Posted on March 8, 2013 @ 06:17:00 AM by Paul Meagher
The National Venture Capital Association (NVCA) is trying to reduce the legal costs of fundraising by offerring model legal documents that could be used to expedite the process of finalizing a venture capital deal. According to NVCA:
A conservative estimate is that our industry spends some $200 million in direct legal fees annually to close private financing rounds. In an all-too-typical situation, the attorneys start with documents from a recent financing, iterate back and forth to get the documents to conform to their joint perspective on appropriate language (reflecting the specifics of the deal and general industry best practices), and all parties review numerous black-lined revisions, hoping to avoid missing important issues as the documents slowly progress to their final form. In other words, our industry on a daily basis goes through an expensive and inefficient process of "re-inventing the flat tire." By providing an industry-embraced set of model documents which can be used as a starting point in venture capital financings, it is our hope that the time and cost of financings will be greatly reduced and that all principals will be freed from the time consuming process of reviewing hundreds of pages of unfamiliar documents and instead will be able to focus on the high level issues and trade-offs of the deal at hand.
Keep in mind that these documents are primarily aimed at venture capital groups and not at angel investment groups. In general, the legal complexity of venture capital fund raising is higher than angel investor fund raising which can be as simple as a joint venture agreement. Nevertheless, it is worth reviewing some of these documents to educate yourself about the types of issues that arise in more complex fund raising deals. If you don't understand some of the terms or concepts being used, perhaps it is time to consult the internet or a library to find the relevant resources to help you understand.
Here is a list of the model legal documents the NVRA offers along with direct links to the relevant Microsoft Word document downloads: