Here's how 4 top law firms have been taking VC-style stakes in their own clients including Peloton and Snowflake — and why many of these lucrative bets fly under the radar

  • Lawyers at Cooley, Fenwick, Gunderson and Wilson Sonsini have all taken stakes in some tech- and life sciences-industry clients.
  • Lawyers at Cooley reportedly made around $150 million when the firm's client Snowflake went public. 
  • Sometimes the investments are made by the firm in lieu of legal fees, and sometimes they are made by affiliated investment funds or lawyers themselves.
  • Do you have more details, or know a firm that should be on this list? Contact Jack Newsham at [email protected] or via Signal at 314-971-1627.
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Lawyers at Cooley reportedly made around $150 million when the firm's client Snowflake went public. It wasn't the first time that Big Law attorneys struck it big investing in a client, and it probably won't be the last.

Venture capital-style investments by law firms and their partners go back decades, with Cooley and firms including Wilson Sonsini and now-defunct Venture Law Group reported to take stakes in emerging companies. Before the dot-com bust, some of those stakes were valued in the tens of millions of dollars.

Investing in clients has always been somewhat fraught, with some legal ethics professionals saying it can cloud a lawyer's professional judgment and lead to conflicts. That's why firms that do take a stake in clients often take a relatively small one, and often just for part of the fees that they charge, with the rest paid in cash, according to published accounts.

Read more: Snowflake's mega IPO resulted in more than $100 million in fees for investment banks. Here's how much Goldman Sachs, Morgan Stanley, and 8 other banks each made.

As Silicon Valley's growth has continued, recent public disclosures have made clear that the practice hasn't died down. And securities filings don't even capture the companies that haven't turned to public markets yet, which have received investment from an even broader group of law firms, according to legal industry sources.

Searches of filings with the Securities and Exchange Commission and past news stories uncovered numerous examples of law firms and attorneys with stakes in clients, but some stood out for the frequency and size of their investments. Here are a few firms known for taking stakes in clients:

Cooley

Invests through: GC&H Investments and others

Recent and notable stakes: Uber, Snapchat, Yext, SendGrid, Repare Therapeutics, Keros Therapeutics, Avedro, Apollo Endosurgery, Calithera Biosciences

Details: Cooley has grown far beyond its Silicon Valley roots, but is still a dominant player in the tech and life sciences industries. The firm, whose revenue hit $1.33 billion last year, according to the American Lawyer, participated in more than 1,000 venture financings and lawyered 20 deals in the billion-dollar-plus range.

Investments made by the firm or its lawyers include a stake in Uber of less than 0.03% at the time of its IPO, which would have been worth about $20 million today. Shares held by GC&H and other Cooley affiliates in Snap were reportedly worth over $11 million at the time of the company's IPO; as of February, Snap said in a securities filing that Cooley and its lawyers owned shares worth around $300,000.

A Cooley representative didn't respond to a comment request.

 

Fenwick

Invests through: Unknown

Recent and notable stakes: Peloton, Smartsheet, Upwork, Facebook, Stoke Therapeutics, Bill.com Holdings

Details: Fenwick & West is known for roles on some of the biggest tech deals in recent decades, including representing Facebook in its 2012 IPO and its subsequent purchase of Instagram, and later representing WhatsApp in its 2016 acquisition by Facebook. More recent megadeals have included representing Loxo Oncology in an $8 billion sale to Eli Lilly and Shutterfly in its $2.7 billion acquisition by Apollo Global Management.

The firm has continued to take small stakes in growing companies, too. Last year, the firm helped take exercise-bike maker Peloton public, disclosing in the process that Fenwick affiliates had about 6,900 Series F shares. Bill.com Holdings, a digital business payments platform, said in its S-1 that Fenwick directly held 182,701 shares ahead of its market debut at $22 a share. And SmartSheet, a SaaS provider whose IPO valued it over $1.4 billion, mentioned in its 2018 S-1 that Fenwick affiliates owned about 0.07% of its shares.

A Fenwick representative didn't respond to a comment request.

Read more: These 10 deals transformed industries and changed they way we think about M&A

Gunderson

Invests through: Unknown

Recent and notable states: Etsy, Natera, Tarsus Pharmaceuticals, Anaplan, Si-Bone, Arcus Biosciences

Details: Gunderson Dettmer Stough Villeneuve Franklin & Hachigian has been recognized in the venture capital and emerging-company community since its founding in the mid-1990s by a group of partners who left Brobeck. While the firm is not ranked by the American Lawyer, which described leaders as "tight-lipped" about its financials, it has grown steadily over the years, and now lists about 300 lawyers on its website.

Notable investments include Etsy, which said a Gunderson affiliate held less than 0.25% of its equity around the time of its IPO, and Natera, a leader in the genetic testing industry, which said in its 2015 S-1 that a Gunderson affiliate held a stake of less than 0.1%. Natera has a market capitalization of about $6 billion today.

Several biotechnology and life-sciences companies have mentioned that Gunderson partners' investment vehicles have equity stakes ranging from less than 0.1% to less than 1%.

Gunderson declined to comment.

 

Wilson Sonsini

Invests through: WS Investment Co.

Recent and notable stakes: Google, Juniper Networks, Palantir, Brocade Communications, Applied Molecular Transport, Nkarta Therapeutics

Details: Wilson Sonsini is one of the godfathers of taking stakes in clients, with the practice dating back to at least the 1970s. After a partner, John Roos, was named the US ambassador to Japan, a legal newspaper reported that his financial disclosures and other documents showed that in 2000, the average partner at the firm made more from investments than from legal fees. Their stake in Avanex, a fiber optic components supplier, was reportedly worth over $100 million after the company's IPO.

Filings with the SEC shows the firm's affiliates remain active investors. They often raise multiple rounds per year, according to reports; in one illustrative example, Miramar Labs, a client that was acquired for $20 million in 2017, listed stakes held by WS Investment Company (2008C), (2015A) and (2010A) in a prospectus.

Another client, Domo Inc., which said in a 2018 prospectus that a Wilson affiliate had a stake of less than 1%, recently announced a joint project with SixFifty, a tech subsidiary of the law firm.

A Wilson Sonsini representative didn't respond to comment requests.

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