Cut your legal fees using Y Combinator’s funding documents

Updated

Startup incubator Y Combinator may have just saved your company a big pile of money in legal fees. The firm just published a set of standardized legal documents that startups can use when raising angel rounds of funding.

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Y Combinator apparently developed the documents with its attorneys Wilson Sonsini Goodrich & Rosati and has been giving these documents to the companies it incubates. That has been successful enough that Y Combinator “open-sourcing” them, i.e., making the documents available to everyone. This is a very cool idea, because legal fees can eat up a hefty percentage of angel investments. (Those investments are usually in the hundreds of thousands of dollars.) Startups probably shouldn’t forego legal advice entirely, but by reducing the legal workload, these forms should help defray a lot of the cost.

Why is Y Combinator give these away to everyone, not just Y Combinator startups? The firm’s cofounder Paul Graham told TechCrunch, “We’re hoping this will cause there to be a lot more startups.” And increasing entrepeneurs’ and VCs’ goodwill towards Y Combinator probably doesn’t hurt either.

So will startups actually use these documents? Well, I called VentureBeat contributor David Adewumi — who’s looking for angel funding for his company Heekya — shortly after I saw the announcement, and it turns out he’d just finished downloading the forms. Adewumi still plans to run everything by a lawyer, but he said the documents look simple enough that he could “literally fill this out myself.” (Heekya is backed by competing incubator LaunchBox Digital.)

TheFunded, the site where entrepreneurs can rate VCs, already allows startups to view funding termsheets from other companies, but you have to submit your documents first.

Update: It looks like the forms are down due to “a glitch” (in the forms, not the website).  I’ll update if I get more details, or when they’re back up again.