Paperless Financing Docs

I've been on a mission to dramatically reduce the legal costs of a venture financing. Our firm is doing our part. On many of our recent transactions, we've gone without counsel and have signed documents without negotiation. That takes out the investor counsel costs. And we've been pushing company counsel to reduce their costs. But we are still seeing company counsel costs of $15k or more on venture financings even with our "no negotiation" approach. I'd like to see venture financing legal fees get to $5k or less. I don't know why raising a venture round can't be like signing a lease on an apartment with standardized docs and a one page rider for any changes.

As we dig into the costs on the company counsel side, there are areas we feel can be improved and areas that cannot. The entrepreneur still needs an experienced counsel to explain the deal to them. That time and money is valuable to everyone involved. I'm hopeful that Brad and Jason's upcoming book will help reduce the time and money spent educating entrpreneurs on venture financings, but realisitcally the company counsel is still going to have to do some hand holding.

But there are many areas where the company counsel is spending time and money doing things that can and should be automated. Tops on that list is document creation, distribution, change management, and ultimately signing.

We've noticed that some of the new online funding platforms, like Profounder, have managed to totally automate this process online. We wonder why the law firms we work with have not. One of the best hacks of the Disrupt Hackathon last weekend was Docracy. I am going to find out if we can use Docracy on our next venture financing to make things more efficient.

And Bijan posted recently that he is using an iPhone app called EasySign to sign legal documents when he is out and about. After going through torture this weekend at our beach house to sign docs that absolutely had to be signed by yesterday, I'm searching for something similar on my Android. Please EasySign team get me an Android version. I promise I will blog about it when you do.

And in the meantime, if anyone knows of any good mobile signing apps on Android, let me know about them in the comments.

This whole area is so ripe for change. We are documenting financings for cutting edge web startups using technology from the middle ages. That must change and it must change now.

#VC & Technology#Web/Tech

Comments (Archived):

  1. Diesel Laws

    I’m so with you on this Fred! “We are documenting cutting edge web startups using technology from the middle ages” – well put!

  2. jenslapinski

    Fred, I utterly agree. However, the problem is bigger than just venture financing. This is true for almost ALL legal contracts. Hiring somebody is too expensive. Share option contracts are too expensive. Commission/bonus plans are too expensive. Simple business deals are too expensive. Articles of Association are too expensive. The list is endless.Automation is one issue. However, at least in my experience, the core problem is that there seem to be no publicly accessible standard docs that one can just point to and say: “This is how this is done and if you want to change this, you pay everybody’s legal costs associated with the changes and no, you can’t charge the cost back to us.”If somebody could create some sort of online repository where we could pool our contracts (without names) and then get some standardized docs that we can just download fill in and sign … it would just be terrific.

    1. fredwilson

      services like docracy are part utility part repositoryi think the combo is important

      1. Scott Edward Walker

        Great post, Fred.  A few quick points:  (1) I’ve been doing deals as a corporate lawyer for 17+ years, and one thing that I have learned is that every deal is different: different parties, different negotiating leverage, different risks.  Accordingly,simply having standardized documents with no negotiation doesn’t make a lot ofsense to me (even at the seed level).(2) Unfortunately, most investors are not Fred Wilson.  Indeed, there are a lot of bad apples out there, and entrepreneurs need a good lawyer to watch their back.  For example, two of my clients were recently sent term sheets from a VC firm in England which turned-out to be a complete scam.  The firm was trying to convince themthat the deal needed to be done under English law and, accordingly, thefounders had to wire them $15,000 to retain a British law firm to representthem.  Sadly, I’ve seen many situations where entrepreneurs have been screwed and/or simply did not understand the documents they signed.(3)  Finally, I like beating-up the lawyers, too.  Having worked for nearly eight years at two major NYC law firms, I can attest to the fact that the big-firm template doesn’t work for entrepreneurs.  That’s why I launched my own firm to address this big problem.  Nevertheless (and with all due respect), it’s getting a bit tiresome listening to the VC’s whine about the legal fees.  The reality is that it’s in the investors’ interest not to have lawyers involved.Keep up the great work!Cheers,Scott (@ScottEdWalker)

  3. OurielOhayon

    Fred, we just closed our series A and we used… for this. it was really awesome. They don t have an android version but they do have an amazing iPad experience which i know you have. We also hesitated with Echosign that has an interface for android…Enjoy

    1. fredwilson

      great suggestionsi don’t take my iPad out of my apartment and/or officei need a signing service on my phone

      1. OurielOhayon

        so echosign is for you

        1. fredwilson


        2. kenberger

          +1. We’ve been signing all our contracts via Echosign over the past 3 years and are very happy with it. It also always impresses the client.Works via smartphone too.

      2. Adrian Sanders

        how come you don’t take your ipad out of the apartment/office?just curious. I’m still wondering if a tablet would be useful in my day to day so I like hearing how / why people use it. 

        1. Peter Sullivan

          I find the best use of the Ipad for the couch and bed surfing. I am starting to use it in the office as a 3rd monitor. 

        2. fredwilson

          i don’t carry anything with me when i am out and about. just my phone. anything more is too much to carry around

        3. Aaron Klein

          Same here. My iPad has become my content consumption computer in the living room after work. No need to unpack my laptop, and it helps me to shift out of work mode and relax.

        4. Adrian Sanders

          Thanks for the feedback. I was hoping to use it as a day to day email replacement machine w/ a bluetooth keyboard but I’ll hold off for now. cheers!

      3. Dave Pinsen

        Looks like Right Signature is another useful app that’s only available on iOS.

        1. Ryan Garver

          We’re actually using RightSignature on ProFounder for all of our signatures since day one.  Their API has been great so far and they have to extremely responsive with new requests.  All of the signing happens embedded in our site and we generate the terms using their document merge API.  It’s beautiful.

