31–40 of 114 posts
Also, transaction fees are typically presented as being deducted from the capital being moved, as opposed to just charging the company. Of course, net it's the same. But language matters.
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.
This is going to be one of those wonderful games of iterated group prisoner's dilemma, in which one member of a formerly functioning cartel has just publicly announced an intention to always play Defect.
Would that imply that, strategically, other investors might wish to avoid co-investing with Spark to punish their defection?
-Pay own legal fees, saves portfolio company money
-Better terms/relationships with investments attracts more, higher-quality startups
-Higher quality startups will likely be the big hits VCs need to be successful
-Attracting high quality startups forces other VCs to work with us on future and larger investment rounds
More progressive still would be funding startups that disintermediate lawyers and the billable hour system.
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.
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.
Earlier quoted context omitted.
The net effect is that they're being more honest about how much they're actually willing to invest, correct? They don't magically have more money and the lawyers have to be paid anyhow. At least it puts the onus on them to keep their negotiations to a minimum.
this. If I give you $8 and ask you to pay me $2 for expenses, or I give you $6 you don't much care. This would only apply to entrepreneurs who don't know that term sheets are less attorney fees.
Hopefully (as pg points out) the next thing to go is the weird way that employee option pools are handled.
Can you...pay the legal fees with the money the VC gave you? :)