
Declined VC wants us to pay legal fees - mntmn
https://medium.com/@cag1412/vc-calling-pay-my-lawyers-2f5fce7abe06
======
beat
Don't ask us what to do. Don't ask Medium what to do. You have a VC... _ask
them what to do_. Your current VC has probably seen stuff like this before.
They will have legal expertise available to you, as well as their experience
and their judgment. Ideally, you pick a VC based on their value besides mere
money anyway. They should be good advisors.

If your VC says just don't engage, then don't engage. If your VC says pay
them, get a second opinion coz that's BS. But odds are good that your VC will
happily call them up for you and give them a good stern talking-to.

For all the calls of "sunshine" here, your own VC is in a much better position
to badmouth them than we are. Toxic behavior like this can get them cut out of
ride-along deals, and they don't want to lose the opportunity to be co-
investors on the best deal flows.

~~~
jusben1369
yes but how does that approach help drum up awareness in their startup?! this
thing has viral posting written all over it. (I actually have no issue with a
startup doing this if it helps them)

~~~
erlehmann_
What makes this likely in my opinion is that the author of the article,
Christoph Gerber, has already founded one successful startup, Lieferando. He
probably has access to legal advice – and he is also not new to the startup
business.

------
danielpal
I'll go the opposite of most of the comments here.

Assuming a NO attitude right from the start is probably not the way to go.
Telling them to "Pound Sand" or just plain NO is not in your best interest.
First, you should let the B investors know about this - ASAP. Second, you
should start by emailing the GP at firm A and asking him to clarify why they
think "you should pay" their legal fees.

With this information, you should consult your legal counsel on how is best to
proceed. Most likely the A VC firm feels like you didn't negotiate in good
faith and you made them spend money with no intention to accept their offer.
You should in this case talk to the GP at that firm and show him that you
wanted to close a deal with them and you even made them aware of another offer
and asked them to reconsider the terms.

Most of this issues are easily solved if you discuss things with the other
party. Assuming a NO attitude from the start, just brings everyones worst
character and might land you in a legal dispute.

~~~
codingdave
Meeting with a firm who is actively out to collect money from you is a
dangerous path for a young founder without a legal background. You don't want
to accidentally give them any more fuel for a potential lawsuit via something
you say during that meeting.

I do agree that talking to legal counsel is wise... but not necessarily VC B's
legal counsel, as that relationship will skew towards what is good for the VC,
not your company.

Also, don't be afraid of getting sued. One of my lawyer friends always says
that small businesses tend to harm themselves by over-avoiding lawsuits. If
you grow enough, lawsuits will happen, and you need to know how to deal with
them. Act from a position of knowledge, not of fear.

~~~
paulsutter
Absolutely no.

The best thing he can do is listen and get more information. You can't resolve
a dispute without talking, and it only ends up in court if you don't resolve
it. Yes he could ask his new investors for advice, and yes he should have
called his lawyer the minute he heard, but the best way to clear things up is
to listen to the VCs who are unhappy.

This is a completely different situation from the reason not to "talk it over"
with the cops.

~~~
codingdave
But this is not a dispute, at least not yet. It is just a one-sided request.
They can just talk to their lawyer, ignore it, and wait to see if the VC files
a suit. Short of that, there is no obligation to even reply. So why go into
potentially dangerous legal territory at all, when you are perfectly in your
rights to just discuss it with your lawyers, but then ignore it?

~~~
paulsutter
This is a VC who wanted to invest in the last round, not an attacking army.
There's no reason to leave the relationship on a sour note.

~~~
zamalek
This doesn't make things necessarily more sour. Firstly, given the evidence in
the post, it sounds like a BS claim (although only a lawyer would know).
Things are already sour. That being said, reaching an amicable arrangement via
legal proxy doesn't make the situation sour _at all._ Getting lawyers involved
is not an aggressive action - they are the subject matter experts. Just like
you wouldn't have a software architect dealing with relations, you don't put a
founder in charge of legalities.

------
freddyc
It looks like you're based in Europe, so be careful relying on any US-centric
advice if that's the case. It pretty much goes without saying, but HN is not a
proxy for proper legal advice from a local lawyer who understands the full
fact set.

With that said, while you're unlikely to be liable for their costs given the
unsigned term sheet (assuming there's no wrinkle in your local law), you don't
want to get trapped in an ugly public battle with a VC as it will potentially
make raising funds in the future much harder - whether for Talon.One or
another company.

I'd recommend talking quietly to the GP at Investor B and seek his/her advice
on how to settle this quickly, quietly and preferably with little or no out-
of-pocket expense. Based on the facts laid out, I don't like the behavior of
Investor A so I hope this process ends with them reflecting on their actions
and realizing that they won't survive long in the VC game if they don't adapt.

------
codingdave
Just say no. If they sent anything short of a lawsuit, they aren't serious.
And if they do proceed to a lawsuit, fight it, and counter-sue for your own
expenses and trouble. You signed no contract with them, they chose to spend
their own money on the project, and they did not complete the deal. That is
just part of doing business. You owe them nothing.

------
rwmurrayVT
Maybe I'm just young & naive, but it's probably in their best interest to go
tell Investor A to pound sand. I'm sure if Investor A consulted with their
expensive corporate lawyer they'd tell them to go pound sand too.

