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There are two groups that benefit, portfolio companies and the VCs' LPs. The former get to keep more of the money that's invested, and the latter are no longer
by pg 13y ago
There are two groups that benefit, portfolio companies and the VCs' LPs. The former get to keep more of the money that's invested, and the latter are no longer being charged for expenses in addition to the management fees they pay.
In practice, the startups' own legal expenses will probably also be lower. In the bad old days, lawyers on both sides would engage in a leisurely and expensive back and forth, knowing they'd both get paid out of the amount invested. But if the VCs have to pay their lawyers out of their own management fees, they'll instruct them to make the negotiations fast and simple, which will in turn decrease the billable hours on the startup's side as well.
- msandford 13y agoOkay, so I got it half right. They've made the consumer of services and payer for services the same (themselves) and thus they have the proper incentives. This is a bigger win for the startup ecosystem than I had previously thought.
- not_that_noob 13y agoAbsolutely. Kudos to Spark and I hope the others follow. And PG, thanks for changing the world. You made the currents swirl in a way that in some small way influence all the ripples like this downstream.
- nwenzel 13y agoThe bad old days are still alive and well in insurance and banking. Bankruptcy is even worse. Eight years in the insurance world has shown me that the two biggest law firm "bad behaviors" are excessive billing and multi-party meetings. Both of which, as noted, VCs will be in a stronger position to refuse to pay. I call this version of the principal-agent problem the "new boat problem." When a partner wants a new boat, she/he bills more hours. Even more pumped for YC interview on Sunday after reading the comments.