    2. Adrian Sanders

      was just going to say that Right Signature was really solid.we reviewed them a while back here:…The main beef I have is lack of integration, poor APIs and yes mobile. It’s amazing that you can auto-one click a PDF in Adobe and have it officially signed / encrypted but so far there’s little of that in the mobile space.One major concern I think (though mostly FUD) that hinders user adoption is the security fear.Mobiles get lost, API’s get breached etc. 

  4. awaldstein

    This is a mission worth pursuing Fred.I’m always OK to pay for counsel and expertise (within reason); I’ve always felt ripped off to pay for processing on the same fee basis.

    1. fredwilson

      that’s such a great way to put itadvice is worth $500-$750/hourthe rest is not

      1. PhilipSugar

        Well said.I’ve never been able to put my finger on it but that is exactly how I feel.You’re fine paying the money when you’re in deep, analytical conversations.But when you see the bill and realize you paid for all the stupid edits, you want to wring somebody’s neck for making a $100 petty grammatical change.

      2. Anonymous Start Up Lawyer

        This is an interesting post.  Let’s assume that Larry Sonsini’s advice is worth $750 hour (instead of the $1000+ that he actually charges). Now to look at the posts, Larry probably spends about 10% of his time providing the kind of advice that is “valued” by Fred and by the commenters on this board. Other things he does, such as read and draft documents, meet with entrepreneurs to learn about their companies to tailor legal advice, spend time negotiating on behalf of clients, spending time working with bankers on offerings, etc., all of those things should not be paid for, and you definitely don’t want to lay out a dime for any of his associates.OK, under that model, if Larry works twelve hours per day, 350 days per year, because, what the hell, we should give him a day off every month.  Under this model, Larry grosses $315,000, out of which he needs to pay his cell phone bill, his rent, his admin (but not his associates, because he won’t be able to afford any of them).I actually think Larry Sonsini is worth a lot more than that. I think he is worth $7 or $8 million per year for himself, plus say another 30 million for an office where I can call him and an admin to find him for me and a bunch of associates and junior partners to do all the non-glamorous work that I want done.  So if we look at his business systemically, I have a few questions:Is Larry overpaid?Should he be satisfied with $315k per year gross?If you think he deserves to make millions, are you willing to pay him $80,000 per hour for the real deep-thinking stuff, if he does all the other stuff for free? If not, what kind of business model do you propose that would allow Larry to make millions, while not charging you for all the time that he wastes doing things that you all think are worthless?Larry has come up with a model that let’s him earn millions, and he has plenty of clients who are willing to buy into that model. They might get irritated by the occasional billing snafu or crappy work product, but they keep coming back for more. I am usually facetious, but I am not joking here. You can attack the model, but do you have an alternative billing model to propose that would still allow Larry to earn $7 million per year, or, instead, do all of you think that Larry Sonsini is overpaid and that he should learn to make do on a lot less money?

        1. PhilipSugar

          You have remained anonymous, so I don’t think its fair to bring up a specific name, but you are exactly right in your last sentence.The heart of what people think is that the value add is not worth the money, everything else is window dressing.I commented on this before:

          1. Anonymous Startup Lawyer

            In your previous comment you said that you didn’t mind if the lawyers made “mad coin.” In this post, you seem to be opposed to it.I, on the other hand, consistently believe that good lawyers should be able to get rich doing this job. Toward that end, I generally agree with Fred that lawyers should undercharge (or not charge at all) for seed rounds and early venture rounds, regardless of whether they are representing the investor or the company.  But if we do that, “your end of the bargain” is that you need to pay us well on your liquidity event.  And when I say “pay us well,” I don’t mean $750/hour for the time that we, as senior law firm partners, spend time on the phone giving you advice that you deem important. That doesn’t work out to being “well paid.”

          2. PhilipSugar

            I said lawyers want to make “mad coin” no value judgement, and I gave the reason why.What you make is what the market place is willing to pay.It doesn’t matter what you think you should make, what you want to make, etc.If I paid everybody what they thought they should make I would not have a business.

        2. fredwilson

          take some or all of the fees in equity

    2. gorilla44

      Every legitimate attorney that I have used has not charged me partner rates for admin/processing work.

      1. PhilipSugar

        They have.  No, not for the simple stuff like filing a charter, etc I agree.But for example when you are negotiating a contract:  About .3hrs (18minutes) might be deep advice about a potential pitfall, what the standard terms are, or some particular point.That partner is going to end up charging 3 hours to implement that advice, they can’t just pass to an associate, they have to draft and then discuss with the other side, etc.You feel ok with the $10 a minute for the former, it kills you for the latter.

      2. awaldstein

        I agree with Phil below but also that processing fees are a percentage/overhead charge. They are based on the model which is based on the partner rates.That’s the problem from my point of view and why this ‘mission’ to fix is a great one.

  5. Peter Sullivan

    Fred creating a much more streamline and easier process is great for the founders and VCs but against interest of any type of counsel. They live off our time, which sucks. I could see law offices neglecting to use any type of application that would decrease their overall income potential. That being said, that shows there is an opportunity to disrupt the pattern. Trust me I sometimes fell our lawyer is doing things in circles to increase payouts. I love an industry agreed upon boilerplate. 

  6. William Mougayar

    There’s one small app that’s useful for emergency signing that I have used on the iPhone. It’s called Scan2PDF. So it fits when you have the paper documents which you can sign, then snap a pic and it pdf’s it and emails it. Not your full end to end solution, but will do when necessary.

