

Ask HN: 2 page simple term sheet and 100+ page contracts. What to do? - funding

We received a very straight forward term sheet which we completely agree upon. However, after signing the term sheet we received 100+ page legal document. What should we do?<p>1. Engage a law firm which will take time.
2. Try to find someone who has hands-on experience 
3. Read it ourselves and figure it out.
4. ???
======
vessenes
100 pages is a lot, but there are absolutely no circumstances under which a
non-lawyer should finalize an equity round of finance without legal
representation.

Even if it you don't care about yourself, or any future employee who might be
saddled with the currently unknown 'gotchas', you will still be screwing
friends/family investors and your spouses and children. Seriously, get a good
attorney.

It's an accepted and expected part of finance that you will incur some legal
costs getting a round of financing done.

All that said, if this is an angel round, that document is too long. A good
angel or group will want to keep it simple, and leave the major lawyering to a
Series A. But overall, a) congratulations! and b) suck it up, and go get the
best lawyers you can find.

~~~
vessenes
p.s. You should also ABSOLUTELY read the entire thing yourself. A basic part
of business ownership -- welcome to it.

p.p.s. Drop me a note: vessenes@gmail.com if you need to talk it over with
someone who doesn't have a vested stake in it, I'd be happy to chat about it
with you.

------
hristov
Depends how much money the investment is for. If it is for 100K or more, I
would have a lawyer look at it. You do not need to hire a large expensive
firm, and a good lawyer should be able to stay within reasonable cost
constraints (just make sure you negotiate an acceptable cost estimate before
you start work).

~~~
funding
any suggestions for new york area?

~~~
gyardley
I've used the New York office of Gunderson Dettmer for this. They're not cheap
but they will explain everything to you perfectly and will get the details
right. In my opinion, money well spent.

~~~
joshu
Seconding that. Gunderson rocks.

------
snorkel
Sit on it and say "we're reviewing it" and in the meantime keep the other
party interested and excited, then tell them after reviewing it that you've
been advised that it needs to be reduced.

~~~
gyardley
'Advised by whom?' they'll ask, so they can put their counsel in touch with
your counsel to swap back and forth redlines. And then what are you going to
say, Hacker News? Get a lawyer, that's just how this works.

------
superk
Honestly, I would hand it back and ask them to reduce it to less than 10
pages. There's nothing to be intimidated about legal documents in general
(reading through them you can make any changes before signing) but 100 pages
just isn't fair in a business relationship.

~~~
funding
Their logic behind it is the efforts of raising subsequent rounds will be
highly reduced with not much changes in the documentation.

~~~
anigbrowl
That's probably true. Read it yourselves over the weekend, and sit down with
an attorney next week - call a few different ones to see who you feel
comfortable with. This phase could go on for a while: don't take any contract
provisions personally, as right now they're no more than an opening
negotiation position.

Cautious congratulations, by the way - this must be an exciting time, even if
it's a bit challenging.

------
gyardley
Both the length of the term sheet and the funding docs are in line with ones
I've signed. This is why you need counsel.

------
damoncali
Get a lawyer. The complexity of the docs is the reason term sheets exist in
the first place.

------
joelhaus
Read it. Take copious notes. Highlight areas of potential concern.

This should help keep your legal costs down, as the attorney can focus his or
her time on the issues most important to you.

EDIT: My brother practices this area of law with offices in NY & NJ; if you
want to keep costs down he could probably put a junior person on your case.
You can reach me at my user name neuenhaus.org

------
petervandijck
Do you trust them? Do they have a reputation to protect?

~~~
funding
A lot. They have a huge reputation.

------
iamdave
1.

Better to take your time than to take your money.

~~~
superk
Engage a law firm will take your time and your money.

~~~
anigbrowl
So does surgery, but procrastination is usually the most costly decision of
all.

