vendors meet rigorous cybersecurity standards.
MEMA OE Mobility Supplier Forum | May 22, 2024 — May 23, 2024
Foley and MEMA Original Equipment Suppliers will host a Mobility Supplier Forum on May 22 and 23. Partnering with Autotech Ventures on May 22, the Mobility Supplier Forum will kick off with a pitch event featuring startups in the automotive and technology industries. Attendees will hear from startups that are revolutionizing Industry X.0, Electrification, Autonomous/ADAS Vehicles, and Connectivity. Each startup will have 10 minutes to pitch, followed by a 5-minute Q&A from a panel of judges. Attendees will be given the opportunity to network with fellow attendees and the startup participants.
Beyond Summit | May 22, 2024 — May 24, 2024
Foley is sponsoring the Beyond Summit in Newport beach. Beyond Summit is a highly curated invite-only “un-conference” designed to bring together — 100 leading family offices, venture capitalists, and technology leaders to discuss the future of innovation and venture capital.
Recent:
Rooftop Reception at IAPP Global Privacy Summit 2024 | April 3, 2024
Following the first day of the International Association of Privacy Professionals 2024 Global Privacy Summit, Foley’s Cybersecurity & Data Privacy team hosted a networking reception on the rooftop of The Delegate.
Women in Climate Investing & Finance | April 3, 2024
Foley and JP Morgan co-sponsored the Women in Climate Investing & Finance LA chapter’s one-year anniversary event. This was a half-day conference in Marina Del Ray, Los Angeles that included two panels followed by a reception. Annie Tsai (Senior Counsel, Los Angeles) moderated a discussion on capital deployment through different asset classes. The Women in Climate Investing & Finance organization has connected hundreds of women in early-stage venture capital to late-stage infrastructure financing, and everything in between, including women considering a career pivot.
NFT.NYC | April 3, 2024 — April 5, 2024
Non-Fungible Tokens (NFTs) and Innovative Technology sector team members Andy Lee (Of Counsel, New York), Jane Blaney (Associate, Washington, D.C.), and Jose Lazaro (Associate, Milwaukee) were on a variety of panel discussions as part of the NFT.NYC 2024 conference.
Lunch and Learn: Preparing for Your Future Business Transition | April 9, 2024
Foley recently cohosted an exclusive small group Lunch & Learn interactive roundtable discussion with Journey Consulting at our Milwaukee office. Steve Barth (Partner, Milwaukee) and Journey Consulting CEO Jayne McQuillan facilitated this interactive conversation for business owners around “Preparing for Your Future Business Transition.”
NACD Signature Series: Cybersecurity Enterprise Risk Management | April 9, 2024
Foley was a proud sponsor of the National Association of Corporate Directors’ (NACD) Signature Series: Cybersecurity Enterprise Risk Management. Cybersecurity is a complex and dynamic risk for enterprises — across the ecosystems of both their operations and those of their partners. This category of enterprise risk requires new levels of integration across a company’s operations, and it includes new levels of accountability for senior management and the board. This was a lively debate that offered practical advice on adapting a board’s oversight and improving an organization’s readiness.
Cybersecurity: Review of Current Issues | April 10, 2024
Steve Millendorf (Partner, San Diego) and Avi Ginsberg (Associate, Boston) joined the New England Corporate Counsel Association for a hybrid in-person/virtual seminar on current issues in cybersecurity. As technology continues to evolve, new security threats and compliance risks confront companies worldwide and require in-house counsel to quickly assess and respond to these constant challenges to minimize damage, losses, and liability to their clients, assets, and reputations. Our team led this interactive discussion over some selected cybersecurity issues that in-house counsel are likely to face in 2024 because of new developments.
2024 Latam Tech Forum | April 11, 2024 — April 12, 2024
Steve Vazquez (Business Law Department Chair, Tampa), André Thiollier (Partner, Silicon Valley), Federico Goudie (Partner, Miami), and Louis Lehot (Partner, Silicon Valley) led a delegation that participated in the recent Latam Tech Forum (LTF) in Miami. LTF facilitates an annual private interactive and off-the-record gathering, as well as access to a digital platform and private meetings and discussions to promote further connectivity among invited technology entrepreneurs and investors across the region.
Managing Regulatory Risk in Earnouts and Other Deferred Pay-outs in Health Care Transactions | April 16, 2024
Larry Vernaglia (Partner, Boston) recently spoke during the American Health Law Association’s Health Care Transactions Conference in the session titled “Managing Regulatory Risk in Earnouts and Other Deferred Pay-outs in Health Care Transactions.”
ABA Science & Technology Law Section: Privacy and Emerging Technology Institute and Spring Meeting | April 17, 2024 — April 19, 2024
Foley proudly sponsored the American Bar Association (ABA) Science & Technology Law Section’s (SciTech) Spring Meeting. The event featured ABA’s new Privacy and Emerging Technology Institute, other programming on the hottest SciTech topics, brainstorming sessions on issues that matter, and networking events. Steve Millendorf (Partner, San Diego) and Jennifer Urban (Partner, Milwaukee) spoke on several panels on data privacy and cybersecurity.
The Next Generation of Telehealth: From Reactionary to Visionary | April 29, 2024 — May 1, 2024
Kyle Faget (Partner, Boston) and Monica Chmielewski (Partner, Chicago), were joined by Jessa Boubker (Associate, Boston) as speakers at the recent Northwest Regional Telehealth Resource Center’s (NRTRC) 2024 Conference, “The Next Generation of Telehealth: From Reactionary to Visionary.” Attendees engaged with industry experts, thought leaders, and innovators and discussed cutting-edge technologies, best practices, and the evolving landscape of digital inclusion in health care access.