  7. Avi Deitcher

    For my counsel, I use an attorney I know and trust: an American living in Israel, so I get New York-quality at Israeli rates, plus with the timezone diff I can email him something end of day, he has it for me by the time I wake up.Not only is he great, but he refuses to do processing and charge me for it when it is unnecessary. I call him for some contract work, he will say, “this is identical to what you did 3 months ago with Y, change the date, names, addresses, and sign.” He wants to get paid for advice, not for gruntwork. But that integrity is rare in the law world.Eventually, law firms will have to compete on flat fee for service basis except for advisory services. “VC Series A = $5k”. When you make the same amount no matter what, you learn to work on your costs. Unfortunately, many states (NY included) have laws that prevent anyone but attorneys from owning a legal firm. No outside investors, no businesspeople, no innovative thinkers. I think that has a deleterious impact on innovation.

    1. ShanaC

      As a general rule, people who choose law are mostly a conservative bunch in terms of life choices. Also as a general stereotype, there is something about the llc/llp partnerships and the idea of developing a book of clients that creates some interesting issues about what technology gets adopted…the federated system that affirms are imply that those with the cash make the rules, irrespective of whether said decision would raise productivity for all.

      1. Avi Deitcher

        Agreed on all, but that is the beauty of a competitive system, in the absence of regulatory restriction (like the ownership rules). Someone out there has to be thinking, “I can make a lot of money on lower margin standard documentation transactions if I can do a lot of them at lower cost.”

        1. ShanaC

          I think there is an added layer of complexity – there is a lawyer above whomentions where the added costs come in

          1. Avi Deitcher

            Is there something missing in your post? I didn’t understand…

          2. ShanaC

            Sorry, I meant this post:…

        2. JLM

          Exactly what Charles Schwab did in the brokerage pricing business.He priced things as a cut above actual cost rather than implying every stock purchase required an Ivy League stockbroker to press the button. And that every decision was the result of intense stock investment analysis.

          1. Avi Deitcher

            Good analogy. I like it. I recall he was vilified by the rest of the Wall Street community for doing so.

  8. William Mougayar

    I love the sub-title of that book “How to look smarter than your lawyer and VC”. Are you sure you approve the VC part, Fred? lol 

    1. fredwilson

      i’d prefer if the title was “be smarter” not “look smarter”

      1. William Mougayar

        I like that nuanced suggestion. Subtitles can change until the last minute.  @bfeld:twitter ? (btw- this is a great application of the new Disqus feature where I want Brad to see this, so he’ll get notified)

  9. Sdw

    Easiest ways to reduce costs of company counsel are  to: (a) dispense with the requirement for a legal opinion, and (b) dispense with personal indemnities or other provisions that require founders to put their homes at risk. If your fund has agreed to these, I agree that you’ve made  it easier for company counsel to actually do its job within the budget you propose.The crux of your message is  that lawyers provide commoditized services to your investees which should be practically free.  Is it your view that lawyers have no place in the start-up ecosystem?

    1. fredwilson

      we are not requiring personal guarantees and will go without an opinion too if we are comfortable with the legal diligence

      1. JLM

        Not picking a side in the discussion but I fear that one’s fiduciary duty — real or imagined — becomes a consideration here.Nobody has ever been sued for making an investor too much money.Lose someone’s money and suddenly every small discreet act becomes scrutinized with an obvious bias toward fault finding.Some of this falls under the umbrella of due diligence and prudent man rules. Not a good neighborhood to be loitering around should someone pull up their hook and their worm is missing?

        1. fredwilson

          i don’t think requiring a personal guarantee from an entrepreneur is”prudent”we could have a longer discussion around a legal opinion

          1. JLM

            I think the issue is more about indemnities not a guaranty. This is primarily an equity view of the world.The issue of legal opinions when both parties are represented by competent counsel is more about E & O insurance than anything else. Bit different in the bank debt world.Another archaic concept and one that is costly to everyone. Should be abolished unless we can get dueling reinstated as the exclusive dispute resolution methodology. Then it would be ok.

  10. reece

    regardless of how well versed I get in term sheet legalese, I consider myself really lucky to work with ken McVay et al at I wish the overall process was cheaper? sure.would I have gotten the extremely entrepreneur-friendly term sheet I got without them? Fred, while I’m with you on lowering the costs of getting a deal done (especially reducing drafting errors from the other side’s rep!), there are some places in my life where I want as little risk as possible, and for that I’ll work with the best.

  11. lazerow

    Wow. This must be a bug w/ Disqus. I posted this comment from my Blackberry on this story and it was posted to this Techcrunch story ( I didn’t delete it from Techcrunch just in case the Disqus team wants to check it out …Nice post fred. Agree 100 pct, but as natalie stein, our general counsel, will attest, I have an innate loathing of all legal waste. I’m shocked ed zimmerman or one of the leading tech firms hasn’t taken the lead here. They should offer zero-cost financings using the standard docs (take a pick re: which ones to use). This would be the most cost effective marketing they could do as they would lock up all future work (subsequent financings, m&a, etc). I’m sure a few entrepreneurs would even give the firm a few options for the help and advice.

    1. fredwilson

      i challenged these guys to do it for $5k and you are challenging them to do it for free!i love iti will alert disqus. that’s a nasty bug

  12. R Merrill

    I have been using Echosign successfully for several years to sign documents. They are web-based and I do not think a dedicated Android-app is required. No relationship – just a satisfied customer.

  13. NicolasVDB

    The Docracy concept is brilliant and way overdue. The whole legal industry should be streamlined.Fred, instead of just using them, how about you fund them and help them become as big a success as they ought to be?

    1. fredwilson

      i use products before i invest in them

  14. rajeshj

    Disclosure: talking my company.oFlows ( addresses a large part of the problem – it not only allows you to sign financing documents, but you can also get due diligence documentation and other regulatory compliance documentation. It can also auto-fill data into SEC registration templates etc. The signature piece works across multiple devices (iOS available, Android under dev) and it doesn’t need an app installed. Its banking grade — our primary customers are banks and other financial institutions — and has gone through all the regulatory hoops with bank regulators.

