Friends,
In last month’s newsletter, we explored two forces reshaping venture capital’s risk-reward calculus: the overwhelming dominance of artificial intelligence (AI) in venture capital (VC) deal flow — now commanding over 63% of invested dollars — and the long-awaited resurgence of the initial public offering (IPO) market, which delivered a dramatic spike in liquidity and exit value for venture firms and their limited partners (LPs).
This month, we share a rundown of what we saw in the Silicon Valley market in the third quarter and prognosticate about what the fourth quarter might bring. Then, we explore how direct venture secondaries have surged while general partner-led (GP) deals remain constrained. Finally, we share some observations on how sovereign wealth funds are reshaping global AI investment.
First, here is what we saw in Q3 2025:
- Venture funding hit $95.6 billion in the period, making four straight quarters of year-over-year growth, and bringing annual funding back to 2022 levels. The money went into a lot fewer deals, which means that investors are selectively plowing more capital into fewer companies.
- More than half of all venture capital went into AI startups, but only 22% of the deals. This underscores the takeaway from point one above.
- Almost a third of all venture capital funding went into decacorns in 2025 year to date. This underscores the takeaways from points one and two above.
- Humanoid robot startups are a new breakaway category in venture capital.
- Merger and acquisition (M&A) exits had another increase.
While Q3 2025 ended with a bang, October began with a government shutdown. While we don’t have official data to share on what the markets have done since the shutdown started, as we plow into week five, we are seeing a dramatic pullback in new venture deals, IPOs, and exits, as “uncertainty” has once again overcome the positive momentum built since the passage of the Trump tax plan in early July. What does the rest of the year hold? A bipartisan budget deal would help lift the fog of uncertainty…
Meanwhile, in “VC secondaries continue to grow, but GP-led deals are lagging,” we examine the evolving venture secondaries market, where direct secondary transactions have surged to around $60 billion annually, while GP-led secondaries have reached $14.6 billion and are projected to grow modestly. Direct deals dominate due to lower costs and simpler diligence, whereas GP-led transactions — often structured through continuation vehicles — face limitations tied to capital requirements and a narrow pool of qualified firms. As liquidity needs persist and top AI portfolios attract buyer interest, secondaries are becoming a vital tool for navigating delayed exits and valuation resets. However, the trade-off between immediate liquidity and long-term upside remains a central tension for LPs and investors alike.
In “US gets most benefits from sovereign wealth funds’ AI investments,” we dive into how sovereign wealth funds are reshaping global AI investment, with over 93% of their $46.4 billion in AI venture funding this year flowing to U.S. startups. This surge reflects a broader geopolitical and economic shift, as countries — particularly in the Middle East — seek both diversification and strategic returns through AI. The United States leads in software, hardware, and policy influence, attracting capital from sovereign entities like Mubadala Capital, which recently led a $1.4 billion round for Crusoe. As public sector involvement in private markets deepens, this trend marks a significant reordering of global capitalism, driven by an urgency to stay competitive in emerging technologies.
As always, do not hesitate to contact us if we can help you brainstorm solutions to a legal or business challenge you are facing or connect you to a potential investor, professional, or entrepreneur.
Spotlight on TED AI
TED AI | October 21–22, 2025
Foley was proud to partner with TED AI for its annual conference at the iconic Ferry Building. This year’s theme, “Are we bold enough?”, invited attendees to explore the potential of artificial intelligence and its far-reaching impact on industries, institutions, and society. The event brought together a dynamic mix of entrepreneurs, technologists, academics, and business leaders for a full day of panels and interactive sessions focused on the future of AI.
The conference featured discussions led by innovators from Emerald AI, Niantic Spatial Inc., Oracle, PwC, SambaNova, Vectara, and Xero. Topics ranged from AI in health care and life sciences to global governance, agentic AI, compute and sustainability, and workforce transformation. Foley’s own thought leaders played a central role in shaping the dialogue: Louis Lehot moderated a panel on funding the next wave of AI startups, exploring how founders and investors can navigate tighter market conditions and build defensible moats; Natasha Allen led a critical discussion on governing AI in a global context, examining how institutions and governments are shaping regulatory frameworks; and Nikhil Pradhan spoke on efficient AI and sustainability, highlighting advances in model compression, hardware acceleration, and distributed training that reduce costs and environmental impact.
The day concluded with a cocktail reception, offering attendees a chance to connect in a relaxed setting and continue conversations sparked in earlier panels. As AI continues to redefine the boundaries of innovation, TED AI 2025 served as a powerful platform for bold ideas, strategic insights, and meaningful collaboration.
Events
Recent:
Founders N’ Funders VC Reverse Pitch | October 27, 2025
Founders N’ Funders Reverse Pitch in San Francisco showcased a unique format where venture capitalists pitched their value propositions directly to founders, flipping the traditional dynamic. The event featured a curated lineup of VCs, who shared insights on scaling companies and supporting entrepreneurial growth. Andre Thiollier, Gurpreet Bal, Erik Nguyen, Rachel Horewitz, Wesley Choi, and Callie Ericksen attended, engaging with founders and investors seeking trusted legal counsel. Overall, the event fostered meaningful conversations and strategic connections, reinforcing our commitment to supporting innovation and the startup ecosystem.
Sidebar Summit — LA Tech Week | October 15, 2025
The Sidebar Summit in Santa Monica was a premier gathering during LA Tech Week, bringing together leading entrepreneurs, investors, civic officials, and media professionals for an afternoon of dialogue and strategic networking. The program featured insightful discussions with executives from Haus Labs by Lady Gaga, Lightspeed, Beehiiv, and AngelList, alongside influential voices from government and media. The event fostered meaningful connections and facilitated high-level conversations on innovation, entrepreneurship, and the future of technology and business.
Sidebar Summit — SF Tech Week | October 8, 2025
The IPO Summit — Silicon Valley Edition brought together prominent investors, founders, and executives for an afternoon of thought-provoking dialogue centered on innovation and the journey to the public markets. Set against panoramic rooftop views in San Francisco, the event featured fireside chats and panel discussions with leading venture capitalists, seasoned executives, and a founding member of Facebook. Attendees engaged in focused networking and strategic conversations, contributing to a forward-looking exchange on the future of technology and finance.
Thought Leadership
Pivotal Push from Lab to Leverage: Why Now Is the Window to Secure Foundational Quantum Patents
Quantum technology is rapidly evolving into a competitive commercial sector, driven by accelerating innovation and a surge in venture capital investment, with quantum computing and software firms raising over $2.2 billion in 2024 alone. According to the MIT Quantum Index Report 2025, patent filings have increased five-fold over the past decade, with China now leading global activity, followed by the United States and Japan. This growth reflects both scientific maturity and strategic efforts to secure foundational intellectual property, as corporations and universities dominate ownership across hardware, algorithms, and systems. As the global race intensifies, early and targeted intellectual property (IP) filings are becoming critical to shaping the future of quantum commercialization and securing long-term competitive advantage.
Emerging Technology Frontiers: Redefining Risk, Control, and Value in Transactions
This article, authored by Natasha Allen and Andre Thiollier, examines how the rapid advancement of frontier technologies — such as artificial intelligence and next-generation computing — is reshaping the legal and regulatory landscape for private equity and venture capital investors. As traditional deal structures struggle to keep pace, risk must now be assessed through broader lenses including algorithmic accountability, data integrity, and technological sustainability. Strategic foresight is essential, requiring legal teams and investors to anticipate how emerging technologies will interact with shifting regulations, market dynamics, and geopolitical concerns. By bridging the gap between innovation and regulation, legal advisors can craft flexible, forward-looking deal structures that withstand policy shifts and technological disruption. Ultimately, successful dealmaking in this environment requires more than transactional expertise — it requires positioning companies and investors to thrive amid constant change.
Breaking Down the October 2, 2025, NVCA Updates to the Model Legal Documents: What Founders and VCs Need to Know
On October 2, 2025, the National Venture Capital Association (NVCA) released significant updates to its model legal documents, reflecting evolving regulatory priorities, market practices, and investment structures. Louis Lehot, Gurpreet Bal, Scott Lin, and Saige Gallop explore how these changes signal a shift in how venture transactions are structured and risk is allocated. Notably, the updates impose reciprocal compliance obligations on both companies and investors, underscoring the growing scrutiny around foreign ownership, data flows, and geopolitical exposure. The NVCA also encourages adoption of governance policies around diversity, equity, and inclusion (DEI), human resources (HR), and whistleblower protections, signaling a broader shift toward institutional standards in venture-backed companies. As these changes become embedded in industry practice, founders and investors alike must engage early with legal counsel to navigate diligence, disclosure, and deal structuring in an increasingly complex regulatory environment.
State of Capital Markets for Public Companies: A Comprehensive Look at the Technology, Clean Energy, and Life Sciences Sectors in 2025
Louis Lehot dives into the current state of U.S. capital markets in 2025, focusing on public company financing trends across technology, clean energy, and life sciences. While traditional IPOs remain active, raising over $30.8 billion year-to-date, alternative structures like private investments in public entities (PIPEs), confidentially marketed public offering (CMPOs), and at-the-market offerings (ATMs) are gaining traction amid regulatory shifts and market complexity. Sector-specific dynamics are shaping capital strategy, with tech firms needing scalable economics, clean energy companies relying on policy-aligned capital, and life sciences businesses timing raises around clinical milestones. As regulatory clarity improves and cross-border IPOs increase, companies must adopt flexible, multi-track financing strategies to navigate today’s selective and evolving market landscape.
