Axios Pro Rata: Weil winds down

1. Key Themes

Theme: AI's drug-discovery-to-development gap is spawning new capital structures

Formation Bio raises a "drug development accelerator" fund

AI has been strong at finding drug candidates but weak at getting them through trials, and Formation Bio is building financial and operational infrastructure around that bottleneck.

• "We've written about how AI thus far has been much better at discovering drugs than developing them, which is a bit like being great at grocery shopping but helpless in the kitchen."
• "Formation Bio also sees the stubborn bottleneck, and just raised a $600 million 'drug development accelerator' fund to help address it."

A startup acting like a VC fund to lower its cost of capital

Formation uses a fund structure with outside LPs rather than another equity round, which preserves shareholder ownership and gives it more shots at drug programs.

• "It's a biotech startup... But it is definitely reminiscent of a venture capital fund, with Formation Bio serving as general partner (including carried interest) and the LP base consisting mostly of university endowments, foundations, and hospitals."
• "...this structure will help Formation Bio 'take more shots on goal' without having to risk diluting existing shareholders by raising additional equity. In fact, Liu says Formation has no plans to do another venture round."

The CRO cost structure is the target

Clinical research organizations' billable-hour economics are framed as the core inefficiency AI and centralization can attack.

• "...he argues that nearly half of drug development costs come from CRO margins — driven by billable hours — with Formation believing it can reduce spend by between 30% and 50%."
• "Formation and other CRO startups may or may not help crack the code."

Theme: Mega-deals and consolidation dominate the M&A tape

Large strategic and sponsor deals landing on the same day

The deal volume spans consumer, security, and semiconductor/optics infrastructure.

• "Welcome to what has become a very busy morning in deals land. Thrive Holdings buying ADT, DoorDash making Instacart official, and possibly the largest tech merger ever."
• "Thrive Holdings agreed to buy home security giant ADT (NYSE: ADT) for around $15.3b."
• "DoorDash (Nasdaq: DASH) made it official, agreeing to buy Instacart (Nasdaq: CART) for $17b, or $65 per share."
• "Marvell Technology (Nasdaq: MRVL) is in advanced talks to buy data center optics maker Lumentum (Nasdaq: LITE), which has a market cap of nearly $83b."

Contested public-company deals

• "Monomoy Capital Partners made a nonbinding $101 per share takeover bid for LCI Industries (NYSE: LCII)... LCI already has an all-stock merger agreement with Patrick Industries (Nasdaq: PATK)."

Theme: Capital is flowing into physical-world AI, robotics, and defense/space hardware

Robotics, factories, and space/defense hardware rounds

• "Firehawk, a Dallas-based maker of rocket motors, raised $150m in Series D funding at a $1.4b valuation."
• "Foundry Robotics, an Emeryville, Calif.-based autonomous factory developer, raised $100m in Series A funding."
• "Rendezvous Robotics, a Golden, Colo.-based developer of self-assembling spacecraft, raised $20m."
• "Bleu Robotics, a French developer of AI models for industrial humanoid robots, raised €5m in pre-seed funding."

AI-for-the-enterprise and vertical AI software rounds

• "Serval, an SF-based IT service management platform, raised $150m in Series C funding at a $3b valuation."
• "Casap, an SF-based platform for automating financial disputes and fraud investigations, raised $56m in Series B funding."
• "Broccoli, an SF-based automated customer platform for home service businesses, raised $52m in Series A and B funding."

Theme: China is a visible source of frontier biotech and neurotech funding

Chinese BCI and AI-protein-design rounds

• "NeuroXess, a Chinese brain-computer interface startup, raised around $105m in Series B funding."
• "BioGeometry, a Chinese biotech using AI-driven protein design, raised over $100m from Shanghai Biomedical Innovation and Transformation Fund, Guoke Investment, Fortune Capital..."

2. Contrarian Perspectives

A venture-backed startup raising its own LP fund instead of equity

The norm for a unicorn is to raise successive equity rounds, but Formation is swapping that for an external-LP fund vehicle. The reasoning is cost of capital and dilution.

• "...this structure will help Formation Bio 'take more shots on goal' without having to risk diluting existing shareholders by raising additional equity."
• "Basically a hub-and-spoke model... 'That's only a short-term strategy to lower our cost of capital,' Liu explains."

The clinical-trial bottleneck is a margin problem, not a science problem

The consensus view is that drug development is slow because biology is hard. Liu's counter-view is that a large share of cost is structural: CRO incentives.