  15. ShanaC

    Actually, the whole legal world is ripe for disruption, there are no easy ways for outsiders to judge legal quality. Further rates per hour and minimum requirements to make billings in biglaw are way too high for unecessary legal work, preventing real training of associates who can and should be doing routine advisement.There is also a glut of lawyers, who because of personal debt load, can’t go into fields of law where there are shortages (eg state level criminal). But that is a whole other story…(unless you are a believer that debt load is causing an increase in rates…)

  16. gorilla44

    The only way to take the attorneys out of the process is if you have a high level of trust on all sides or really experienced entrepreneurs. VCs do many more times the number of deals than even highly experienced entrepreneurs. Your typical entrepreneur may have concerns that they are missing something and want the council of an experienced counsel. Also, if there are angel investors already in the company, the entrepreneur needs to cover his/her butt and get an attorney to review the docs. I don’t see a way around that.

  17. Tom Royce

    Take a look at the real estate space for document signing and management programs. They have made great strides in the past couple of years and with the volume of real estate transactions, the bugs have been worked out. Docusign is the industry leader at the moment.

    1. fredwilson

      yup, i agree tom. that’s why i mentioned a lease in my post

  18. Matthew Bartus

    Electronic signatures are a very small part of the problem. But I agree that paying paralegal rates to shuffle signature pages around is unpleasant for most people.We use a service called Docusign ( that we picked after testing all of the major systems.  We picked it because it gave the most control over the flow of signatures (e.g., everyone signs at the same time, signs in a certain order, etc.).  We have used it to close major financings with parties all over the world, and it works especially well with smaller routine matters like option grants.  We also pair this with cloud based storage to automate most of the filing costs.  Other systems may be on par now, but at the time we felt it was a good solution.Our clients love it and the first reaction is usually something like “wow, that was easy.”  Ironically, the most resistance I get from using the system is with other VCs in financing rounds (but our VC clients love it).  But that resistance is slowly breaking down when people realize they can sign from anywhere.  (And I do believe it works on Android because it is web based).

    1. anwith1n

      Matt, thanks for the comment and for choosing DocuSign. I’m DocuSign’s social media manager and am confirming that DocuSign does work on Android as well as iPhone / iPad, Windows Phone 7, and Blackberry.A DocuSign Android app developed by a 3rd party, and is available on the DocuSign Marketplace:…We’re available to answer any further questions from Matt or any other readers of AVC.Fred, thanks for highlighting how automating the signing process delivers tangible benefits such as cutting costs. With a less time-consuming signing process, entrepreneurs can focus on building their businesses.- An Bui

    2. Mat Mullen

      I’ve tried Docusign and had a bad experience with it during my company’s acquisition.  The amount of email reminders and notifications the service sent was incredibly frustrating and caused me to stop paying for the service all together. I recently started using and think their UI and general document signing process is WAY better then Docusign and is half the price.  Don’t mean to hate on Docusign, but there technology and website is dated and frustrating…not to mention expensive. 

      1. Tom Gonser

        Matt – sorry to hear you had a bad time!  Of course, the number and frequency of reminders is something that is set by the sender.  It can be aggressive or passive depending on the need. DocuSign is really designed for a different purpose than the solution you mention – it is a fine service for super simple, low value transactions, while DocuSign has been designed for high volume business transactions where legality and management and control of transactions is important.  This thread seems focused more on the whole workflow, template, and management practice around managing the signature process, which is why I jumped in.We recently tested side-side across several different esign tools, and found that 40% of users could not complete a simple sending process using competing solutions compared to DocuSign.  Be that as it may, I’d love to get your input on the new release coming out June 8th, and again on July 8.  I think you will be impressed.Either way – managing electronic agreements and signatures is inevitable and is starting see very broad use across entire markets.

  19. baba12

    It is an interesting post coming from a VC. THe fact that lawyers are needed to be part of the deal especially more so for the entrepreneur seems to be a reflection of how deals are structured.I would think that if you can let some sunlight on the deal structures you have and explain what each part meant to USV and to the entrepreneur maybe you could educate and also open the flood gates on the types of deals that screw both VC’s and entrepreneurs over.As deals are done secretly there is always a need to have a third party ( lawyer) make sure that one is not getting screwed. If the goal of structuring a deal is to be fair then adding transparency and defining the various permutations and combinations for a deal structure maybe wroth Mr.Wilson’s time to edumacate the minions.I am not sure Mr.Wilson can get the sunlight to shine on this aspect of the VC world without causing a lot of friction.Until then lawyers making sure there is fairness for all concerned are necessary.

  20. Gregg

    While I agree whole heartedly that financing deal cost can and should be dramatically reduced, I think there is far bigger opportunity to reduce friction and cost in Bussiness to Bussiness interactions beyond VC financing.While social media and the web at large has done a great job in making personal connections easier and frictionless (equivalent of lower costs), very little innovation has occurred to reduce costs and friction in the realm of true business to Bussiness transactions. Fred’s point on VC financings are just the tip of the iceberg.Networks will be built to radically change this offline process and cost structure. Business can and must create many more deals and partnerships in the newly connected world we live in. Lawyers and VC’s are as good a spot to start as any. Presently, the cost of creating a business relationship often exceeds the value and the deal never gets done (and shouldn’t). Biz Dev folks still get on airplanes, spend too much on lawyers, spend too much to “integrate” or make the “deal” work, and then spend to much time and money managing the deal. If business development was as easy as Fred’s suggested financing process, many more deals and business relationships would be feasible and profitable. True business development networks will change all this. Hopefully, financing deal costs will lead the way cause I sure pay my lawyers too much…..Gregg Freishtat CEO, Vertical Acuity

