In 2021, about 7,500 U.S. startups completed an equity financing round with at least $1 million in venture capital. Six law firms served as outside company counsel in over 56% of these transactions (4,200 total VC deal transactions):
• Gunderson Dettmer: 16% (1,200 deals)
• Cooley: 14% (1,000)
• Goodwin: 8% (600)
• Wilson Sonsini: 7% (525)
• Orrick: 6% (450)
• Fenwick & West: 5% (375)
This distribution follows a power law—a few firms dominate, while many follow. However, since the pandemic began, competition has been heating up. What's driving new entrants?
Law Firm Adoption Rates of NVCA Forms (2022, See Chart):
• Cooley: 100% adoption rate.
• Goodwin Procter: 91% adoption rate.
• Fenwick & West: 89% adoption rate.
• Orrick: 83% adoption rate.
• Wilson Sonsini (WSGR): 59% adoption rate.
• Gunderson Dettmer: 36% adoption rate.
Despite some differences between firms, there has been a significant push by industry insiders since 2018 to adopt the NVCA model forms. Nearly 85% of Series A charters in 2022 were based on the NVCA model, a significant step up from ~3% in 2004. Additionally, 100% of sampled startup charters in 2022 were filed in Delaware, up from 56% in 2004. The NVCA model is now the industry standard for venture deal equity financings.
Even Gunderson Dettmer, which had the lowest NVCA adoption rates at 36% in 2022, has aligned their documents to match a 70% similarity score to the NVCA forms (based on a formula used by Robert Bartlett, a Professor at Stanford Law School, which we'll assume to be directionally accurate).
While the VC legal services market has historically operated under a power law, open-sourcing the NVCA model has started to level the playing field. More lawyers and law firms are joining in on the action, even though deal count is down from its 2021 peak (PitchBook-NVCA estimates the VC quarterly deal count is down ~25%+ through Q1 2024).
In the coming weeks, I will be open-sourcing some of my knowledge on these documents and invite anyone who is interested to join me and share your best checklists, tips, forms, and cap tables to provide open access to those who really want to know how it all works. And even if have mastered these forms, you may want to pickup a few pointers along the way.
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This post was originally shared by Chris Harvey on Linkedin.