The other day, I wrote about the entrepreneur that had the funding pulled after final docs were done. The saga continues. She called the partner on the deal and requested legal expense reimbursement. The VC kept talking about "trust" and their long list of satisfied entrepreneurs. The least they could do is pay for legal expenses incurred for deal negotiation and IP diligence. Since every VC attorney needs to run up fees on a "standard" deal negotiating all kinds of "critical items," this entrepreneur had a $75k bill. She had to either had to pay, shut the company down/restart, or negotiate to have the next funder pay for it (ha-ha).
The VC responded with a whole bunch of excuses like this was against their "corporate" policy and that the next VC could move through the deal faster. However, this entrepreneur had been around the block a few times and called him out on it. Every VC's counsel has all sorts of issues in every supposedly standard document. And IP diligence is completely custom. People embarrassed themselves by quitting then coming back to their jobs because they were assured that diligence was completed and the wire was ready.
At this point the entrepreneur was waiting for a further discussion with the senior partner...
Till next time....
Here's some other related items I will blog about:
- My friend who just did an inside round that washed out founders and previous investors.
- My view on the big business vs entrepreneurial risk
- Why these Preferred terms need to be eliminated
- Some positive outcomes of this recession