Friends,
In last month’s newsletter, we explored how recent policy shifts and strategic market activity were beginning to restore momentum across the venture landscape, offering early signs of recovery in the innovation economy.
This month, we examine two forces testing the boundaries of venture capital (VC): the fundraising challenges facing emerging managers and the growing enthusiasm for AI-driven rollup strategies.
In First-time VCs face second-fund slump, we look at how first-time fund managers, many of whom launched during the record-setting years of 2021 and 2022, are now struggling to raise follow-on capital. With only a fraction securing second funds, the data reveals a stark shift in LP (limited partnership) behavior amid economic uncertainty, political headwinds, and overexposure to the venture asset class. The result is a widening gap between emerging and established firms, with long-term implications for innovation and investor diversity.
Meanwhile, AI rollup hype tests the limits of VC economics explores how venture firms are borrowing from private equity by acquiring fragmented businesses and embedding proprietary AI to drive efficiency and scale. While the strategy has captured investor imagination, questions remain about its fit within traditional VC models and whether it can deliver venture-scale returns. As firms chase operational leverage, the lines between venture and private equity continues to blur.
Together, these updates reflect a venture ecosystem in flux, where capital concentration, strategic experimentation, and macroeconomic pressures are reshaping how firms build, fund, and scale.
As always, reach out if we can help you navigate a legal or business challenge, or connect you with a potential investor, founder, or advisor.
Spotlight on Cyber Breakfast 3.0
Annual CISO & Founders Cyber Breakfast Event | August 5, 2025
Foley was proud to co-host the third annual CISO & Founders Cyber Breakfast at Black Hat 2025, an exclusive morning gathering that has quickly become a cornerstone of the cybersecurity community’s calendar.
Set against the iconic backdrop of the Bellagio fountains, this year’s event brought together an exceptional group of CISOs, startup founders, security experts, and top-tier investors for candid conversations on the evolving threat landscape and the innovations shaping the future of security. Guests enjoyed a curated breakfast experience while engaging in meaningful dialogue and forging strategic connections in a dynamic, high-energy setting.
Now in its third year, Cyber Breakfast continues to grow in impact and influence, offering a unique space for collaboration among the industry’s most forward-thinking leaders. Foley is honored to support this tradition alongside our co-hosts: First Rays Venture Partners, StageOne Ventures, Hyperwise Ventures, and SVB.
Events
Upcoming:
Investor-Focused HealthTech Panel Discussion & Reception | September 3, 2025
Foley, alongside the Ainsley Advisory Group, is hosting the panel discussion, “Blueprint for a Unicorn: The Founders Playbook for Winning in Health AI.” David Kantaros and David Sanders are among the panelists discussing the path ahead, pitfalls, and what success looks like for health AI companies from laying the foundation, to navigating growth challenges, to securing funding.
Second Annual Private Fund Managers Conference | September 25, 2025
Foley, in collaboration with Langham Hall and Optima Partners, is hosting the Second Annual Private Fund Managers Conference, a premier event for leaders across the alternative investment and asset management space. Designed for fund managers, institutional investors, and family offices, this exclusive gathering will explore the evolving regulatory landscape, emerging market trends, and strategic insights essential for long-term fund success. Hear from senior leaders from Foley, Langham Hall, Optima Partners, and distinguished guest speakers from across the industry. Cap off the evening with a networking reception, offering the perfect opportunity to connect with fellow professionals.
General Counsel Lunch | September 26, 2025
Foley is excited to host the upcoming “IPO Readiness — What it Really Takes in Today’s Environment” discussion. The event will take place over great food and will foster meaningful conversations among a small group of General Counsel navigating real challenges and decisions. Here, our Foley team will offer insights drawn from decades of advising companies through IPOs, follow-ons, 144A offerings, SPACs, debt raises, and post-IPO governance.
TedAI | October 21, 2025 — October 22, 2025
Foley is excited to once again be supporting TEDAI San Francisco, returning for its third annual conference this October. This year’s theme, “Are we bold enough?”, will explore the future of AI through groundbreaking conversations and panels featuring industry leaders. The event promises bold ideas, deep insights, and meaningful connections at the intersection of technology and innovation.
Thought Leadership
Is an IPO Window Opening for H2 2025?
Louis Lehot shares his insights on the IPO market and how it is showing encouraging signs of recovery in 2025, with 201 companies going public year-to-date compared to 225 for all of 2024. While deal volumes are increasing and aftermarket performance is strong, average deal sizes remain smaller than historical norms. Key sectors including AI (artificial intelligence), fintech, crypto, and defense tech are driving investor interest, supported by favorable regulatory and political tailwinds.
The Rise of “Acquihiring” in a Post-Layoff Tech Sector
As we come to the midpoint of summer 2025, the tech industry continues to lay off staff, as big tech companies implement strategic workforce reductions. These layoffs are the result of the quick and efficient integration of AI, as firms restructure and phase out roles in the process. Additional factors include cost-cutting initiatives, operational streamlining, and performance-based cuts targeting underperforming employees. This article was written by Louis Lehot.
Will the Late Summer M&A Rebound Continue into Fall?
The lazy days of summer seem to be behind us as M&A (mergers and acquisitions) activity is getting a jump start. A recent article in the Wall Street Journal cites late July/early August as having “the highest-volume week for mergers and acquisitions for U.S. companies since 2021, according to LSEG.” This is an unexpected, but welcome boom in a typically a slow time of year. This article was written by Louis Lehot.
