I was under the impression that more and more founders (and even investors) are speaking out against the idea of legal fees paid by the founders. Is that only at the seed stage and acceptable at Series A?
To me it is totally unreasonable. We had a series A investor that required that. Their attorneys poked around and argued about every little thing and charged us $1200 an hour. They even had a $50k cap in the documents which they asked the VC to raise once they saw they were going to be able to exceed. The VC of course agreed because it wasn't his money and then proceeded to pressure us to accept it. We had already wasted so much time with these guys and racked up our own legal bills. So we were pretty much at their mercy.
If my company is going to pay your legal fees, then they work for me, not you and I will reserve the right to fire them and find someone really cheap instead.
If my company is going to pay your legal fees, then they work for me, not you [sic] and I will reserve the right to fire them
This the most logical comment on this thread. I can't believe people accept paying a VC's legal bills during a negotiation. VC's are in the business of doing deals, and have their own legal retainers to work on those deals - not to mention a fan favorite movie "My Cousin Vinny" teaches every American that giving $1 to a lawyer creates client-attorney privilege.
It's amazing that without being sued (and then losing on appeal in court), people are willing to pay out of pocket for a lawyer to actively work against them in what could be one of the most important deals of a founder's life.
> not to mention a fan favorite movie "My Cousin Vinny" teaches every American that giving $1 to a lawyer creates client-attorney privilege.
Yes, but in this case, you aren't paying the lawyers, you're paying the bills that the lawyer is charging their clients, the VC. Essentially, it's a reimbursement where you are paying for the VC's A/C privilege.
The term sheet we posted is just meant to show what a pretty good term sheet looks like from a good investor. The investor having its legal fees reimbursed by the company is something that shows up all the time. Sure, you can negotiate that if you want. You can negotiate other things too, or choose not to. The way this usually plays out though is that unless you have the kind of leverage that lets you basically write your own term sheet, you have to prioritize, and most people prioritize getting what they want on valuation, control, clean terms, etc. before making sure to shift $30K in legal fees back to the investor.