  21. jeffyablon

    Fred, this could have been two posts … or more.Split the issue about automation (obvious, and certainly the kind of thing that belongs square in your bailiwick, Mr. source-of-cash) from the one about details.What the people you negotiate deals with are buying for their—oops … YOUR—$15K (or $5k, or whatever) isn’t reallly I dotting, or T crossing. They aren’t really buying advice, because the chance of them getting any real concessions from you, their financier, is, let’s face it, slim. And I certainly hope they aren’t buying “understanding” of a term sheet; if they aren’t smart enough to understand one, they have no business being in business and you have none investing in them.What they are buying is the BELIEF that their behinds are covered. And let’s face it; if your deal ever goes sour their chance of outdueling you in a court room is not great, and if they do it will be because the deal was so huge that they were able to hire a really high-profile guy to extract some better terms when the time comes.Contracts aren’t really about defining people’s behavior. They’re about defining people’s EXPECTATIONS. And you’re spot-on on that point even if you didn’t say it directly: once you’re at this stage of things with a potential partner, you’d both better already understand the expectations part clearly—and no amount of money spent with an attorney will clarify any of that.Jeff YablonPresident & CEOAnswer Guy and Virtual VIP Computer Support, Business Change Coaching and SEO Consulting/Search Engine Optimization Services

  22. Bo Sartain

    I like Rajesh’s beginning: Disclosure, talking my company.I couldn’t agree more that we need to automate and streamline the process to make these deals more affordable.  I also agree that there is a role for the attorneys, but we need them focused on high-level counseling where they are really worth $350 – $700 per hour and not spending time on routine matters at those rates.What I have done with my new company VentureDocs is automate the drafting of the legal documents for the formation and financing of tech startups.  This is a lot more than fill-in-the-blank templates–real code allows mass customization.  Every deal can be different.  If you want a feature in your deal (such as broad-based antidilution), check the appropriate box and the software will drop in standard language (in this case, about 3 pages) into the legal documents.What used to take me about 5-6 hours of marking up documents now takes me about 20 minutes.You can go to my website to see the concept.  This is just a placeholder for now; the real site is under construction.  I do have a couple of prototypes (term sheets) available for download, however.  They are written in VBA, so you may need to change your settings in Word to allow macros to run.  Also, make sure the file downloads as a .dot file (in some testing IE changed the extension on the document so the macros would not run).I need entrepreneurs, VCs, angels, incubators and attorneys to test my products as I am at the stage now where I have prototypes ready to go and am validating the market.  If you want to test the products or learn more, contact me at bo@ Fred for starting the discussion and thanks to the community for your support.

  23. Patrick Ambron

    What process do you think minimizes costs on both ends? IMO, you should negotiate basic terms of the deal withOUT counsel. You use counsel to make sure the docs reflect what you agreed upon. Bringing them into negotiations drives the price up. Here’s what I believe is the fastest/cheapest way from A to B. I say this after spending WAY too much time and money not following this process, but would love to hear your thoughts1) Negotiation w/out counsel: Investors and founders agree basic terms of a deal2) Let the investors take first crack at papering up the deal based on that agreement3) Company counsel reviews the docs and make sure they do, indeed, reflect the agreement and they are protected4) One set of revisions is given to investors and discussed. After this discussion you should have final documents

  24. JLM

    The first problem is that lawyers — transaction lawyers — charge too damn much.Price negotiation is the first line of attack.Second is standardization of docs.Huge problem — one cannot practice law without a law license (from the appropriate state mind you) and I suspect that every one of these standard document sites runs afoul of this problem. It is pretty difficult to see how one overcomes the reality that contract preparation is not the practice of law.This is tenet of every state’s real estate licensing laws and has been for years.The real estate industry has had this issue licked for years. It is ALL docs in real estate.

    1. ZekeV

      All states, as far as I know, allow publishers to sell legal forms and related commentary without running afoul of unlicensed practice-of-law rules.  I would be comfortable arguing that providing document automation is also allowed by extension.  As long as there is no individualized “advice”.  You could commit UPL if you have too much individualized customer service — e.g., allowing subscribers to call into a helpline for assistance customizing a document.

      1. JLM

        Look at TREC forms in a state wherein lawyers do not need a brokers license to act as a real estate broker. A broker loses his license potentially for moving a comma in a deed of trust.Most of this stuff has not yet made it through the Courts but look to the actions of regulators to see the direction iy will ultimately go.

        1. Zeke Vermillion

          I may have been too hasty in typing my view that document automation is not UPL.  You are absolutely right that the courts are all over the place on this issue.  I should have said that it *can* be carefully structured to minimize UPL risk.  Whether any particular service has thought through the problem to that extent, I don’t know.One NY case I found, however, which may or may not still be good law (Duncan & Hill v. NY Dept. of State, 62 AD 2d 690, 696) says the following:”A consideration of this question must start with the recognition that from time immemorial real estate brokers and agents have drafted “simple” contracts between their clients as a part of their professional work, in expediting the progress of their business and the affairs of their clients (see People v Title Guar. & Trust Co., 227 N.Y. 366, 374-375). As long as real estate brokers and agents have not held themselves out to be attorneys at law, have confined their actions to serving their clients in relation to the specific transaction (such as drawing a contract of sale) in which the broker has a financial interest for payment of his services, and have made no charge for these incidental services, such acts have been held by our courts to be proper and not to constitute the unlawful practice of law.”Seems helpful. I would not give a legal opinion on non-violation of UPL based on this, though!

          1. JLM

            The Texas Real Estate Commission would revoke the licenses of all the brokers Involved in the scenario you describe. It would not even need to get anywhere near a District CourtA Texas brokers license requires 900 hours of courses and a comprehensive body of both instruction and testing — the most of any licensing regime in the Nation.What you describe is unquestioned to be the UPL in Texas.I am not advocating for or against any position but simply pointing out that a very well developed body of law in a very mature industry has no sense of humor when it comes to the UPL.