• "'CROs have perverse incentives,' Liu says. 'We can't really save on manufacturing, which is expensive, but we can cut a lot of the redundant headcount, extra site visits and other things that cause clinical trials to cost so much.'"

A law firm can fail even while revenue doubles

Weil's revenue doubled over a decade, yet it is dissolving. The lesson is that relative performance and talent retention matter more than absolute growth.

• "Weil Gotshal generated around $2 billion in revenue last year. That's double a decade earlier, but well behind the revenue of top peers."
• "...a law firm's most valuable assets walk out the door each night, and rival poaching can cause something akin to a bank run."

3. Companies Identified

Formation Bio

• Description: AI-enabled biotech startup building a pharma company, now with a $600M fund.
• Why mentioned: Case study in a novel capital structure and CRO-disruption thesis.
• Quotes: "Formation Bio is not a venture capital firm. It's a biotech startup backed by some of the world's most successful and deep-pocketed investors — including a16z, Sequoia Capital, and Thrive Capital — and was valued at $1.7 billion when it last raised funding in 2024."

Weil, Gotshal & Manges

• Description: Elite Wall Street law firm deciding to dissolve.
• Why mentioned: Cautionary tale on underinvestment and talent poaching.
• Quotes: "The firm raked in business during the chaotic aftermath of the 2008-09 financial crisis but failed to reinvest those profits and even cut lawyers when many of its competitors were in growth mode."

Thrive Holdings / ADT

• Description: Thrive Holdings is acquiring home security company ADT.
• Why mentioned: Headline take-private-scale deal.
• Quotes: "Thrive Holdings agreed to buy home security giant ADT (NYSE: ADT) for around $15.3b."

DoorDash / Instacart

• Description: Delivery platforms combining.
• Why mentioned: Major consumer-internet consolidation.
• Quotes: "DoorDash (Nasdaq: DASH) made it official, agreeing to buy Instacart (Nasdaq: CART) for $17b, or $65 per share."

Marvell Technology / Lumentum

• Description: Semiconductor firm in advanced talks to buy a data center optics maker.
• Why mentioned: Possibly the largest tech merger ever, tied to AI data center buildout.
• Quotes: "Marvell Technology (Nasdaq: MRVL) is in advanced talks to buy data center optics maker Lumentum (Nasdaq: LITE), which has a market cap of nearly $83b."

Serval

• Description: IT service management platform.
• Why mentioned: Largest valuation among VC rounds listed ($3B).
• Quotes: "Serval, an SF-based IT service management platform, raised $150m in Series C funding at a $3b valuation... Sequoia Capital led."

Firehawk

• Description: Dallas-based rocket motor maker.
• Why mentioned: Defense/space hardware unicorn round.
• Quotes: "raised $150m in Series D funding at a $1.4b valuation led by Advent International and Rochefort Asset Management."

Foundry Robotics

• Description: Autonomous factory developer.
• Why mentioned: $100M Series A in industrial automation.
• Quotes: "raised $100m in Series A funding. Marlinspike Partners led, joined by Khosla Ventures, SE Ventures, and Wing VC."

NeuroXess

• Description: Chinese brain-computer interface startup.
• Why mentioned: Large neurotech round outside the US.
• Quotes: "raised around $105m in Series B funding led by SDIC Juli, Shenzhen Capital Group, and Qinzhi Capital."

BioGeometry

• Description: Chinese AI-driven protein design biotech.
• Why mentioned: $100M+ AI-bio round in China.
• Quotes: "raised over $100m from Shanghai Biomedical Innovation and Transformation Fund, Guoke Investment, Fortune Capital, Xinglian Capital, Gaorong Capital, and Index AI Industry Innovation Fund."

Onsemi / Ferric

• Description: Chip company in talks to buy a NYC chip startup.
• Why mentioned: Near-$1B outcome for a company that raised little.
• Quotes: "Onsemi (Nasdaq: ON) is in talks to buy NYC-based chip startup Ferric for nearly $1b... Ferric has raised over $40m from firms like New Science Ventures."

Lightspeed

• Description: Venture firm.
• Why mentioned: Fundraising for AI.
• Quotes: "Lightspeed secured $750m for a new AI-focused fund and related vehicle, per the WSJ."

Anthropic

• Description: AI lab acting as a strategic investor.
• Why mentioned: Showing up as an investor in multiple deals.
• Quotes: "phData... secured new funding from existing backer Gryphon Investors and new investor Anthropic." / "Rocker, an AI assistant maker, raised $12.85m. Greycroft led, joined by Anthropic and Menlo Ventures' Anthology Fund..."

