In a recent paper, authors Sergey Chernenko, Josh Lerner, and Yao Zeng consider investments by mutual funds (“cross over funds”) in 99 unicorn companies. Given the rise in recent years of investments by cross over funds in private companies, the authors compare the investments made by these funds compared to those made by venture capital funds. There have been numerous studies examining the role of venture capital funds in governance of private companies and the contribution of venture funds to promoting certain governance practices and information reporting. Not surprisingly, the authors find that more often than not cross over funds structure their investments as straight convertible preferred stock, rather than participating preferred stock. Cross over funds are more focused on cash flow rights, require stronger redemption rights, and generally are not interested in board representation or other roles in the companies. As a result, mutual funds tend not to monitor the governance of the unicorns in which they invest and function more as passive investors, without providing the type of oversight considered characteristic for venture investors. Although late-stage private placement activity declined in 2016, the trend toward companies remaining private longer remains important. As a result, understanding the roles of late-stage investors in unicorns can provide important insights. See the full paper here:

Renaissance Capital reported several record lows in their 2016 Annual Review of the U.S. IPO Market.  A total of 105 IPOs were completed in 2016, raising $18.8 billion in proceeds—the lowest activity level since 2009 and the lowest proceeds level since 2003, respectively.  The median deal size for 2016 IPOs was $95 million, which is attributed to the number of smaller biotech offerings in 2016.  Only four IPOs raised more than $1 billion this year.  Additionally, 2016 had the lowest number of IPO filings since 2009 with just 120 companies filing for an IPO, an almost 50% decrease from 2015.

Sector updates.  The tech sector accounted for 20% of all U.S. IPOs in 2016, with only 21 offerings, raising $3 billion in proceeds.  The lack of tech sector participation in the IPO market is attributed to the public-private disconnect on valuation.  Renaissance reports that venture capital-backed tech companies chose to avoid public-market valuations and decided to remain private.  Mergers and acquisitions provided quick exits for tech companies that had filed for IPOs.  The healthcare sector remained dominant, accounting for 40% of all U.S. IPOs.  Another year of elevated biotech activity contributed significantly to this year’s 42 healthcare IPOs, which raised $3.4 billion in proceeds.  The financial services sector raised the most proceeds in 2016.  The 15 financial services IPOs raised $4.3 billion in proceeds.

Private equity-backed IPOs.  The number of, and the proceeds raised in, private equity-backed IPOs in 2016 are the lowest since 2009.  However, PE-backed IPOs continue to perform better than the overall IPO market.  The 30 PE-backed IPOs raised $8.8 billion in proceeds, with only five of the 30 finishing the year below the IPO issuance price.

Venture capital-backed IPOs.  Venture capital-backed IPOs in 2016 also represent the lowest level of activity and proceeds since 2009.  42 VC-backed IPOs raised $3.5 billion in proceeds. 50% of these deals were biotech and only 10 deals raised over $100 million.  The tech sector (historically comprised of VC-backed companies) contributed to the 56% decrease in VC-backed IPOs.  As discussed above, the notable public-private valuation disconnect contributed to the lower IPO numbers.

As 2016 comes to a close, we will continue to monitor the U.S. IPO market and provide updates on this blog.

On May 24, 2016, the Biotechnology Innovation Organization (BIO) published a study, “Emerging Therapeutic Company Investment and Deal Trends,” which collects ten years of data to identify trends affecting “emerging therapeutic companies” (“ETCs”).  ETCs are companies that are (1) developing therapeutics with a lead drug in research and development (“R&D”), or (2) have a drug on the market, but have less than $1 billion in sales at the time of the transaction.

The study focuses on venture capital, initial public offerings (“IPOs”), follow-on public offerings, licensing, and acquisitions.

Venture Capital Trends

Venture funding reached a record high of $6.8 billion during 2015, which included the largest biotech venture capital deal on record, raising $446 million.  The study also found that Series A financing nearly doubled from 2014 to 2015.  The study found that nearly 70% of venture capital funding in 2015 went to early-stage companies and nearly $2 billion was invested in oncology companies.  Although oncology companies were successful in obtaining venture capital funding, the study found that funding was inconsistent across disease areas, as companies in certain disease areas have not rebounded well since the financial crisis.

IPO Trends

The study found that IPOs for ETCs were strong during 2015, with 39 companies going public.  The study found that a positive effect of the JOBS Act has been the increase in the average amount raised per IPO for R&D stage companies from $68 million in 2012 to $90 million in 2015.  Another trend that the study identified was that the clinical development stage that ETCs are in at the time of their IPOs has shifted in recent years.  In the years approaching the financial crisis, there were no Preclinical or Phase I company IPOs in the United States, yet during 2012 to 2015, there were 34 such IPOs.  According to the study, this shift in IPO activity may represent an increased preference for investing in early-stage companies.  When considering the disease type for companies that have obtained IPO financing, the study noted that neurology companies raised $1.05 billion, the highest amount of capital across disease type.

Other Trends

The study also found that: (1) during 2014 to 2015, follow-on public offerings by ETCs increased from $8.9 billion to $16.1 billion; and (2) licensing proved to be a critical aspect of capital raising (reaching a record high of $7.1 billion) and an alternative investment strategy to acquisitions, as 38% of all ETCs partnered during 2015.

A copy of the study is available at:

Successful privately held companies considering their liquidity opportunities or eyeing an IPO often turn to late stage private placements. Late stage private placements with institutional investors, cross-over investors and strategic investors raise a number of considerations that are distinct from those arising in earlier stage and venture transactions. Also, for some companies, the late stage private is a prelude to a strategic transaction or an IPO.


