[anotherfounder]

It really seems short-sighted, since the focus should be on making sure companies have enough runway, comfortable and focused on product. For an early stage startup, $25K- $60K can be an extra part-time/full-time (depending on location/function) employee.

[harryh]

That goal is not in conflict with what I said.

Say that a company needs $X to have "enough runway." The VC firm can either invest $X and pay for the firms legal fees themselves or invest $X+legal_cost and have the company pay the fees. In the latter scenario the VC firm will probably end up with a greater ownership percentage.

It is worth noting, however, that it might not really make any difference. Much like tax incidence who directly pays for the lawyer really might not matter much in terms of where things end up in the end. The cost will always, to some degree, be shared by the firm and the company.

[anotherfounder]

I see. So, the choice is essentially : A: <Capital> from which the startup can pay legal fees OR B: <Capital> + <Legal Fees> where the Capital is probably less as VC firm is probably accounting for Legal fees separately.

Even then, it is interesting that the optics of this doesn't bother investors.