{"id":1550,"date":"2012-12-27T10:30:47","date_gmt":"2012-12-27T18:30:47","guid":{"rendered":"https:\/\/berkonomics.com\/?p=1550"},"modified":"2012-12-27T10:30:56","modified_gmt":"2012-12-27T18:30:56","slug":"the-hold-your-nose-theory-of-legal-documentation","status":"publish","type":"post","link":"https:\/\/berkonomics.com\/?p=1550","title":{"rendered":"The \u201cHold Your Nose\u201d theory of legal documentation"},"content":{"rendered":"

Investors sometimes join into investment rounds that have been pre-negotiated by others, receiving the paperwork already created by attorneys from that negotiation.\u00a0 It is not uncommon for a sharp investor to discover a \u201cstinky\u201d clause or two in such agreements when reading them in preparation for signing.\u00a0 Bill Payne came across just such a stinky clause in a recent deal we both were late in the process of joining.<\/p>\n

Changing the deal that late in the game is nearly impossible, after other investors have already completed their documents and the deal supposedly put to bed.\u00a0 So what does the latest tag-along investor do?<\/p>\n

You can tell from the title of this insight that the usual result is to passively sign while holding the nose, a trick perfected by experienced investors suffering this malady for not the first time.<\/p>\n

What if it is the company attorney or entrepreneur that finds the stinky clause so very late in the game?\u00a0 How do you confront the investors who have already agreed to terms and even perhaps signed their documents?\u00a0 Is it worth risking the deal to negotiate a late change during the equivalent of the ninth inning?<\/p>\n

[Email readers, continue here…]<\/span> <\/em>The answer is obviously in the importance of the issue to the person discovering it.\u00a0 In most cases, the probability of \"DB<\/a>whatever the clause being triggered sometime in the future is slight, and therefore the risk remote.\u00a0 So it is a bet against the event made with chance on your side.<\/p>\n

Then again, it is those improbable future events that end up causing lawsuits years later, often just because a party to an agreement did not understand the implication of a clause or even a document.\u00a0 We hire attorneys precisely to help us prevent future conflict by resolving issues before they happen.<\/p>\n

Most of us will let the matter slip and sign while holding our nose, a feat in itself (holding the nose, paper and pen at the same time).\u00a0 Some of us will pass on the deal rather than confront the issue, especially if it is an important one to the late signer.\u00a0 And that often happens when just such an issue has bitten the candidate investor in some past deal, making the likelihood of such negative reaction higher with sophisticated, long time investors.<\/p>\n

Maybe there are skunks in the woods that don\u2019t even know they smell.\u00a0 Or maybe there are targets in the woods without the capacity to even catch the odor of a bad negotiation or deal documentation.\u00a0 Either way, there are risks in deals we sometimes never catch – that later catch up to us in the most surprising places and times.<\/p>\n","protected":false},"excerpt":{"rendered":"

Investors sometimes join into investment rounds that have been pre-negotiated by others, receiving the paperwork already created by attorneys from that negotiation.\u00a0 It is not uncommon for a sharp investor to discover a \u201cstinky\u201d clause or two in such agreements … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"footnotes":""},"categories":[20,5],"tags":[],"class_list":["post-1550","post","type-post","status-publish","format-standard","hentry","category-protecting-the-business","category-raising-money"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/berkonomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1550","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/berkonomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/berkonomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/berkonomics.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/berkonomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1550"}],"version-history":[{"count":0,"href":"https:\/\/berkonomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1550\/revisions"}],"wp:attachment":[{"href":"https:\/\/berkonomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1550"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/berkonomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1550"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/berkonomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1550"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}