Japan’s M&A Boom: A Private Equity Powerhouse in 2025
M&A in Japan has been going against the global trend, which is leading to dealmakers taking a closer look at Japanese companies and their low valuations, as well as Japan’s increasingly open M&A environment. Japan can, without a doubt, claim a position as the epicenter of Asia’s M&A resurgence, with $232 billion in deal volume during the first half of 2025, according to Reuters. This big figure, driven by a surge in private equity activity, highlights Japan’s improving corporate landscape and its growing appeal to global and domestic PE (private equity) firms. Fueled by corporate deleveraging, PE take-privates, ultra-low interest rates, attractive valuations, and strategic cross-border acquisitions, Japan is rewriting the rules of M&A in Asia, particularly in sectors like technology, infrastructure, and healthcare. This article was written by Brian Wheeler.
Big Tech Looks to AI Startups to Secure Talent
Louis Lehot digs into the impact of AI on Silicon Valley innovation in this article. Acquihires have been a part of Silicon Valley for quite some time now. Larger tech companies acquire startups primarily for their talent, as opposed to their products or technology. However, starting with former FTC (Federal Trade Commission) chair Lina Khan’s subpoenas to big tech companies probing their prior unreported small acquisitions, big tech companies were frozen out of the M&A market since early 2021. As new AI startups were formed, they couldn’t exit and had trouble raising follow-on rounds of capital.
Deals
Foley Represents Upload Ventures in Latest Financing Round for Brazilian Startup IORQ
Foley & Lardner LLP represented Upload Ventures as an investor in the R$35 million (approximately $7 million) financing for IORQ, a smart credit platform designed to decentralize access to capital in Brazil. Additional investors in the round included Monashees, ONEVC, and Norte.
Foley Represents Fullpower-AI in Strategic $25M Investment from Tempur Sealy International Concurrently With 10-Year Global Licensing Agreement
Foley & Lardner LLP represented Fullpower-AI, a leader in AI-powered health and wellness technologies, in securing a transformative partnership with Tempur Sealy International (Tempur Sealy), a wholly-owned business of Somnigroup International Inc. As part of the agreement, which is anchored by a 10-year global licensing agreement for Fullpower-AI’s KOA Sleeptracker-AI Large Action Model platform, Tempur Sealy will make a $25 million Series C investment in Fullpower-AI, valuing the company at $160 million.
Foley Represents HerculesAI in Sale of Legal Technology Assets to Aderant
Foley & Lardner LLP represented HerculesAI, a pioneer in AI-driven compliance and decision intelligence solutions, in the sale of its legal technology assets to Aderant, a leading global provider of business management solutions for law firms and a subsidiary of Roper Technologies Inc.
Foley Represents xmad.ai in Sale to Workato
Foley & Lardner LLP represented xmad.ai, a frontier AI-research company, in its sale to Workato, the leader in agentic orchestration. The acquisition was announced alongside the launch of Workato’s AI Research Lab, a new research and innovation hub focused on advancing the science and engineering of autonomous enterprise agents.
Foley Represents Cortical Ventures as Lead Investor in SAFE Financing for 2nd Set AI
Foley & Lardner LLP represented Cortical Ventures as the lead investor in the SAFE financing for 2nd Set AI, a company providing AI solutions for enterprises looking to deploy generative images and video to enhance creativity while protecting IP and brand guidelines.
Foley Represents LM Funding America in $23M Capital Raise
Foley & Lardner LLP represented LM Funding America, Inc. (LM Funding), a Bitcoin treasury and mining company, in its $23 million capital raise through a combination of a $12.6 million registered direct offering and a $10.4 million private placement. The net proceeds from the offerings will be used primarily to purchase additional Bitcoin for LM Funding’s treasury. The company also recently announced the planned acquisition of an 11-megawatt mining site in Columbus, Mississippi, funded directly from its balance sheet.
Foley Represents NEA as Lead Investor in Series A Funding for AI Marketing Platform Bluefish
Foley & Lardner LLP represented New Enterprise Associates (NEA) as the lead investor in the $20 million Series A funding round for Bluefish, an AI marketing platform that helps advertisers understand and refine how they are showing up in AI queries. The funding round was also led by Salesforce Ventures.
Foley Represents OpenLight in $34M Series A Financing
Foley & Lardner LLP represented OpenLight, a world leader in custom Photonic Application-Specific Integrated Circuit (PASIC) chip design and manufacturing based on heterogeneous integration, in its oversubscribed $34 million Series A financing. The round was co-led by Xora Innovation and Capricorn Investment Group and included Mayfield, Juniper Networks (now part of HPE), Lam Capital, New Legacy Ventures, and K2 Access.
Additional Articles of Interest
Natasha Allen on AI Investment Due Diligence — ‘It’s a whole new set of considerations’
Louis Lehot Assesses European Investment Trends Amid Macroeconomic Shifts
Louis Lehot Assesses Figma IPO
Gustavo Resendiz Featured in Q&A on Secondary Market Momentum — ‘Investors want liquidity’
Patrick Daugherty Weighs in on CLARITY Crypto Legislation
Authors
Louis Lehot
Partner, Venture Capital
Silicon Valley / San Francisco / Los Angeles
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