In the earliest days of a company the most critical things are team & product development. Founders energy needs to be primarily focused on those two things. Everything else is often a distraction.
Raising capital for startup companies also requires a big effort. Choosing the right investors that respect/support your vision, that you can imagine working with and can help isn’t an easy task even in the best of times.
And once you make this decision, the company hires lawyers and the investor hires lawyers, documents get drawn up and legal fees start building.
We would rather these startups spend less time and money in the documents and contracts and more time focused on building their business.
And we want our own actions to be consistent with this objective.
In recent years our firm and several others have taken efforts to simplify our seed and Series A legal documents. It has been a good thing and improved efficiency.
But we would like to do more to align our interests with founders.
For as long as I can recall, both as an entrepreneur and a vc, startups have been asked to pay their investors legal expenses related to their investment. Whether the company raises $500k or $5MM it has become “standard” that the company foots the investors legal bill.
I didn’t understand it then and I still don’t get it now.
Starting today we would like to change that.
My partners and I at Spark Capitalare going to pay our own legal fees at the earliest days of the company up to a cap of $25k going forward. If this cap lasts a few rounds even better. The only fine print we can think of is if there are multiple co investors we would ask them to pay their own way as well. If not than we wil just pay our pro rata.
We would rather see this money go towards better uses and continue our efforts to align ourselves with the founders that risk it all every single day.