Sidley Austin has seen nearly 70% growth in the firm’s emerging companies and venture capital client base over the pandemic period, building on a cast of partners in Northern California with deep ties to early-stage companies and investors.
The growth comes as the firm tripled the size of its emerging companies group across its Palo Alto and San Francisco offices in the past 12 months. New laterals from indigenous tech firms have helped Sidley capture more work for growth sectors such as tech, fintech, life sciences and health software.
“Sidley came to this realization earlier than most, that they would miss out on a big part of the practice if they didn’t tie in this earlier-stage piece,” said Divya Bala of Lippman Jungers Bala.
Hank Barry, the leader of the firm’s emerging companies and venture capital (ECVC) practice, says clients can trust the firm’s lawyers, who are all “veterans of the valley,” to complete venture financings and keep hygiene clean.
On top of that, Barry said, the firm offers its regulatory practice—an area of growing importance to tech ventures in particular—and the strength of an international platform. Finally, its lawyers understand how to help companies navigate a significant change in culture when going public.
Simply put: “At Sidley, you don’t give anything up and you get something extra. That is very compelling to early-stage companies,” Barry said.
The narrative is resonating with laterals and clients alike.
“In the past, there was a fairly simple legal landscape in Northern California. Over the ensuing 25 years, it’s become increasingly complex. Now, these companies are in the crosshairs of all kinds of issues such as shareholder activism and class action lawsuits,” said Martin Wellington, who joined the firm from Davis Polk & Wardell in 2015 and is now managing partner of Sidley’s Palo Alto office.
Wellington continued, “It’s no longer this parochial, small tech market in Northern California. These companies are at the center stage of the global economy, and there’s nothing that matters to a GC that we’re not world-class at.”
In the past year, clients have tapped Sidley’s lawyers to advise Dream Sports, India’s leading sports technology company, on several transactions totaling over $1 billion; Arvelle Therapeutics in its $960 million sale to Angelini Pharma; and Bullpen Parlay Acquisition Company, a SPAC targeting the online sports gambling sector, in its $230 million initial public offering, among other deals.
A Domino Effect
The growth of Sidley’s ECVC platform didn’t happen overnight.
Sidley ”built the right way, bringing well known private equity partners with a strong emphasis on tech and tech M&A to the table, then circling back to people looking for stronger infrastructure,” Bala said. “This laid a foundation of senior corporate partners who could speak to the immense amount of success of the tech platform and the ability to service clients with all the specialty areas that it built out.”
Dan Clivner, co-leader of the firm’s M&A and private equity practice, joined the firm to oversee the launch of its Century City office in 2015. The former Simpson Thacher & Bartlett partner has represented investment firms and affiliates of Apollo Global Management, The Blackstone Group, KKR and Siris Capital Group, among others.
In 2019, the firm brought on Mehdi Khodadad, who chaired Cooley’s private equity practice, alongside partner Joshua DuClos. Khodadad has built a practice representing leading technology and life sciences companies and their venture capital and private equity sponsors. One of his major clients is Clearlake Capital Group, which he represented in its $3 billion acquisition of Endurance International Group Holdings in 2020.
“If the firm didn’t have the pieces that came before, the same argument could not have been made to ECVC people, who would have seen it as taking a risk to leave an indigenous firm,” Bala said.
In May 2020, the firm recruited Frank Rahmani as a corporate and life sciences-focused partner to bolster its emerging companies practice. Rahmani previously spent 23 years at Cooley, where he completed more than 500 institutional and venture financings.
Growth continued in 2021, as Sidley brought on Fenwick & West technology partners Andrew Harper and Idan Netser; Hogan Lovells’ global life sciences group leader Asher Rubin; and Cooley capital markets partner Carlton Fleming, among others.
Global, Regulatory Needs
“There was a time when Silicon Valley firms seemed impenetrable. But with these moves that Sidley has made, each one signaled to the market that there may be some reasons why those platforms, as strong as they are, might have some vulnerabilities,” said Sabina Lippman of Lippman Jungers Bala.
Those vulnerabilities, according to Lippman, include lacking a strong regulatory practice for life sciences clients and a deep private equity bench for more traditional investors looking to invest in tech companies.
Life sciences companies have increasingly complex needs, spanning intellectual property and partnership deals, according to Sharon Flanagan, the leader of Sidley’s global life sciences practice. Flanagan is also a member of the firm’s management and executive committees and serves as the San Francisco office managing partner.
And certain trends are creating the need for additional expertise in certain areas. For instance, efforts to use data to diagnose diseases earlier or achieve better clinical results drives demand for privacy lawyers, Flanagan said.
Another trend, according to Rahmani, a member of the firm’s life sciences practice, is an uptick in cross-border deals as countries such as China drive investment. Once again, that requires regulatory expertise and market access across multiple geographies, he said.
Rahmani, who said he continues to see life sciences companies “transcend borders with deals,” recently represented Chinese-based structural heart disease treatment company Venus Medtech (Hangzhou) Inc. in its $300 million acquisition of Cardiovalve Ltd., an Israeli developer of a transcatheter mitral and tricuspid valve treatment.
Similar trends are at play for tech companies, according to Harper and Netser, who joined the firm in January along with more than 200 tech clients (including several that have since achieved ‘unicorn’ status).
Harper said there’s a particular need for expertise in regulated spaces such as healthtech, insuretech, fintech and privacy. Some examples of this work at Sidley include handling libel and privacy work for Facebook as well as regulatory work for Coinbase.
Flight to Full-Service
“In the past few years, we’ve seen a flight to quality and a flight to global full-service firms who can help clients with all of their key needs, and that requires strong capital markets, private equity, regulatory and M&A benches. There’s a multiplier effect, once you have a strong bench in these areas,” Lippman said.
As part of that flight to quality and full-service, clients at Sidley are coming to the firm to handle more of their needs, Harper said, noting that one of his clients previously used 30 law firms, while now the vast majority of its needs are handled at Sidley.
“That solves a lot of problems for the general counsel,”Netser agreed, noting that the acting legal counsel of a startup doesn’t want to quarterback 5 or 10 firms. “We can be a one-stop shop for them, and it saves them a lot of pain.”
Just as Sidley bridges the gaps between clients’ various needs, it’s also creating connections across different clients, including another key demographic for the ECVC group: the investor base.
In the past two to three years, there’s also been a rapid convergence in the venture markets. Traditional investors are now interested in emerging companies as an asset class. Simultaneously, venture-backed companies are moving up market as they have growth rounds earlier in an effort to grab market share, according to Sandi Knox, who leads the corporate venture capital practice at Sidley.
As a result, Sidley is representing large financial investors and hedge funds in ECVC transactions.
“Private equity investors are used to calling all the shots, and that is almost antithetical to the culture of venture-backed companies where no one takes control of the enterprise from the beginning,” Knox said. “We help bridge the gaps between these two parties.”
Some of the firm’s recent work for investors includes advising Khosla Ventures as the lead investor in the $40 million Series B financing of brain computer interface company Synchron; Kleiner Perkins as the lead investor in the $50 million Series C financing of database platform PlanetScale; and GIC in its Series C investment in Solugen, which is focused on decarbonizing the chemicals industry.
Sidley has been in Northern California for over 50 years, Harper notes. It’s simply narrowing its focus to tackle the ECVC client base. And it’s planning for more growth in this practice.
“We’ve seen vibrant activity across all sectors of the early-stage world, that’s one of the reasons we’ve been aggressively building this office,” Barry said. “It’s been growth to meet the market.”