~~~
brianwawok
Big corporate lawyer has a conflict if interests. Every lawsuit they bring is
big $$$, who cares if valid or not. Of course they could go too far and get in
trouble I guess, but all they need is a shred of merit.

IANAL but I would ask one vs posting on hacker news. If this goes the wrong
way, it could destroy your startup.

------
late2part
One thing I see more and more in business in the USA is the lack of class, the
lack of diplomacy and tact. It reminds me of my time in India where business
transactions start off with a winner-takes-all mentality. More and more I see
vendors signing an agreement that says X - and then afterwards asking us to
waive rights or pay more or forgive transgressions; typically they'll say
"We're not going to do what we said, please give us permission to not do what
we said we'd do." Of course, they do it slightly crafty, saying "We need you
to do this, OK?" And invariably, me and my team politely says "No, we will not
deviate from the agreement without value, you will stick to the agreement."
And invariably they do.

Tell these money lenders that you don't owe them a penny, and you decline to
pay their legal bills, and not to contact you again.

You may even consider this a fair credit issue:

[http://debt-collection-defense.whocanisue.com/fighting-false...](http://debt-
collection-defense.whocanisue.com/fighting-false-debt-claims/)

Demand proof of debt and demand they do not contact you. If they continue,
take valid legal action.

~~~
sib
What makes you assume this is a USA issue? The company that the author is
writing about is headquartered in Germany.

------
davidu
There is no scenario where you should feel compelled to pay their legal fees.
Perhaps they will think again before starting to run up a legal tab on a term
sheet in the future.

That said, if this is a <$5k amount of legal bill… I might just offer to split
it to leave cordially.

------
sverige
Now _they 're_ bluffing for real. Good thing you didn't sign anything. Sounds
like they would have been a gigantic PITA all the way through if you had
signed with them.

------
centizen
Investor A has no grounds to force you to pay their lawyers unless you signed
an agreement stating otherwise.

------
yAak
Talk to your legal counsel first, before doing anything. Especially before
making a blog post about it.

------
metaphorm
this medium post was ill advised in my opinion. this kind of stuff causes
reputational damage to everyone involved (regardless of who is in the right
and who is being a greedy asshole).

real professionalism involves establishing that you are mature enough to
handle yourself in difficult situations and know how to get GOOD ADVICE from
qualified advisors, not randoms on the internet.

talk to a lawyer and talk your board of investors. take down this blog post if
you know what's good for you.

------
godzillabrennus
Please share the name of this investor.

~~~
pc86
Sunlight is the best disinfectant, name and shame and all of that.

Calling one party "Investor A" when they are acting like snakes and attempting
to extort money from a company simply because they didn't get to invest only
serves to protect that party in the future. And I say extort because the
logical reading of "Pay our legal fees" is "Pay our legal fees ... or we will
sue you."

~~~
JonFish85
This is a very dangerous game to play. I'd bet that there is more to this
story than meets the eye, as there almost always is. There's always another
side to the story. And in the case that this _does_ end up as a lawsuit, name-
and-shame could open the door to a much bigger case.

~~~
logfromblammo
In the US, in cases of libel or slander, the truth shall be sufficient
defense. In Europe, you may be better off not saying anything defamatory, even
if it is true.

Either way, it may be best to couch the story in terms of "I recall that X did
Y, and at the time, I felt that it was grossly inappropriate," rather than "X
did Y, and is a complete jerk."

~~~
drivingmenuts
> In Europe, you may be better off not saying anything defamatory, even if it
> is true.

That makes no damn sense. How could the truth be considered defamatory? It's
real, it's fact.

~~~
pc86
It's Europe. From an American mindset, many European laws seem some
combination of draconian, incomprehensible, and/or ridiculous. Bring up any
discussion surrounding American law and you're sure to see the same sentiment
coming the other direction as well. They are two very different legal
contexts.

~~~
logfromblammo
Consider that people in the territories now controlled by the U.S. and Mexico
were willing to murder thousands of Europeans in bloody gun battles, in order
to escape their governance.

And then, when building their own confederation and federation governments,
they debated at length on how to avoid the sort of legal foundations that
inevitably lead to laws that are draconian, incomprehensible, and/or
ridiculous.

Unfortunately, history suggests that such laws arise not because the legal
foundations are flawed, but because humans are sometimes authoritarian,
illogical, or insane, and the laws are little more than the trails left as
such people pass through the circles of power.

In my opinion, New World laws are only more sensible than Old World laws (on
average) because they have spent less time accumulating cruft. But look at how
hard the U.S. federal and state legislators work to catch up!

------
deedubaya
I'm sure future investors will be comforted by your open ended internet
inquiry on legal matters /s.

------
zekevermillion
Would love to know who the investor and their law firm are. Unfortunately I
don't think it's wise to base the decision on feedback from HN. Should ask
your own lawyer b/c there may be facts that are not in your medium article. In
general if there's nothing signed with the other party that explicitly says
you agree to pay legal fees, at least in NY, you do not owe legal fees due to
broken deal talks as a matter of law.

------
whbk
I'm sure it's a bit more complicated than this and we'd need to see all
correspondence, etc. to give an informed opinion, but generally speaking based
on that fact pattern: Tell them to fuck off. Or better yet, don't tell them
anything until they act on it - and then have your lawyer tell them to fuck
off.