Dine Brands Global

• Description: Applebee's and IHOP franchisor.
• Why mentioned: Take-private offer.
• Quotes: "Cobblers Cove Capital and Arkhouse Management offered to buy... Dine Brands Global (NYSE: DIN) for around $494m in cash, or $39 per share, per Bloomberg."

Mochatrade

• Description: Provider of tokenized U.S. equities to traders in India.
• Why mentioned: Tokenization/crypto-rails use case backed by Coinbase Ventures.
• Quotes: "raised $5.5m. CoinFund led, joined by Coinbase Ventures."

4. People Identified

Ben Liu

• Description: CEO of Formation Bio.
• Why mentioned: Architect of the fund structure and CRO-disruption thesis.
• Quotes: "CEO Ben Liu says that his goal is to build a large pharma company, on par with an Eli Lilly or Sanofi..." / "'We do think we've found a category that we would hold onto, which we'll share in a couple quarters.'"

Christine Lagarde

• Description: European Central Bank president.
• Why mentioned: Announced early departure.
• Quotes: "Christine Lagarde said she'll step down as European Central Bank president on Feb. 7, 2027 — nine months before her term is set to expire."

Daryl Tol

• Description: President of General Catalyst's HATco.
• Why mentioned: Leaving the health-system acquisition effort.
• Quotes: "Daryl Tol is stepping down as president of General Catalyst's HATco, the effort that bought an Ohio hospital."

Kim Cooper and Kim Moore

• Description: Founders of U&I Ventures (ex-YouTube; ex-Glynn Capital).
• Why mentioned: Debut seed fund.
• Quotes: "U&I Ventures raised over $32m for its debut seed fund. Its founders are Kim Cooper (YouTube) and Kim Moore (Glynn Capital)."

Lisa Liu

• Description: New partner at crypto VC Dragonfly, formerly SignalFire.
• Why mentioned: Notable VC hire.
• Quotes: "Lisa Liu joined crypto-focused VC firm Dragonfly as a partner. She previously was with SignalFire."

Sascha Gruber

• Description: New CEO of LGT Capital Partners.
• Why mentioned: Leadership change at a major Swiss alternatives manager.
• Quotes: "LGT Capital Partners of Switzerland promoted Sascha Gruber to CEO."

Erin Mulvaney & Andrew Scurria

• Description: WSJ reporters.
• Why mentioned: Source of the Weil post-mortem.
• Quotes: "The roots of the crisis at Weil date back more than a decade."

5. Operating Insights

Don't ignore the incentive structure of your vendors

Formation's thesis rests on identifying that CRO billing models create waste, then building an alternative.

• "'CROs have perverse incentives,' Liu says. 'We can't really save on manufacturing, which is expensive, but we can cut a lot of the redundant headcount, extra site visits and other things that cause clinical trials to cost so much.'"

Reinvest windfall profits and protect your talent base

Weil's collapse stems from harvesting a boom without reinvesting, then losing people to better-capitalized rivals.

• "The firm raked in business during the chaotic aftermath of the 2008-09 financial crisis but failed to reinvest those profits and even cut lawyers when many of its competitors were in growth mode. It has fallen behind industry leaders in head count, revenue and profit—leaving it vulnerable to poaching from rival firms."

Use structured capital to fund repeatable bets without dilution

For asset-heavy, multi-shot businesses, separating program-level capital from the corporate cap table can preserve ownership.

• "...this structure will help Formation Bio 'take more shots on goal' without having to risk diluting existing shareholders by raising additional equity."

6. Overlooked Insights

Spin-out NewCo structure with a possible long-term hold

Formation says selling early assets to Big Pharma is a temporary financing tactic, and it hints at a category it intends to keep, which suggests a pivot toward owning late-stage assets.

• "'That's only a short-term strategy to lower our cost of capital,' Liu explains. 'We do think we've found a category that we would hold onto, which we'll share in a couple quarters.'"

AI labs and platforms as strategic minority investors in unglamorous categories

Anthropic backs both a data-management services company and an AI assistant maker, signaling ecosystem-building outside core AI infrastructure.

• "phData, a Minneapolis-based provider of big data management solutions, secured new funding from existing backer Gryphon Investors and new investor Anthropic."
• "Rocker, an AI assistant maker, raised $12.85m. Greycroft led, joined by Anthropic and Menlo Ventures' Anthology Fund, Matchstick, and Stripe."