I don't often write rebuttals to famous bloggers.  Reasons being 1) They're the popular ones that everyone will believe over me  2) They're the ones with the experience/knowledge and half the time I believe them over myself and 3) I just don't write enough here.  Really though, I've never been one to ingest what people throw at me [influential, powerful, or otherwise] and I wouldn't suggest that you do so either.  So, reasons 1 & 2 are actually moot.  Perhaps I'll start with this.

Fred Wilson recently wrote a piece titled "A Challenge to Startup Lawyers" in which he takes aim at excessive legal fees for seed round financing and stakes out a  goal of a maximum of $5k in legal fees for seed rounds.  He asks, "What do we need to do to get there?"

The answer, of course, is competition.  I'm sure that you can find someone or some way to incoporate a company and negotiate a seed round for $5k or less.  The question is whether or not you want to go that route.  Clearly, not enough VCs feel compelled to go bargain brand, so the "trusted" legal firms are able to stay [wait for it] firm on their pricing.

While Fred's more conspicuous discourse is about how we can get to the $5k threshold, there are clear undertones that it should cost $5k or less.  Should it?  The argument centers around how much this excess cost can debilitate a newly seed financed startup.  Yet it is not the legal firm's repsonsibility to price their product according to what is convenient for their customer.  It is their respponsibility to maximize profits and react to different market pressures.  If the legal fees are too high and not worth the opportunity cost of missing out on more developer work hours, then it is the startup's responsibility to act accordingly.

It just feels a bit funny to me to equate what was spent in legal fees with what is lost in product development.  If money is really the bottleneck that retards growth and development, then shouldn't the startup look to raise more, and shouldn't the VC happily oblige as they are financially incentivized to provide this support?  In other words the financial situation could just as easily be remedied by lowering the cost of equity capital as it is by reducing legal fees.  It really is a case of each "side" [lawyers and VCs] looking to protect their business model and margins.

I don't purport to know which side should or shouldn't bear these costs.  I would just prefer it if everyone looked at this [and all] issues from all sides.  It really is a bit of debonair charm to provoke compassion by siding with the struggling entrepreneur.  Remember though that everyone else [the lawyers, VCs, Angels] is definitely not struggling.  And let's face it, most VC funded entrepreneurs are not doing too badly themselves.