great one..this is really great..

Brad, great idea, but don't you think you might need to run it as an annual conference? There are things that change every year in the code and in case law that might require changes. If you don't get them together once a year they will each make their own "fork" and within a few years it will be in the same place.

+1 My thoughts exactly. As market conditions change and as VC (and their lawyers) encounter new situations, they will continue to add terms into subsequent doc revisions.

In the interest of full disclosuret: I'm a former big firm lawyer who now runs a small firm. I've represented both investors and entrepreneurs in financing transactions for over six years.

I agree with the concept of creating standardized documents, but I think it's important to set expectations. Narrowing the range of issues for lawyers to negotiate reduces unnecessary legal time (and therefore reduces legal costs), but even where the terms are well known, the range of options for each term is generally accepted, and "standardized" documents exist, there is no such thing as a one-size-fits-all agreement. Every entrepreneur and every investor has a different risk profile, and these differences will always result in the need to personalize an agreement. So while much time and money can be saved by getting consensus on many terms in financing agreements, it is a bad idea for anyone (least of all inexperienced entrepreneurs) to try to say money by taking a "standardized" agreement and simply filling in the blanks.

Two things entrepreneurs can do to reduce their legal fees in a financing without cutting corners:

(1) Find a lawyer who has experience negotiating financing transactions. Financing terms are not incredibly complicated so you don't need someone who does hundreds of deals every year (in fact, it's probably not cost-effective), but you also shouldn't go with your uncle the divorce lawyer who will waste time trying to negotiate common terms. If you need recommendations, ask investors or other entrepreneurs who have gone through a financing.

(2) Ask your lawyer to go through a typical term sheet with you (many will be willing to do this without billing you) before you approach potential investors so you become familiar with the terms. It takes no more than an hour to do a detailed walk through of a typical Series A term sheet (I recommend the annotated model term sheet available at http://www.nvca.org), and much less time for a seed financing term sheet. The knowledge you'll gain will allow you to negotiate more efficiently and effectively, leaving less for the lawyers to negotiate later.

I disagree with you that this is necessary in a seed deal (reasonable in a $1MM+ Series A). Any lawyering at all wastes money at the seed stage. But in any case, entrepreneurs can benefit from the standardized documents because they can see a redline of what's being proposed against the standard. In other words, even if an investor doesn't want to use the standard documents, they ought to start from there.

awesome stuff, Brad.

Orrick has a set of these too, Brad: https://tsc.orrick.com/ Might as well get in touch with them too.

Brad – I think the underlying issue here is law firm rates. They are too high for startups, and there has been much focus of late in the legal community on the death of the billable hour and a need for alternatives, especially in the startup community. I think an easier way to deal with this issue in the context of financings (whether seed or otherwise) is to cap all fees in the deal. Cap company counsel fees the same way investor counsel's fees are capped, and then expectations are set. Particularly at the seed stage, there should not be unforeseen issues that have the potential to drive up fees, so law firms should easily be able to get behind this proposal. The general rule of thumb is company counsel, assuming it drafts, is 1.5x investor counsel's fees. If the investor and startup community adopted this as standard practice, then which set of docs to use becomes somewhat irrelevant.

I agree there is a benefit to standardized docs, but it is important understand that even with standardized documents there will be some negotiation. I disagree that lawyering is a waste of money at the seed stage. Experienced entrepreneurs may understand terms well enough to get away without much legal advice, but first time entrepreneurs can get fleeced by early stage investors without the benefit of a lawyer (or another advisor) who has experience with financing transactions.

I think the fact of the matter is companies and investors don't want to buy time from lawyers – they want to buy expertise from lawyers. If big firms came to terms with that, they could charge a slightly higher (though still reasonable) flat fee on the company side for an early-stage deal (seed, Series A, etc.) than could a small firm that might not have the level of expertise under its roof (and we can debate how much expertise is actually needed for these deals – the answer is not a lot, which is why junior associates are the ones primarily doing them, albeit inefficiently, at bigger firms) and perhaps still attract the lion's share of the business, and then have the relationship with the company from day one (which is better and cheaper than swapping in a larger firm at a later date as the company scales – always a costly proposition).

Fundamentally, investors do not want to pay big firms to train their associates, and that is what happens on financings. Big firms use financings as a training tool for junior and mid-level associates, who bill out at $200-$300/hr. The net result is mistakes and inefficiency, which then drives up fees. A capped fee on the company side eliminates this and better aligns interests. Until then, smaller firms will be able to pick-off early-stage clients. But, there will never be enough small firms to service all of the VC ecosystem, and the big firms know this, and so they aren't incented to do much about rates. Only until the investor community says enough is enough will rates at big firms get modified, because the relationships with the investment community are key to any big firm's success.

If you can pull this off we will send you to Washington. They need some help there too.

Lawyers & V.C. Why no entrepreneurs included in your think tank day?
Seems a little one-sided on Preferred.

These series a docs are great… But the entrepreneur is typically the most cash constrained at the very beginning of its life; the entity formation stage. Can we do something with open source docs to help with the entity formation?

I am both an entrepreneur (having started up and run 2 companies) and an attorney (having worked at both large silicon valley law firm, and small east bay law firm servicing startup companies). Happy to join in, if you want another perspective (smorgan@equilytics.com).

@bramchoen – actually, at WSGR, we use a more robust version of the automated document creation tool (that you might have seen on our web site that creates term sheets) that automatically creates Series A documents after filling in an online questionnaire. http://www.wsgr.com/wsgr/Display.aspx?SectionName…

I completely agree with you. I was motivated by the same thoughts, which is why I created a website called http://www.TheLawyerMarket.com. The Lawyer Market basically is like Priceline, but for finding lawyers instead of travel deals. The Lawyer Market has already helped several young entrepreneurs with their legal needs.

I would rather be pumping capital into emerging companies instead of paying my lawyers but I do have to admit that my lawyers are quite worth the money so anyone in the business of starting and running companies for money better get used to it. Sure a term sheet looks relatively straight forward but do you see 10 a week as an entrepreneur? I don't think so. Bite the bullet. It will be worth it!