Thought Leadership
Significant Recent Decisions Relevant to Private Company M&A
In navigating the complex world of private company mergers and acquisitions (M&A), understanding recent legal decisions is paramount. This white paper serves as a guide, distilling intricate court rulings into digestible insights for business professionals. From governance disputes to acquisition agreement nuances, each case discussed sheds light on pivotal aspects of M&A transactions. Through clear explanations and relatable examples, this compilation aims to empower readers with the knowledge needed to navigate the legal landscape effectively. Whether you’re a seasoned dealmaker or new to the M&A arena, this resource provides valuable perspectives on the evolving dynamics of corporate governance and transactional strategies.
A Look at the Venture Capital Landscape in Q1 2024
With the first quarter of 2024 behind us, analysts are now taking a look at the dealmaking landscape so far this year. CB Insights has released their State of Venture Q1’24 report, showing a “mixed bag” for VC dealmaking to start the year. Their data shows dealmaking dropping to a 7-year low in Q1. It was also the eighth straight quarter we saw a drop in equity deal volume. However, they note that several blockbuster deals contributed to a modest rebound in funding (11% QoQ), driven by generative AI. Here is a look at the highlights from the CB Insights report.
The Complex Terrain of the Video Game Industry: Challenges and Opportunities
The video game industry is brimming with innovation, competition, and transformative technological advancements. As we look at the current state of this vibrant sector, it is evident there are both challenges and opportunities, particularly for venture capital investors. Lyman Thai (Partner, San Francisco) is a keen observer of the video gaming industry and has extensive experience representing game studios, gaming-adjacent technology companies, and their investors. He sheds light on the intricate legal considerations and strategic maneuvers necessary for success in this ever-evolving sector.
AI Regulatory and Legal Issues Today: A Conversation with Natasha Allen
As is the case with most emerging technologies, developments in artificial intelligence are quickly outpacing regulations, and with this comes a variety of important legal considerations. While there has been a push for more robust regulatory oversight, regulations on a federal level have yet to materialize. Natasha Allen (Venture Capital Co-Chair, Silicon Valley) within the firm’s Innovative Technology sector, looks at the current legal and regulatory issues facing AI startups and what to watch for moving forward.
Thinking About Selling your Business? Now is the Time
The economic environment has mostly stabilized following the inflationary shocks of 2021–2022, and a strong Q4 of 2023 suggests that M&A may be in line for a comeback in 2024. The trends discussed in this article demonstrate why now is likely a great time to sell your business.
Deals
Foley Represents vState Filings in Merger with Interstate Filings
Foley represented vState Filings in its merger with Interstate Filings. vState Filings works with clients nationally and globally, assisting individuals, entities, accounting and legal firms, and management companies with filing and maintaining corporate status across all 50 states and various international jurisdictions.
Foley Advises Apricus Generation in Series A Funding to Build Distributed Solar, Battery Development Platform
Foley represented Apricus Generation, a new holding company designed to build a national distributed solar and battery development platform and Independent Power Producer, in its initial $28 million Series A funding round, with a total offering of $100 million in process to close over the next few months. Participants in this initial closing are long-term committed investors with experience investing in the founders’ prior successful ventures.
Foley Advises Coalition For Health AI in its Formation and Structuring Founding Partnerships
Foley advised the Coalition for Health AI (CHAI), Inc. in its formation and on the structuring of its initial group of founding partnerships in support of its stated mission to be the trusted source of responsible AI in health that serves all. The recently announced list of CHAI founding partners includes leading non-profit research, behavioral science, patient advocacy, and community-based provider organizations as well as leading commercial technology and health care organizations.
Foley Represents ARCHIMED in Acquisition of Majority Stake in Innovative Skincare Company Cellese
Foley represented global private equity health care specialist ARCHIMED in its acquisition of a majority stake in Cellese, a developer of innovative topical dermo cosmetics sold under the AnteAGE brand name.
Foley Represents TCGX in $30M Private Placement Financing in Nektar Therapeutics
Foley represented TCG Crossover in the $30 million private placement financing in Nektar Therapeutics, a biotechnology company developing medicines for the treatment of auto-immune disorders.
Foley Represents AI Pioneer Matterport in Definitive Agreement to be Acquired by CoStar Group
Foley is representing Matterport, Inc., a global leader in 3D digital twins and artificial intelligence for the real estate industry, in its proposed acquisition by CoStar Group for an estimated equity value of approximately $2.1 billion and an enterprise value of approximately $1.6 billion. Under the terms of the definitive agreement with CoStar, Matterport stockholders will receive $2.75 in cash and $2.75 in shares of CoStar Group common stock for each share of Matterport common stock. The transaction, which is subject to regulatory and stockholder approvals and other customary closing conditions, is expected to increase the development and deployment of advanced AI and digital twin technology across all of CoStar Group’s product lines.
Foley Advises 401GO in $12M Series A Funding
Foley served as legal advisor to 401GO in its $12 million Series A funding round led by Next Frontier Capital with additional contributions from Rally Ventures and support from existing investors Impression Ventures and Stout Street Capital.
Foley Represents NEA as Lead Investor in Series B Round for beehiiv
Foley & Lardner LLP represented New Enterprise Associates, Inc. (NEA) as the lead investor in the $33 million Series B funding round for beehiiv, a startup building a platform for creating and distributing newsletters. NEA was joined by additional investors Sapphire Sport and Lightspeed Venture Partners.
Originally published at Foley.
