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Doesn't this just mean Spark will have a little less money to actually invest, thus will need to invest at slightly lower valuations to get the same returns, an
by tlrobinson 14y ago
Doesn't this just mean Spark will have a little less money to actually invest, thus will need to invest at slightly lower valuations to get the same returns, and companies will accept those lower valuations because they no longer have to pay the legal bills?
Of course that's a huge simplification, and I'm in favor of reducing sneaky terms that can take entrepreneurs by surprise, so I'm not complaining.
- dopamean 14y agoThis is exactly what I was thinking. Seems like a cost that will be recouped somewhere. Perhaps some startups dont mind that. I don't know enough to have an opinion on its merits. I would imagine some startups may not mind footing the legal bills if it means saving in some other way.
- benmccann 14y agoI think it's also likely to reduce total legal expenditures. The investors previously did not see the legal bill and so their lawyers had less incentive to minimize fees.
- jacquesm 14y agoYou are essentially saying that a VC has no problem saddling up one of their portfolio companies with unnecessary costs, in other words that they are hurting their own interests.
- benmccann 14y agoClearly the VCs have an interest in keeping legal expenditures down. But the extra layer of indirection does not help that goal. E.g. employers, individuals, and insurance companies all have an interest in lowering health costs, but the structure of the market makes it a difficult goal.
- danielweber 14y agoPrincipal-agent problem. The very first thing that popped into my mind, though, was what happened with ArsDigita. I don't think they've agreed to not use the company's money when suing the company's CEO.
- sharkweek 14y agoI would absolutely without question go with the investment with the fewest hassles. Even if it meant a smaller initial dollar amount (within reason), there's a lot of value in simplicity.