[andrewfong]

Interestingly, venture capital LAW definitely has a self-dealing problem. Many (if not most) major law firms in the valley have both company-side and investor-side clients. And even if they don't, law firms often see a fair amount of company-side clients based on investor referrals. As a result, company-side counsel can often be reluctant to push too hard against investors lest they risk jeopardizing future business.

My first company actually had a situation where the same firm represented both us and the investor during our seed round AT THE SAME TIME. To be fair, this was the investor's idea, not the law firm (and the law firm made sign all sorts of waivers), and we ultimately saved a small amount in transaction fees and I can't say we would've gotten much better terms with independent counsel. But the entire affair makes me cringe a little every time I look back on it.

In case you're wondering, yes, there are rules against all of this. But you can waive a lot of the rules by providing written consent (and many clients don't think twice about this).