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It matters if the cost is unpredictable and only one side can control how much it comes to. The information isn't symmetric.
by neltnerb 6y ago
It matters if the cost is unpredictable and only one side can control how much it comes to. The information isn't symmetric.
- bdowling 6y ago> It matters if the cost is unpredictable But the legal fees for a VC funding round ARE predictable. The article even includes a chart of standard fee caps for various rounds.
- neltnerb 6y agoAnd then demonstrates how the VC's greater leverage was used to strongarm a startup founder, after the deal was done, to pick up the costs despite an explicit cap as the only thing they insisted on. So it's predictable if you can factor in the risk of whether your VC will attempt to do that I guess. Though if a VC did that to me I think I'd be more inclined to do what one of the examples in the article did and just say, "Nope, nope, if you're trying to screw me over before we even start, we are not starting."
- jariel 6y agoThe costs are established as part of the deal, before it's signed. It's part of the nego at least as a cap. The issue here is not 'who pays' because that's not important, the issue here is the scope and cost of the transaction tax. Like HN instituted common safes ... it'd be nice to institute more consistent language for Round A's, but the lawyers are not incented to really do that now are they.
- neltnerb 6y agoThe article has an example where despite negotiating caps the vc firm used their greater leverage to force multiple founders to pick up fees beyond the negotiated cap. I am talking about the content of the article, I am not taking about your experience.