Foley & Lardner January 2024 Newsletter

Friends,

Happy New Year! Sharing business and legal developments as we see them today.

For many, January is a time of resolutions, goals, and predictions for the new year. For us, we will continue to rely on the principles that we established a long time ago — working with founders, startups, and investors who are pushing the boundaries in their respective fields and adaptable to ever-changing market conditions.?

The past two years have presented a host of challenges for startups and investors. Changing?regulatory landscapes?have made exit opportunities?hard to come by. Dry capital continues to sit on the sidelines?—?PitchBook?points to a large drop in active venture capital investors in the US. They define active investors as those who have made two or more deals, which dropped by 38% in the first three quarters of 2023 compared to the same period last year. That means 2,725 fewer firms made deals in 2023.?

On a brighter note, interest rates are expected to drop in the coming year as there has been encouraging news on the economy. And this is not just speculation; on December 13, the Federal Reserve indicated that it is ready to make at least three cuts next year and up to four in 2025. TechCrunch reports that this might mean tech shares and valuations could get a boost as “cash-rich” investors look for new places to invest. Investors are also willing to take greater risks when interest rates are lower, which is always a good thing for founders.

With the?boom?of artificial intelligence, both from an operational and investing standpoint, companies will be expected to operate in a?capital-light?model. This means more agile teams, moving quickly to prove product-market fit, profitability, and exit opportunities.?AI-powered automation could lead to much greater efficiency for startups and improved operations. This technology can automate various tasks, from data entry to customer support, meaning significant cost savings for founders. No one can predict the future 100%, but conditions seem right for a sunnier year for startups. As we kick off the new year, founders should prepare for what this means and work with their advisors to determine how they can best capitalize on more favorable conditions.

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.

Your Foley & Lardner Silicon Valley team

Natasha Allen , Eric Chow , Brandee Diamond , Louis Lehot , Lyman Thai , André Thiollier , Alicia Dorner , Alidad Vakili ?and Tiaan De Nysschen .