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The analysis here seems pretty shallow. As in every other deal, one needs to consider what they're offering, and your own position. In our case, we are equity

The analysis here seems pretty shallow. As in every other deal, one needs to consider what they're offering, and your own position. In our case, we are equity rich and cash poor. We don't care nearly so much about our share, so long as a great product gets off the ground. We also don't particularly think it's a wise course of action to bargain with a law firm. Especially when one has better things to do. We're talking about 1% here. Shouldn't you be spending time worrying about your product? Or more cynically, getting a better VC deal? Lastly, there's the equity equation. If these particular lawyers would improve your prospects for 1.01% over the alternative (other lawyers, or more specifically, over the bargaining process for other lawyers when you should probably just be coding), it should be worth it: more if you're risk averse.

nivi 19y ago
Thanks for the comment Dani. When it comes to applying the equity equation, consider the opportunity cost: http://venturehacks.com/articles/equity-equation#opportunity http://venturehacks.com/articles/equity-equation#opportunity For example, 1% spent on lawyers is 1% you can't spend on developers.
- DaniFong 19y ago
  True, but another consideration is that sometimes those optimal deals take long enough to make, they should be factored into said opportunity cost. Whatever time you're spending hunting and bargaining with lawyers could be, alternately, spent hunting for developers, or hunting for users, or one of any other things. Indeed, the value of the better firms may be far more than worth any 1% investment. Perhaps a better idiom is that the lawyers are investing in the company. They're large enough to qualify for riskier investments open only to institutional investors, so they miss much higher levels of interest than the public. This means that a deferred payment is a significant hit to their bottom line, and should be counter balanced. Additionally, certain law firms waive their fees unless an initial financing to completes. These firms, in addition to helping you out legally, also can help appreciably in raising the next round, and getting the best deal (for themselves and the founders).

nivi 19y ago

Thanks for the comment Dani. When it comes to applying the equity equation, consider the opportunity cost: http://venturehacks.com/articles/equity-equation#opportunity http://venturehacks.com/articles/equity-equation#opportunity For example, 1% spent on lawyers is 1% you can't spend on developers.

DaniFong 19y ago
True, but another consideration is that sometimes those optimal deals take long enough to make, they should be factored into said opportunity cost. Whatever time you're spending hunting and bargaining with lawyers could be, alternately, spent hunting for developers, or hunting for users, or one of any other things. Indeed, the value of the better firms may be far more than worth any 1% investment. Perhaps a better idiom is that the lawyers are investing in the company. They're large enough to qualify for riskier investments open only to institutional investors, so they miss much higher levels of interest than the public. This means that a deferred payment is a significant hit to their bottom line, and should be counter balanced. Additionally, certain law firms waive their fees unless an initial financing to completes. These firms, in addition to helping you out legally, also can help appreciably in raising the next round, and getting the best deal (for themselves and the founders).