When you get the nod from a venture capital firm for start up funding, your work is still not done. A simple “yes” answer is not the end of the road for your search for capital. Subsequently, you must sit across the table from your venture capital firm and negotiate the terms of the deal.

 

Should you do this alone? Or should you have someone trained and experienced in legal business entities and capitalization on your side?  Most entrepreneurs are not experienced in business partnership negotiations and are new at obtaining capital. It would reason, therefore, that having an attorney on your side during your venture capital negotiations would serve you best.

 

Why would hiring an attorney be beneficial? After all, it’s just another expense – and not a cheap one. However, an investment in an attorney may be worthwhile, as he or she will look out for your interests and attempt to negotiate the best terms for you.   

 

However, this does not mean that you must have an attorney sit with you at the negotiation table. Although some entrepreneurs might choose this option, simply having an attorney available to review the proposed term sheet and offer negotiation advice would work as well.

 

Here is what an attorney might help you with:

 

Compliance

One of the most important jobs an attorney will perform for you is to assure that every term you and your venture capital firm decide upon is within state and federal regulations and securities laws.

 

Realistic goals

Your attorney will help you see reality through your dreams. Most entrepreneurs want to keep full control over their start up company, but start up funding requires that some control be given away to the venture capital investor. An attorney will help advise you of your choices for outside capitalization and keep your feet grounded.

 

Fairness

An attorney will ask, “is this transaction fair?” An experienced litigator might be able to spot an unfair deal and advise you of your possible reactions.

 

Explanations

Do you know what an antidilution clause is? Or a conversion provision? An attorney will help explain the terms with which you are unfamiliar and their implications to your business.

 

Are the rewards of an attorney worth the cost? Most likely. Having an attorney on your side can help you get the best deal possible. Whether an attorney is at your side during negotiations or just available to review and offer advice, this legal specialist is a good investment for your start up company.

 

 

 

 

 

 

Tags: angel investors, business capital, business funding, find angel investors, find venture capital, funding, startup business, startups, vcs, venture capital

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