          2. ZekeV

            Fair point.  Atty regulation is hopelessly outdated in this country, and shows no signs of being susceptible to change anytime soon.Also, Texas is one of those ideosyncratic states where common sense is no guide to divining the appropriate legal standard.  I took a bar review class years ago from an old eccentric John Pieper who has passed the bar in every state in which his course is offered, except for Texas.  He said that he is usually able to pass the bar in a state based on generally applicable principles, but not in Texas.Also interesting to note that Texas is the jurisdiction of choice for rightsholders in patent infringement suits.  Perhaps the members of the jury pool view IP as a property right analogous to Hill Country ranch land.  Trespassers shot on sight.

    2. fredwilson

      i agree about price negotiation. i won’t hire a lawyer without an upfront discussion of fees and ideally a cap.however, the entrepreneurs we back often show up with a lawyer attached to the hip and we don’t have a lot of leverage to negotiate fees at that point

  25. Eric Normand

    Disclaimer: I work for an electronic signature company:'s good to hear that you’re working on this tough problem. Legal costs need to come down in all areas. I predict that these online services will actually give more business to lawyers because more contracts will be signed. Just like email means we send more correspondence, electronic contracts will proliferate.We won’t be paying lawyers to draft our contracts. That will become menial labor. But they will have more work enforcing the multitude of contracts that will be signed.

  26. treyfisher

    If you are hiring a lawyer, have him/her give you a flat rate to provide the work you want done. Negotiate the fee upfront, that way you avoid any surprises. The billable hour is outdated and does nothing but piss people off. Venture financing is not rocket science and the fees should not be 15k to 20k. 

  27. paramendra

    “On many of our recent transactions, we’ve gone without counsel and have signed documents without negotiation.” Way to go. And that ultimate Fred Wilson bribe: “Please EasySign team get me an Android version. I promise I will blog about it when you do.”

  28. Thorsten Claus

    I recently ran into Jason Seed who will go live with soon. Early stage deals are difficult for my funds, but I liked the solution a lot:* You use your smartphone and a pin as your identity and two-factor authentication* You can email forward (or upload) any quote or document for signing (great, because most of my communication is through email and not through secure data rooms)* docs can be viewed on the phone, signature fields are recognized automatically (this is my biggest plus, no more editing where to sign and initial, even when skewed)* Signature can have 2D bar codes (as can have every page), so you can verify signatures and see public documents signed (or private, if you were part of the deal and have a read2sign account)We are recently testing architecture requirements with SAP integration as well as secure email systems for internal and external email communications. The current workflow system, delegate access, and approvals would allow for such integration, we just have to figure out the details…

  29. ZekeV

    I’d like to see document automation with easily-recognized visual shorthand similar to the stamp on Creative Commons-licensed works.  Of course there’d be a full text contract underneath the hood, but on top (and in terms negotiations) you’d see only a set of standardized logos or glyphs.  I think this would streamline the negotiation process considerably and add brand recognition to commonly-used terms.

    1. William Carleton

      This is exactly where we should be going.

  30. Ethan Stone

    A few of thoughts.First of all, there’s no excuse for paper.  I’m paperless.  My engagement letter asks my clients to accept that I won’t be generating paper unless they absolutely insist and I won’t be keeping paper no matter what.  In my experience, deals have completely shifted away from paper.  Although most deals do still involve a manual signature, it’s almost always conveyed by an e-mail pdf file and added as such to the official (pdf) executed version of the document.  So if you’re dealing with lawyers who are still using paper, maybe it’s time to have a talk with them.  It’s possible that they’re under the misconception that someone wants it and would be thrilled to do away with it.On electronic signatures, a simple e-mail usually suffices. If you want to get fancy (or there’s some reason to be worried), everyone can get class 2 certificates so that the e-mail’s origin is verified. As a matter of law, though, an e-mail is perfectly sufficient. If you’re dealing with lawyers who don’t know that and are insisting that people jump through hoops while they’re on vacation in order to produce wet ink paper signatures, you should have a talk with them about it.As for standardized documents, the problem is less document automation as standard setting.  If I were you, I would come up with a standard set of documents, specify the portions of them that you will negotiate without consulting counsel and maybe have your lawyer draft a few standard variations (not as a published position, since that can invite some bad reactions), and then really stick to that as the only basis for doing your deals.  Bear in mind that you need to guard against getting to bureaucratic about not changing your documents.  Standardized provisions work in the vast majority of situations, but sometimes there’s a good reason to vary. We’re not talking high volume, low margin consumer transactions here, so it would be dumb to give up a deal or even piss off an entrepreneur over holding fast to a policy.By the way, despite your impressions to the contrary, that’s how the vast majority of landlords do business. I’ve rarely signed a lease without marking it up to some degree. Usually nothing major, but it’s the kind of thing that seems possible to get right, so why not? Landlords almost always agree with that approach.On the costs, I guess it’s a little self-serving to comment. But so long as VCs almost force founders to go to one of a small number of firms with very high overhead, you’re going to have to pay. I’m not saying that’s a bad idea. Really. There are serious advantages to be had by going with a name brand firm, even if the actual services don’t demand it. But you’re paying for the security and clout of the brand, not the time and effort involved in document production. If you doubt that, think about what you paid for your estate plan. That practice is totally automated, highly standardized and extremely low overhead. The good practitioners charge high flat fees to do standard work because their clients don’t want to take the chance of going with someone who might miss something and get it wrong. I’m not complaining by noting that. I pay those fees happily for my own estate planning. But that’s the business model and that’s what you’re paying for.

    1. fredwilson

      great comment ethanbut we don’t force entrepreneurs to use a specific law firmthey bring their lawyer to the table and we deal with them

      1. Ethan Stone

        OK.  “Force” was too strong a word.  But entrepreneurs are constantly told (with good reason – I tell people the same thing) that if one of a short list of firms is willing to defer fees, it will help them a lot in securing funding.  Not surprisingly, those firms are very expensive.  Again, I really don’t mean to knock them.  But you’re paying for (1) the brand (important and unique), (2) a senior very experienced lawyer to take a quick look and get involved if anything seems out of the ordinary (important though not unique), and (3) a junior lawyer who doesn’t know her #$$ from her elbow to produce the actual documents (not important and not unique).

