Every venture financing has to involve lawyers. But not every lawyer is suited for your venture financing. Here’s the deal with lawyers and what they can (and should) do for your for your venture financing.
Education and Negotiation – An experienced startup lawyer should have lots of VC financing experience. Your VC obviously should have lots of VC financing experience. You know who doesn’t have a lot of VC financing experience? You. That’s where a good startup lawyer can be helpful. If nothing else, she can educate you on the stuff that matters and does not matter. She’ll be able to negotiate more effectively than a lawyer who has no deal experience. She’ll likely have a good reputation and your choosing her will reflect excellently on you.
Focus – When you get that term sheet or definitive financing agreement (subject of a future post), you’re going to have a million questions. You’re going to (and you should) ask above every word in that document. Some of it will seem like Greek. Honestly, most of it should. A good startup lawyer is going to guide you and get your attention on the stuff that matters.
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Capped Fees – A good and experienced startup lawyer is going to cap her fees. If a lawyer doesn’t agree to do this, then you have to question how experienced she is in the startup space. Pre-funding, a startup lawyer may even defer fees until you get funding or waive payment, preferring to get warrants or some other equity compensation.