Deals
Foley Represents Brazilian Fintech Velotax in $23M Series A Financing
Foley & Lardner LLP represented Brazilian fintech startup Velotax in its $23 million Series A funding round, one of the largest Series A financings in Brazil this year. The round was led by Valor Capital Group, QED Investors, and Picus Capital.
Foley Represents FloWorks in Acquisition of Slater Controls
Foley & Lardner LLP served as legal advisor to FloWorks International, a leading specialty distributor of critical flow control products and portfolio company of Wynnchurch Capital, in its acquisition of Slater Controls LLC.
Foley Advises Delta Air Lines on Investment in WestJet
Foley & Lardner LLP served as legal advisor to Delta Air Lines Inc. (NYSE: DAL) in its acquisition of a minority equity interest in Canadian airline WestJet Airlines Ltd. from Onex Partners and affiliated funds (Onex Group).
Foley Counsels Bridge Renewable Energy in Financing for Distributed Energy Solar and Battery Storage Portfolio
Foley & Lardner LLP served as borrower’s counsel for Bridge Renewable Energy (BRE), a subsidiary of Bridge Investment Group Holdings LLC and a leading developer, owner, and operator of distributed generation solar and energy storage assets, in a portfolio financing to support the construction of a 40 MW distributed energy solar and battery storage portfolio.
Foley Advises Belpointe Prep, LLC in $204M Mixed-Use Development Refinancing
Foley & Lardner LLP served as legal advisor to Belpointe PREP, LLC (Belpointe OZ) (NYSE American: OZ) in securing a $204 million post-construction financing for Aster & Links, a newly constructed Class A apartment complex in Sarasota, Florida.
Foley Represents AI Startup Woz in Seed Funding Round
Foley & Lardner LLP represented Woz, the groundbreaking platform that is the first to combine AI with expert human oversight to build business-ready mobile apps, in its $6 million seed funding. The round was led by Cervin Ventures, with participation from Burst Capital, Y Combinator, Untapped Ventures, MGV, and the Lacob Family, co-owners of the Golden State Warriors.
Foley Represents Foley Products Company in Sale to CMC
Foley & Lardner LLP served as legal advisor to Foley Products Company, the largest regional supplier of precast concrete solutions in the United States, in its definitive agreement to be acquired by Commercial Metals Company (NYSE: CMC) for a cash purchase price of $1.84 billion, subject to customary adjustments. The transaction, subject to customary closing conditions, was approved by the boards of directors of CMC and Foley Products and is expected to close in a timely manner following customary regulatory review.
Foley Advises TruStage™ in Sale of Digital Storefront Business
Foley & Lardner LLP served as legal advisor to TruStage, a financially strong insurance and financial services provider founded in 1935, in the sale of its Digital Storefront (DSF) business to Demopolis Equity Partners.
Foley Advises Millennium Physician Group on Partnership with IMA Medical Group
Foley & Lardner LLP served as legal counsel to Millennium Physician Group, a Mosaic Health Company and one of the country’s largest independent physician groups, in its acquisition of IMA Medical Group.
Foley Advises Wynnchurch in Sale of Clyde Industries
Foley & Lardner LLP served as legal advisor to Wynnchurch Capital and its partners in connection with the sale of Clyde Industries.
Foley Advises Insurance Office of America on Significant Producer, Employee, and Strategic Partner Investments
Foley & Lardner LLP served as legal advisor to Insurance Office of America (IOA), one of the largest privately held independent insurance brokerages in the United States, in connection with significant investments from its producers and employees alongside new strategic investments from Madison Dearborn Partners, LLC, and Navacord Corp.
Foley Advises Strata Critical Medical in $124 Million Acquisition of Keystone Perfusion Services
Foley & Lardner LLP advised Strata Critical Medical, Inc. (NASDAQ: SRTA), formerly the medical transportation division of Blade Air Mobility, Inc. (NASDAQ: BLDE), in its $124 million acquisition of Keystone Perfusion Services LLC, one of the largest organ recovery and normothermic regional perfusion (NRP) service providers to the transplant industry, and an industry leader in perfusion and other critical medical solutions for hospitals in non-transplant surgeries nationwide.
Foley Advises Ownership Group Led by Patrick Zalupski in Purchase of Tampa Bay Rays
Foley & Lardner LLP served as legal counsel to an ownership group led by Florida-based business executive Patrick Zalupski in the purchase of Major League Baseball’s Tampa Bay Rays for an undisclosed amount from former principal owner Stuart Sternberg in a deal unanimously approved by MLB owners. This is the third ownership group of the Rays since MLB awarded Tampa Bay an expansion franchise in 1995.
Authors
Louis Lehot
Partner, Venture Capital
Silicon Valley | San Francisco | Los Angeles
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