  31. William Carleton

    Thanks for pressing on with this campaign, Fred. It’s often the case that financings become an occasion for “catching up” with IP assignments, option grants, even licenses/commercial contracts that have been let to slide. Where lawyers exceed the $5k target in fees, it might be prudent for them to call out (to the client) that some of the work was being done to make sure the company could give appropriate reps to the investors. No company-side startup lawyer I know wants to participate in a financing where she/he doesn’t have confidence in the capitalization and basic IP reps.There are lawyers working on this problem, including Florian Feder, Brian Rogers, Jeremy Freeland, Ehren Brav, Asher Bearman and others. Some think that a big part of the solution would be to open source all the templates that bigger law firms use, not just in connection with financings but all aspects of an emerging company practice. I understand from Asher that DLA Piper is doing things to make their document library accessible.Another thing that would help would be total transparency on individual deal terms.

  32. Florian Feder

    There has been tremendous development in this field recently and various sites have sprung up that try to tackle the “too expensive lawyer” dilemma.  Lots of commercial interest has showed up as well.  I still think that the best solution is a simple legal wiki that provides a framework for the crowd to develop acceptable legal forms free of any commercial interest:

  33. SignEasy

    Hi Fred / readers of AVC,An Android version is in the works; we’ll let you know as soon as we have something to share.In the meantime, for anyone interested in checking out EasySign today, send an email to [email protected] with AVC / @fredwilson:disqus  in the subject line and we’ll give you the unlimited package for free.Happy signing!-StephenEasySign Mobile

    1. fredwilson

      the perfect comment for an app mentioned at AVCas JLM would say “well played”

    2. spatro

      There was a typo in the email address above.The correct address is: [email protected] sure to include your easysign user id.ThanksSunil PatroFounder & CEO | t: @easysignmobile

  34. mchusma

    Fred,I agree.  Notarizations are even worse – filled with fraud and painful.  We are the easiest way to sign documents online and the first online notary service.  iPhone and Android native apps should be out June.-Chris

    1. fredwilson

      don’t get me started on notarizations. they are at the top of my pet peeves. i absolutely hate them

      1. JLM

        An archaic concept which needs to be abolished

  35. Sum Rohatgi

    I use Zosh – which is a simple way to sign documents on the iPhone/ iPad. My use is in real estate deals.

    1. Josh Kerr

      I use Zosh too.  Awesome app, iPad, iPhone, free form editor for annotating, signing, filling, etc..  It produces a PDF with high quality that can be emailed directly from your mobile phone.  Works entirely from a mobile device with no need to originate the document with a desktop browser.They won a demogod award at DEMO in Spring 2010 and were acquired by YouSendIt in December 2010.  I can’t wait to see what YouSendIt has in store..

  36. Michael F. Martin

    “I don’t know why raising a venture round can’t be like signing a lease on an apartment with standardized docs and a one page rider for any changes.”Really? I’m with you on the need for lawyers to get more efficient. Gawande’s commencement address arguing that doctors need to work together more like a pit crew and less like lone cowboys is just as relevant to lawyers and law: http://brokensymmetry.typep…But venture financings are never going to be as simple as signing a lease on an apartment. That’s unrealistic.

    1. fredwilson

      i don’t agree. first round venture deals should be cookie cutter

  37. Jeff Schrock

    Paperless is LONG overdue.  These systems tend to become market standard and FWIW, it looks like it’s DocuSign’s market to lose.I’ve used them (as initiator and signatory) on multiple deals and think highly of it.  All the mobile apps, salesforce integrations, enterprise extensions, etc… are all coming if not already here.

  38. dking65

    You should look at who are specialists on providing electronic document templates with neat intelligence enabling clauses/terms to be added deleted etc. They are starting to be the next smart thing for retailers fed up of paying high costs for EDI. There are plenty of pure tech solution out there but the difference with Hauste is they have depth and experience to create a workable solution without costing a fortune. Hauste are already working on a project to handle the assignment of property tenancies across thousands of different landlords so you can guess the capability 🙂

  39. Leonid S. Knyshov

    I recently went to a DocuSign hackathon. I coded an app (an invoice system that makes corporate approve processes transparent to the vendor), so I wasn’t just an observer. It’s a small component of my overall product, so it wasn’t that big of a deal.In a matter of a few clicks, I can define a multiple-party sign-off process with triggers at each stage. The technology is extremely impressive and will make many lawyers wishing to use my service happy when it goes live on my site.Wet signatures need to go away. Among other things, I help attorneys to transition from storing tons of paper to just storing wet signature pages and keep the rest of the document completely electronic. That is nothing new.Wouldn’t it be nice to keep everyone on the same page and just sign everything on an iPad? 🙂

  40. Tom Gonser

    Hey Fred –  I hear your pain!  We call this the ‘paper problem’ and it costs everyone $$.Look into DocuSign ( for signing legally binding agreements.  We invented SaaS ESIGN and process about 70% of the SaaS ESIGN transactions today. Where iPad based signature-stampers are as easy to use as stamping an image of your signature into a word doc, they probably lack sufficient depth to stand up in court.  DocuSign on the other hand warrants our process to support the Federal ESIGN Act, and way beyond signing allows you to manage the workflow required to collect signatures on documents. The best part is the signers don’t need ANY applications to sign at all. They just need a browser to authenticate, sign, and return what you send them.  Android, iOS — nearly all browsers.  One interesting feature in the DocuSign system is the creation of templates which can be created from any document you already have.  Add to it the types of signers there will be (director, bank, founder, ceo, whatever), and what routing order you want, if there is any data that needs to be collected, where you want them to sign, initial, whatever.  Then save this as a template in your account.  Now every time you generate that type of contract, whatever it is, this template is automatically applied, and you merely need to add the contact info to send it along on its way.  Really powerful and fast.   You can export these templates and share them with anyone who can load them into their DocuSign account and modify/use them from there.You won’t be the first to see the benefits – NAR, Salesforce, Microsoft, Cisco, Intel, Fidelity, and thousands of other high profile companies use DocuSign every day to manage contract processing worldwide.Check it out at, and let us know how we can help.  :: Full disclosure – I started the company.Thanks,Tom

  41. Doug Alexander

    I use NoteTakerHD on my iPad to sign docs.   I don’t know if it is on the Android.   They just have to send you the docs as PDFs.  I have my admin send me the signature pages if its a lot of docs.