~~~
gist
> I'm sure it's a bit more complicated than this and we'd need to see all
> correspondence, etc. to give an informed opinion

Exactly. We are hearing one side of a story. We have no idea of what promises
were made by the startup to the VC firm. (Or vice versa) Those promises could
be construed as a contract with enough of a leg to stand on for a suit to be
filed. Doesn't mean that the VC firm would win but the important lesson to be
learned is that someone who feels wrong can file a suit and potentially
extract a settlement which may be cheaper than fighting litigation.

------
mindcrime
Seems unlikely that you're under any real legal obligation to pay. But as
others have said, it might be worthwhile to pay, or pay partially, just to
avoid burning bridges and leave on cordial terms. It would depend on the
amount they expect and other factors, of course.

~~~
HelloNurse
Cordial terms with sociopath swindlers? Why?

~~~
mindcrime
It has not been established that anybody in this story is a "sociopath
swindler". As such, I think the best advice is to assume good intentions and
try to remain cordial and professional and avoid a "scorched earth" policy.
But that's based on acknowledging that we don't have all of the details and a
general philosophy of favoring diplomacy first.

~~~
HelloNurse
While there's a chance that the OP's account of the situation is biased or
incomplete, "professional" VCs with "good intentions" don't ask for money, and
professional firms doing any sort of business in good faith send legitimate
bills (in this case, for hypothetical services) immediately, not after six
months.

The only professional viewpoint is that they are sociopaths who are willing to
burn bridges with clients and other VCs for the sake of revenge or swindlers
who want to extract money from a weak party.

------
_kst_
I have almost exactly zero expertise in this area. I have a gut reaction to
your question, but there's no point in my sharing it.

But if I were an expert, I suspect that I still wouldn't offer an opinion
after hearing only one side of the story.

------
mathattack
One of the stories from Chaos Monkeys [0] is how the author was no the
receiving end of a potential company-ending lawsuit. He talked to PG, who
ultimately was the one to play hardball with the other firm. Angels and VCs
are better at this than founders.

[0] [https://www.harpercollins.com/9780062458193/chaos-
monkeys](https://www.harpercollins.com/9780062458193/chaos-monkeys)

------
CPLX
It says "I got a phone call" at the end as the entire punch line. It's not
even a written or emailed request, it can just be ignored.

------
cmurf
TIINAL (the internet is not a lawyer). Get legal advice from a lawyer. Inform
investor B, get a referral from investor B for a lawyer.

My gut instinct is no, nothing was signed, there is no contract, but there may
be an intent that assigns some share of cost for the failed partnership, but I
doubt it. But IANAL so that is not legal advice.

------
bhouston
You do not have any legal reason to have to pay this but share it with current
VCs so they are aware of the issue.

------
segmondy
They figured since you got some funding, you might be foolish enough to pay to
make them go away. Please talk to your VC, get legal advice and if possible do
name those idiots so folks who know to steer clear from them. Ask that VC, if
they pay the legal fees for all the companies they decline.

~~~
VLM
Linked article needs more empathy. OP thinks they're negotiating a legal deal
in good faith. VC is actually bored that afternoon and is literally
telemarketing, or maybe panhandling depending on how you look at it.

Linked article's thought process is exactly whats going thru the mind of an
elderly person when a telemarketer preys upon them "Well, he wouldn't say HUD
will sue me if I don't pay $500 for him to clean my furnace ducts unless it
were true, so I better pay him"

Even if the rate of return is low for the bored VC, at least its not negative
and probably not zero.

There is a meta large scale issue WRT the overall market that there is
documented proof that at least one VC out there is so bored and sees so few
productive opportunities to work on, that their best way to spend an afternoon
is panhandling. Now does that prove that there exists one VC thats an isolated
idiot which statistically must be true, or is it anecdotal evidence of an
overall market slowdown / bubble pop which certainly could be true, or perhaps
both?

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lancewiggs
A version of this happened to us - we played the role of Investor B and I
became a director of the company.

It was a very easy no.

Our fund does not charge any fees to companies - no legal fees nor director
fees. This way we align with the company on trying to minimise transaction and
on-going costs for all parties.

------
uptown
"Should we pay or not?"

Sure. You've asked the internet for our guidance, so I say go ahead.

------
juandazapata
No legal ground to pay them. Just ignore the noise and focus in your product.

------
owlscouncil
Lawyer up, do NOT post to your blog, do NOT post to HackerNews.

