Back to: BUSINESS FUNDING PROCESS
Counsel & Expenses
The venture funding process often requires extensive legal services. An attorney serves the role of helping each party:
- Understanding the important considerations,
- Negotiate the funding deal (often with the other party’s counsel),
- Conduct or facilitate examination of the target company (due diligence), and
- Memorialize the transaction through drafting/reviewing legal documents.
The extent of attorney involvement varies depending on a number of factors, including:
- The stage of funding,
- Involvement of counsel (increased negotiation/document review),
- Amount of Due Diligence,
- Detail of drafting services required, and
- relationship be investors and entrepreneur (less negotiation).
The cost of legal fees are generally deducted from the funding received by the company. As such, the company pays for the legal fees of both parties. The investor’s counsel generally does not receive compensation if the deal does not go through. Also, the fees paid by company counsel may be capped at a specific dollar amount or as a percentage of the financing. In a series A financing it is common to see fees range from $5000 in a financing deal that requires little due diligence and drafting and up to $50,000 if there is extensive negotiation, diligence, and drafting.