  42. Jennifer McFadden

    Fred,Looking forward to Brad and Jason’s book and will check it out. Could be useful given the work we’re doing w/the CUNY accelerator. Another interesting book on venture financing (despite the horrific title) is Raising Venture Capital for Serious Entrepreneurs. Gives a good introduction to VC and modelling from the entrepreneur’s AND vc’s perspective. And, would love to see the financing process automated. If you come across anything interesting as you get comments, it would be great if you could add an addendum to your post.Best,Jennifer…

  43. Mark Stansbury

    I would imagine that I could advise a basic financing for $5,000 (in Columbus, Ohio) if it looked like the company had a future. 

  44. Drtonyratliff

    This is a great idea. I’m a dentist, and I got so frustrated paying attorney fees that I bought several practices without an attorney and I’m sure it was risky, but it was a great learning experience and it saved me thousands of dollars. I would be happy to share on an open source site – buying a dental practice isn’t that much different than buying any other service business.

  45. ChitownKen

    Fred,I am totally on board with your mission to drive legal fees down for entrepreneurs and small deals. I know founders doing small seed rounds, with $25K and up of legal fees. It’s crazy.Electronic signatures and document management are great tools to enhance efficiency at the margin, but of course, the fundamental issue is simply that the big law firm model necessitates fees that are simply too high for startups and small companies. Because most entrepreneurs don’t know deal-savvy solo attorneys, they tend to go to known firm names, which they really don’t need and can’t afford. If they are lucky, they figure this out in advance. If not, they figure it out the hard way — when the bill arrives. The counter-reaction that is emerging is the notion that seed-stage deals should use template documents, with no lawyers at all. This is an overreaction, and in most cases, a mistake. Open-sourcing documents is a great idea and definitely helps generate consensus on key terms. But other than for truly commoditized documents such as NDA’s, there is and will always be a need for some degree of lawyer review and customization. Going legally bare is just too much exposure and, to take the metaphor one step further, can lead to getting badly burned.The key is to keep the amount of lawyering — and the legal fees — in proportion to the size and complexity of the deal. If you find a good lawyer whose fee structures are reasonable, then you won’t feel compelled to try to go without. Good solo attorneys are hard to find, but there are increasingly more of them. I, for one, can meet Fred’s challenge of keeping legal fees in small seed rounds to $5,000, and well within reason for more sizable transactions. I am sure there are other good lawyers out there who can as well.Kenken “at”

  46. josephcohen

    I’ve been using HelloFax to sign and send stuff. I emailed a picture of my signature from my iPhone and can now use it on every doc I need to sign. SO awesome.

  47. Martin Ertl

    Fred,You’re bang on that a big driver of legal fees is processing and coordination work that should be automated. Advice from lawyers is valuable, clerical work isn’t.We’re tackling this problem at Contractually (, a web app to make contracts easy from start to finish for startups and freelancers.Members use our contract forms (or bring in the forms they currently use or their lawyer’s forms), negotiate and fill out the contract online with other parties, and e-sign the contract to complete the deal. The signed contracts are then automagically organized for later retrieval by all parties.Everyone is in the loop without headaches: we get rid of emailing Word documents through confusing threads, printing, and the faxing/scanning/couriering of the signed contract.Full disclosure: I’m the founder of Contractually. I’m also a recovering lawyer. 🙂

  48. Macy Shubak

    I couldn’t agree more.  I’m a paralegal at a law firm inMadison (AlphaTech Counsel) and we’ve automated numerous documents, such asincorporation documents, bridge financing documents, employment and consultingagreements, equity incentive plan documents, etc. We’ve programmed invariations to create a variety of flavors of documents tailored to thescenario.  It generates a good first cut that I prepare, and thencustomized tweaks for the deal can be made as needed.  That way, the bruntof the client’s dollars can be spent on substantive legal advice and complexdeals.  As to your question about e-sign technology for Android, checkout DocuSign. 

  49. Patents In India

    This thread seems focused more on the whole workflow, template, andmanagement practice around managing the signature process, which is whyI jumped in. Trademark watch

  50. Justin Esgar

    Fred – excellent post.My company, Autriv Software Development is proud to announce SignMyPad – the PDF Signature Solution.  No more printing documents to sign then, then find a fax machine or scanner to send them back.  Save trees!! With SignMyPad you can load PDF’s right from your email, or dropbox and add text, date and your signature.  Email it right back out from the app or sync back to your DropBox!  For $3.99 it’s a great deal – whether you sign one document a month or 100.  SignMyPad is now available for the iPad and Android.We have a Pro version for $99 that includes all the amazing features of SignMyPad along with geo-tagging saved PDFs. This means, as long as your iPad has internet, the GPS location and the date/time will be saved to the meta data of the PDF.  Currently SignMyPad Pro is only available for the iPad.We have been covered by… and FoxNews:…

  51. Michael_kariv

    Fred, can you share the standard term sheet you use. We shall start raising seed on July 1, and I want to have an “ideal” to offer to others for consideration. That it comes from you might actually make them accept 🙂

  52. fredwilson

    that’s a great tip