What are Financing Expenses and who pays them?
Typically with venture capital investments, the Company will pay the legal expenses of the attorney for the investors; generally the investors will select a single attorney to represent all the investors if multiple investors are part of the syndicate. The company's counsel nearly always prepares the financing documents. The advantage to the company of this arrangement is twofold the financing can be closed more quickly because Company counsel can deliver the initial document package shortly after agreement on a term sheet and as draftsman can better control the timing thereafter. As a result, the financing should be accomplished less expensively.
What are typical financing expenses?
The company often pays the legal fees of both its own counsel and counsel, if any, for the investors (which typically is paid from the financing proceeds). A cap on legal fees for investors' counsel is often established, and runs in the range of $15,000 to $35,000. Anywhere from $15,000 to $35,000 is typical, depending on the complexity of the transaction (for example, a Series A financing for a new startup will likely be more expensive than a Series E with a bridge loan and warrants for a long-established company) and which side will bear primary drafting responsibility. Some companies are able to negotiate that the payment of expenses is contingent upon the consummation of the financing; however this is not a typical practice.