Hi Chris, really enjoying the series of articles. My understanding for the startup picking up the tab was so that the lead firm didn’t just get stuck with the bill with other investors riding on their coat tales, which kind of makes sense. My experience is that fees go sideways when the startup docs/structure/ records are in a bad way and need to be cleaned up. Fixing ‘legal technical debt’ is often 10x the cost of doing it right in the first place. Cheers Toby
Toby, thanks so much for sharing! Yes, what you said is definitely true, but I think the same justification for legal debt could be used for paying for one set of attorney's fees and not two. Company counsel is in the best position to make sure the company does not have any legal technical debt. I understand the argument but find it hard to trust that a startup should pay not just for its own counsel but two sets of attorneys to effectively lower its legal technical debt.
The "not riding the coat tails" argument is also a good one. But the question is, who benefits the most from that arrangement? The startup or the investors?
Hi Chris, really enjoying the series of articles. My understanding for the startup picking up the tab was so that the lead firm didn’t just get stuck with the bill with other investors riding on their coat tales, which kind of makes sense. My experience is that fees go sideways when the startup docs/structure/ records are in a bad way and need to be cleaned up. Fixing ‘legal technical debt’ is often 10x the cost of doing it right in the first place. Cheers Toby
Toby, thanks so much for sharing! Yes, what you said is definitely true, but I think the same justification for legal debt could be used for paying for one set of attorney's fees and not two. Company counsel is in the best position to make sure the company does not have any legal technical debt. I understand the argument but find it hard to trust that a startup should pay not just for its own counsel but two sets of attorneys to effectively lower its legal technical debt.
The "not riding the coat tails" argument is also a good one. But the question is, who benefits the most from that arrangement? The startup or the investors?