  • Timing and process;
  • How are the terms of late stage private placements different;
  • Diligence, projections and information sharing;
  • Providing liquidity to early investors and founders through a secondary component;
  • IPO and acquisition ratchets;
  • Governance issues;
  • Valuation issues;
  • The placement agent’s role; and
  • Planning for a sale or an IPO in your negotiations.


  • Anand Subramanian, Qatalyst Partners
  • Barb Izzo, former Managing Director at a Fortune 100 public company, advisor to several successful Silicon Valley tech companies.
  • Jeff Thomas, NASDAQ Private Market
  • Anna Pinedo, Morrison & Foerster LLP
  • Susan Mac Cormac, Morrison & Foerster LLP


TuesdayApril 26, 2016
Registration/Breakfast: 8:00 AM – 8:30 AM
Session: 8:30 AM – 11:00 AM

Morrison & Foerster LLP
425 Market Street
San Francisco, CA 94105

To register for the San Francisco session on April 26, simply email

CLE credit is pending for California and New York.


Wednesday, April 27, 2016
Registration/Lunch: 11:30 a.m.
Session: 12:00 p.m. – 2:30 p.m.

Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, CA 94304

To register for the Palo Alto session on April 27, simply email

CLE credit is pending for California and New York.

On March 9, 2016, Morrison & Foerster is bringing together social entrepreneurs, funders, lawyers and others professionals in the community for a series of panel discussions exploring a range of legal and business issues for impact investors and companies that want to maximize their positive impact.

New and Existing Corporate Forms for Impact Entities

This session will preview how to blend impact with shareholder value using existing corporate and new forms (Public Benefit, Social Purpose, Benefit and L3C). If you are an entrepreneur (or lawyer representing emerging companies), come learn more about the array of options available and which ones could be right for your business (particularly if you want to raise capital and scale). If you are an investor considering impact investing or a foundation exploring alternatives to philanthropy, this session will provide guidance on how these forms can impact monetary and environmental/ social returns on your investment.


  • Jordan Breslow, General Counsel, Etsy


  • Rick Alexander, B Lab, Head of Legal Policy Counsel, Morris Nichols Arsht & Tunnell
  • Will Fitzpatrick, General Counsel, Omidyar Network
  • Tomer Inbar, Partner, Patterson Belknap Webb & Tyler
  • Suz Mac Cormac, Partner, Morrison & Foerster LLP

Event Details:

Morrison & Foerster LLP
250 West 55th Street
New York, NY 10019

Networking Reception: 5:30 p.m. – 6:30 p.m.
Panel Discussion: 6:30 p.m. – 8:00 p.m.

CLE credit is pending for California and New York.

To register for this session, please click here.

Our 2016 survey, Getting the Measure of EGC Corporate Governance Practices, provides an overview of the choices made by EGCs that undertook initial public offerings during 2014 and 2015 insofar as capital structure, exchange listing, governance policies and procedures, board composition, compensation, and various other matters. A number of charts and resources accompany this year’s survey.

Read the 2016 review.

JOBS Act Quick Start provides a comprehensive overview of the provisions of the JOBS Act, including the changes brought about in market practice as a result of the IPO on ramp provisions. This 2016 update, which we invite you to read, describes the recent FAST Act improvements, the final rules relating to Regulation A, and the final rules implementing Regulation Crowdfunding.

To download your copy, click here. To request a hard copy, please e-mail

PitchBook’s 2015 Annual U.S. Venture Industry Report reported a total of 73 venture capital-backed IPOs were conducted in 2015, the lowest number since 2013.  The number of VC-backed IPOs had been climbing since 2009, from 10 IPOs in 2009 to 122 IPOs in 2014.   2015 VC-backed IPOs raised approximately $8 billion, the lowest proceeds collected in three years.

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The median IPO size for VC-backed IPOs has remained consistent over the years, fluctuating no more than $11 million since 2009.  In 2015, the median IPO size was $77 million.  The median valuation of VC-backed IPOs has been declining since 2011, with the median valuation in 2011 reported at $424 million down to $252 million in 2014.  In 2015, the median valuation of a VC-backed IPO was $301 million, a number higher than 2014, but still lower than 2011-2013 figures.  Due to lower ambitions on IPO valuations, PitchBook reports that compensatory provisions will have to be included more frequently in order for investors to recommit in late stage financing rounds.

VC 2

12_15_Israel-Seminar_RightTool_600px_Final (3)

On December 15, 2015, in Tel Aviv, Israel, Morrison & Foerster will present a complimentary seminar titled “Finding the Right Capital Raising Tool”. Identifying the right capital-raising tool for a company depends on a number of different factors.  Understanding the alternatives and their best uses will be the focus of our discussion.  Morrison & Foerster Partners James Tanenbaum and Anna Pinedo will address:

  • Early stage private financings;
  • Venture and institutional financings;
  • Late stage or pre-IPO financings; and
  • Follow-on financings for already public companies, whether U.S. listed or TASE-listed.

As we discuss each of these approaches, we will be joined by a company presenter from SQream, ElMindA, Mobileye, BioLineRx and BioCancell.  Our company presenters will share their perspectives and experiences.

We also will discuss how a board of directors can best advance the company’s capital-raising and growth plans.

For more information, or to register, please click here.

The International Financial Law Review (IFLR)’s Bankers’ Counsel Poll was compiled with Morrison & Foerster LLP. With input from partners Anna Pinedo and James Tanenbaum, poll questions were formulated. Using recommendations of in-house counsel from the editorial team and Morrison & Foerster, the poll was distributed to counsel at the largest global investment banks that operate in U.S. equities markets. Responses were obtained from a representative cross section of those banks. IFLR’s Bankers’ Counsel Polls provide banks with an anonymous forum to learn how their peers are coping with market and regulatory issues related to IPOs. To access the Bankers’ Counsel Poll, please click here.