An enterprising venture capital fund named Y Combinator made waves last week when it posted all the legal documents you need to start up your company and get some funding on the Internet. They had been drawn up by Y Combinator’s law firm, Wilson Sonsini, and Y released a generic version, minus the company’s specific details. The idea would be to let future startups avoid paying those pesky legal fees for early stage deals by using the standardized docs.
But as with all new ideas, there were a few problems with the launch. Soon after, the documents had been “open sourced,” as Y Combinator calls it, the docs were taken down. What was the problem? Apparently Wilson Sonsini had them taken down because they didn’t have the proper disclaimers.
Today, it’s all back up on the Web with the all-important disclaimer atop each form. Well, little might be the wrong word. It reminds the hapless entrepreneur that just because you’re using these documents doesn’t mean you’re Wilson client. It also doesn’t mean that Wilson is advertising. And it’s not legal advice. And Wilson is not liable for anything. “It’s not our fault. Whatever it is.”
So what do venture capital lawyers think of all of this? Of course, they all say they won’t be replaced by a few documents, especially because each startup’s situation is very different.
On the other side, VCs, like our friend Jason Mendelson at Mobius, have been calling for ways to cut legal costs for venture financing deals.
So what do you think, will open sourcing funding documents change the practice for venture lawyers? Will it take the place of venture lawyers? Will it drive down the legal fees on early stage venture deals, which range from $25,000 to $40,000?
— Zusha Elinson